World Bank Painted a Bleak 2023 Picture in its ‘Global Economic Prospects’ Report

Major stock futures on Wall Street are trading higher this European afternoon, drawing optimism from the latest remarks by the Federal Reserve policymakers as investors braced for the upcoming release of consumer price index (CPI) in the U.S. the next day. While the S&P 500 has been altering between gains and losses into 2023, each up day having outperformed the previous down session, resulting in an overall moderate gain that drove the markets to the best start to a year since 2019.

Yesterday, U.S. stocks had ended higher after Federal Reserve Chairman Jerome Powell refrained from offering clear indications of how high interest rates could be raised going forward in a speech to Sweden’s central bank. Recent comments by other officials have supported the view that the central bank might need to remain aggressive in raising interest rates to control inflation. The Dow rose 0.6%, the S&P 500 gained 0.7%, and the Nasdaq added 1%.

Today, at the time of writing, the Dow Jones Industrial Average rose by 0.28%. The Nasdaq Composite and the S&P 500 moved up by 0.28% and 0.31% respectively. The euro rose 0.16% against the dollar, to $1.07538.

On Jan. 10, 2023, the World Bank published its Global Economic Prospects report, stating that the outlook for the global economy and future economic conditions is bleak. According to the report, 2023 growth forecasts have been cut across the board, with the global economy projected to grow by 1.7% in 2023 and 2.7% in 2024. The World Bank also cited a number of adverse developments that could push the world’s economy into a deep recession. Also, a recent report from the World Gold Council highlighted a weaker US dollar and heavy central bank buying of gold as drivers behind the recent move higher in the precious metal. Their 2023 Gold Outlook also highlighted how gold performs well during a recession, with the precious metal ‘delivering positive returns in five out of the last seven recessions’. The report also emphasized gold’s positive performance 12 months after the US dollar (DXY) peaked, something that occurred in late September last year.

The first crypto trading week paints a positive outlook for Bitcoin (BTCUSD), regardless of expiring futures or perpetual contracts. On an annualized basis, the March 2023 its futures yield is holding solidly above 1%, while the funding rate, calculated by the amount of open positions on the major centralized exchanges, has remained positive since mid-December. Despite the scandals and bankruptcies in the crypto industry – in particular, the sensational stories with FTX, Voyager and Genesis, Bitcoin has been holding on to reduced volatility mode, hovering between the levels of $16600-17000 for more than two months. Historical volatility has reached levels last seen in July 2020, a 2.5-year low.

Commoditywise, the U.S. Energy Information Administration (EIA) estimated the world's oil demand could reach a total of 100.48 million barrels per day in 2023, with China and India likely to drive the consumption of crude up. At the time of writing, for settlements in February, West Texas Intermediate (WTI) grew by 2.48% to $76.59 per barrel, while Brent contracts for March rose 2.64% to $81.72 per barrel. Meanwhile, The G7 countries are planning a new round of sanctions against the Russian oil industry with the goal of limiting prices for exports of refined petroleum products, the Wall Street Journal reported.

The Bank of France governor estimated the ECB would firmly continue raising interest rates to curb record consumer prices. Commenting on the French economy, the country's national bank asserted the economy successfully escaped the contraction territory in the last quarter of 2022. The French CAC 40 rose by 1% as of 3:35 p.m. CET, with the Euro Stoxx 600 advancing 0.55%. The British FTSE 100 advanced by 0.91%, while the German DAX gained 0.96%.