January 9, 2023
United States:
Morgan Stanley Warns US Stocks Risk 22% Slump
US equities face much sharper declines than many pessimists expect with the specter of recession likely to compound their biggest annual slump since the global financial crisis, according to Morgan Stanley strategists.
Michael Wilson — long one of the most vocal bears on US stocks — said while investors are generally pessimistic about the outlook for economic growth, corporate profit estimates are still too high and the equity risk premium is at its lowest since the run-up to 2008. That suggests the S&P 500 could fall much lower than the 3,500 to 3,600 points the market is currently estimating in the event of a mild recession, he said.
Europe:
ECB Sees ‘Very Strong’ Wage Growth Ahead as More Hikes Planned
The European Central Bank predicts wage growth — a key indicator of where inflation is headed — will be “very strong” in the coming quarters, strengthening the case for more interest-rate hikes.
A study of salary developments since the start of the pandemic shows underlying pay growth has been “relatively moderate” and is currently close to its long-term trend, the institution said Monday in an article to be published in its Economic Bulletin.
Asia:
Oil Jumps at Start of Week With China Optimism Spurring Gains
Oil rallied at the start of the week amid optimism about China’s demand recovery and gains in wider markets.
West Texas Intermediate futures surged above $76 a barrel Monday, rebounding from last week’s 8.1% drop, as China issued a fresh batch of crude oil import quotas. A Chinese central bank official also said the nation’s growth would be back on track soon as Beijing provides more financial support to households and companies, according to an interview with People’s Daily, the Chinese Communist Party mouthpiece.
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