Will High Job Numbers Pressure Stocks Further? Markets Wait

Market participants await the latest US employment data to determine how the Federal Reserve will alter its policy. According to the San Francisco Fed President, Mrs. Daly, a rate hike may not be necessary if the employment sector shows a slowdown. According to Mrs. Daly, if bond yields remain this high, the central bank may not be required to raise interest rates again but hold in the longer term. However, this will largely depend on the employment data, and if the employment data reads higher than expectations, bond yields are again likely to rise and pressure the stock market. 

All three of the leading US indices ended the day lower and would have witnessed a poor session if the price did not retrace towards the end of the session. By the end of the day, US indices honored the set price range, as said in yesterday’s market analysis. The NASDAQ saw the most significant decline, falling 0.36%, the Dow Jones losing 0.05%, and the SNP500 0.13%. European indices are trading slightly lower during this morning’s Asian session but are improving as the cash open nears. Global institutions may potentially be avoiding US-based assets and opting for EU equities due to the upcoming Non-Farm Payroll data. However, the US employment data will influence both European and UK equities. 

What’s the Deal with IMF and Pakistan?

Back in 2019, the International Monetary Fund (IMF) and Pakistan reached an agreement to provide financial assistance to help the country address its economic challenges. So far the country has received $4.0 billion out of the total amount of $6.5 billion. For the next tranche of around $1.0 billion, the country has to meet various conditions causing the delay in staff level agreement. As a result, investor sentiment has been negatively impacted, and the market has remained range bound. However, all is not dark! There are ways to navigate these economic uncertainties, and you can do so with KTrade. In this blog post, we’ll take a closer look at the IMF and Pakistan agreement, the reasons behind the delays, and the potential impact on investors and the market.

Firstly, the IMF deal will provide much-needed financial assistance to Pakistan, which has been struggling with a mounting debt crisis. The country’s external debt currently stands at around $105 billion, with the government struggling to meet its repayment obligations. The IMF has agreed to provide a loan of $6 billion to Pakistan over the next three years, which will help to alleviate some of the pressure on the country’s finances. However, as of March 2023, the talks between the government and the IMF appear to be at an impasse amidst an expanding list of conditions, including lending guarantees from friendly countries. Mixed signals from government officials, including planned petroleum and flour subsidies, have fueled speculations of further delays in the program’s revival. Despite this, through the materialization of additional bilateral, multilateral, and IMF’s funding, the government is targeting a reserve balance of around USD 8-9bn by June 30th, 2023. (For those looking for regular updates on Pakistan’s economic climate, follow our LinkedIn and Facebook). 

Status Quo likely in upcoming Monetary Policy

The State Bank of Pakistan (SBP)’s monetary policy committee will convene on Jan 22’21 to set interest rates for the next 2 months. We project the central bank to opt for a status quo and keep interest rates unchanged at 7.00%.Our stance is largely underpinned upon: 1) contained external accounts with a current account surplus… Continue reading Status Quo likely in upcoming Monetary Policy