US stocks buoyed on the well anticipated Federal Reserve’s rate hike by 25 bps to 4.50% to 4.75%. This marks the eight time since the rate hike cycle began in March of 2022. The Fed sees ongoing increases to the target range and expects no rate cuts in 2023. It however does not rule out that should inflation starts coming off faster than expected, then it could play into its monetary policy setting. Amid the positive sentiment, JOLTS jobs data disappointed showing January job openings of over 11 million, indicating that the labour market continue to remain tight. $S&P 500(.SPX)$ rose by 1.0% while $NASDAQ(.IXIC)$ was up 2.0% in a risk on rally with the dovish tone that the deflationary process has started.
The European economy eked out a marginal GDP growth of 0.1% in 4Q22 as it grapples with multiple challenges from an energy crisis and ongoing geopolitical tensions. However, the German economy, the largest economy within the EU, surprised negatively with a contraction of -0.2% raising the potential of a recession. The ECB is expected to further tighten monetary policy with another 50bps point rate hike this week which could add further pain for the economy.
China, continue to hold on to stock market gains post the Lunar New Year holiday with tourism rising sharply from a combination of a pent-up demand as it moves on from the pandemic and large household savings. The International Monetary Fund have also revised China GDP growth to 5.2% in line with the rosy consensus of other financial institutions that the worst could be over for China.
$Meta Platforms, Inc.(META)$ 4Q22 earnings beat estimate even though sales continue to decline for straight quarters as it faced a slew of challenges from Apple’s iOS privacy tweaks to competition from other social media platforms last year. The recent financial discipline was welcome by investors, with Meta reducing 11k or 13% of its workforce which could reduce expenses substantially for the year. The growth of its free cashflow could not only come from cuts to operational expenditure but also a reduction of its capital expenditure. Meta is currently trading at 19.4x/15.4x of FY23/24 consensus price to earnings ratio. It is also noteworthy, that rival Snap (SNAP US) who reported, points that the slump in the advertising market could have bottomed.
$Advanced Micro Devices(AMD)$ 4Q22 results were in-line with expectation with its Data Center offsetting the weaker PC and Gaming demand. Cloud service providers in North America continue to help drive up solid growth in the Data Center segment with a 42% y-o-y growth. However, the Client segment revenue fell by 51% y-o-y due to high inventory of the PC market. AMD expects 1Q23 sales to be down 10% y-o-y on continue pressures from Client and Gaming Segment. AMD trades at 26.5x/19.8x of FY23/23 consensus price to earnings ratio. The strategic acquisition of Xilinx could help diversify its overall business and AMD expect to continue to gain market share despite the challenging macro-economic environment.
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