This Week
Nonfarm Payrolls and unemployment rate data on Friday will be the most important economic releases of the week and will provide further cues on the Fed’s interest rate path this year. The earnings season continues as Walt Disney, Google (Alphabet), Amazon and other major companies will release their earnings. The Middle East remains in focus with possible negotiations between the US and Iran taking place this week despite US forces gathering in the region ahead of an expected US strike on the country. Ukraine, Russia and the US will hold the second round of tripartite talks on a potential peace deal this week.
Stocks
EXXON
Exxon’s stock price jumped 3.39% to hit an all time peak midweek amid widespread optimism in the oil industry. Oil prices are currently trading at multi month highs, while ongoing supply disruptions in the United States are indirectly boosting Exxon’s revenue. The oil major posted better than expected results on January 30 amid record production levels and positive future projections helping to boost its stock price. Elevated geopolitical tensions have also lifted energy stock valuations in recent weeks.
COCA COLA
Coca Cola’s stock price climbed 2.68% and hit a record high on Friday with the stock remaining attractive as a defensive, consumer staple amid high market volatility. The recent announcement of the appointment of a new CEO Henrique Braun, who will take up his role at the end of March will be tasked with a new push for market growth and is seen as positive for the company. Deutsche Bank also upgraded its price target to $83, citing its optimism in the well known company’s future. The company will report its earnings on February 10.
Commodities
Crude Oil
Crude oil prices surged 7.7% last week, pushing to multi-month highs as geopolitical risk in the Middle East intensified. Fears continued to grow that the US could take military action against Iran, lifting concerns over potential supply disruptions. Oil’s price was also supported by expectations that the weekend’s OPEC+ meeting was unlikely to see any increase in output. Firmer demand expectations added to the upward pressure.
Gold
Gold prices pulled back 2.7%, moving away from fresh record highs on Wednesday after a shift in US monetary expectations gave the dollar fresh support, while profit taking also undermined the precious metal. President Trump’s decision to nominate Kevin Warsh as the next Federal Reserve Chair led markets to reassess expectations for aggressive rate cuts. Warsh is expected to take over when Jerome Powell’s term ends in May.
NATURAL GAS
Natural gas prices jumped 13% last week as another wave of winter weather swept across large parts of the United States. Persistently cold conditions drove a surge in heating demand. At the same time, low gas storage levels in Europe added to concerns about falling supplies lasting through the winter. Traders were also looking to the Middle East amid some reports that, in the event of a US attack, Iran might block the Strait of Hormuz, an important transit hub for Liquified Natural Gas.
AUD/USD
The AUD/USD traded higher over the past week as broad US dollar weakness particularly early in the week lifted the greenback’s rivals. The Aussie also received support from increasing expectations of interest rate hikes this year. Rising commodity prices and improving risk appetite underpinned the Australian dollar. With pressure on the dollar following shifts in Fed expectations, the pair extended gains. Optimism around China-linked demand was another supporting factor.
Recap
Last week the S&P 500 increased 0.3%, the Nasdaq fell 0.2% and the Dow Jones was down 0.4%.
US stock indices and the markets overall were highly volatile with stocks rising to all time highs early in the week, as sentiment ebbed and flowed on geopolitical uncertainty, positive earnings results and the announcement of the next Fed Chair, Kevin Warsh.
Crude oil prices jumped to multi month highs while natural gas prices also finished the week higher as traders continued to monitor heightened tensions in the Middle East and potential supply disruptions. Gold and Silver price hit record peaks, although both fell sharply late in the week, finishing lower amid profit taking. Platinum and Palladium prices began the week brightly, but fell sharply to near one month lows. OPEC+ left its output levels unchanged over the weekend.