US stock markets have lagged behind Europe

In contrast to eager European investors, people in the US are still reluctant to buy stocks. Shares were up more than 4 percent after three days of trading, with the 50 biggest stocks in the eurozone already up 4.75 percent, while U.S. indexes fell. And managed to gain 0.4 percent in a single week and is slightly down.

US stock markets made a valiant attempt to catch up yesterday, but the effort was undone by two disappointing releases. First, recession fears returned to the table with the release of expectations from US manufacturing purchasing managers. US manufacturing contracted at an even faster rate in December than the previous month. This was revealed yesterday by Institute for Supply Management (ISM) figures. The ISM Purchasing Managers’ Index fell to 48.4 from 49.0 on a monthly basis. An index reading above 50 indicates growth, while a number below 50 indicates contraction. Economists were expecting an index level of 48.5. S&P Global’s alternative measure also showed a contraction on Tuesday, with the purchasing managers’ index falling to 46.2 in December from 47.7 in November. This was reported yesterday as the Composite European Purchasing Managers’ Index rose to 49.3 from 47.8. This is the highest level in 5 months.

Second, US investors are proverbially holding their noses with their expectations regarding the federal funds rate. While nothing new was revealed in last night’s Fed minutes, investors were reminded not to expect rate cuts this year. Some interest rate hikes will be necessary, albeit at a slower pace. But, as we read in the minutes of the meeting, this should not be taken as a ‘signal of weak resolve to reduce inflation’. Despite mounting evidence that inflation has peaked, the Federal Reserve should be cautious about cutting interest rates too quickly. Then they will make the same mistake they did in the 1970s. If the central bank cuts rates too quickly, inflation will rebound and the tightening policies of recent months will be of no use. The central bank must first be confident that inflation will return to the desired 2 percent before considering rate cuts.

The fear of recession is also reflected in the growth of oil and gas prices. Although there are other reasons for the steep decline over the past few days. For example, investors’ assessment that China’s economy will further lag due to the current corona wave in the country is also contributing to the drop in oil prices. And the strengthening of the dollar in the first days of this year is also seen as a reason. Relatively warm winter weather in Europe and the expectation that temperatures in much of Europe will remain above average in the coming weeks will lead to a sharp drop in gas prices. This reduces the need to use existing gas reserves. On average, European gas reserves are now 83.5 percent full. That’s only 8 percentage points lower than a month ago, while we should be in the peak season for gas demand right now. Large quantities of LNG are now being received at European ports as well. Current gas prices are now 25 percent lower than they were a year ago, so before the invasion of Ukraine. Year after year we have to deal with significant deflation in gas prices!

Investors are trading Microsoft for Amazon

Last night, shares of Microsoft (NASDAQ: ) closed down 4.4 percent at $229.10. An analyst at investment bank UBS cut his price target to $250 from $300. He expects growth in Microsoft’s Azure cloud business to slow faster than investors expect. This is due to the rapidly maturing cloud market and slowing global economic growth. Investors appeared to have turned to Amazon (NASDAQ: ), which fell just 0.7 percent. Although Amazon is the biggest of cloud services, it came with good news. For example, it has a huge loan of no less than 8 billion US dollars for general corporate purposes, it announced that it is working on a labor surplus (18,000 people will lose their jobs in the group this month), but above all, there was a rumor in the market that Jeff Bezos will return to Amazon after leaving Amazon two years ago. Last year, Amazon had the dubious distinction of becoming the world’s first publicly traded company to lose $1 trillion in market capitalization. Maybe a little too much for major shareholder and founder Bezos, who wants to do it again?