By Peter Nurse
Investing.com -- The U.K. economy narrowly managed to avoid entering a recession in the fourth quarter, while the race to become the new governor of the Bank of Japan takes a surprise twist. Crude prices soared after Russia announced plans to cut its output in March. Stocks are set to open lower, with Lyft slumping after a disappointing update, while the Michigan sentiment index will also be in focus. Here's what you need to know in financial markets on Friday, 10th February.
1. U.K. avoids a technical recession … for now
Britain’s economy narrowly avoided entering a recession in the final quarter of 2022, with data released earlier Friday showing that the country’s gross domestic product was unchanged in the fourth quarter following a revised 0.2% decline in the July-September period.
This meant that the British economy dodged back-to-back quarterly contractions, the definition of a technical recession.
However, output slumped 0.5% in December alone, suggesting that this is merely delaying the inevitable.
“The January PMI surveys suggested that activity weakened at the beginning of Q1 2023 and we currently see GDP contracting by 0.3% q/q,” said Adam Cole, a strategist at RBC Europe.
2. Yen surges on surprise BOJ governor report
The Japanese yen surged Friday following a report in the influential Nikkei newspaper that Prime Minister Fumio Kishida will nominate Kazuo Ueda, a professor and former Bank of Japan board member, to the role of governor of the central bank from April.
By 6:00 ET (11:00 GMT), USD/JPY traded 0.5% lower at 130.88.
Masayoshi Amamiya, deputy BOJ governor and a known dove, had been widely expected to assume the role, but the newspaper reported that he refused to take the post.
Amamiya had been seen as likely to continue the central bank’s ultra-easy monetary policies, which had seen the yen fall to its lowest level against the dollar in 20 years last year.
Ueda’s potential appointment has come as something of a surprise, and it’s hard to tell immediately what it would mean in terms of the bank's near-term monetary policy direction. But the market has seen it as a move away from the status quo.
3. Stocks set to fall; Lyft slumps after disappointing update
U.S. stock markets are set to open lower Friday as investors digest more hawkish Fedspeak investors, raising concerns about the central bank’s next interest rate moves.
By 6:00 ET (11:00 GMT), Dow Jones futures were down 60 points, or 0.2%, while S&P 500 futures were down 0.4% and Nasdaq 100 futures were down 0.8%.
Federal Reserve Bank of Richmond President Thomas Barkin on Thursday became the latest policymaker to stress the importance of the central bank continuing to raise interest rates to combat inflation.
This appears to have dashed hopes that the Fed's aggressive interest rate increases would be coming to an end in the near future.
The three major averages are all on course to end the week lower. The S&P 500 is down 1.3% this week, the DJIA is off by 0.6%, while the Nasdaq Composite is on pace for a weekly loss of 1.8%.
Lyft (NASDAQ:LYFT) stock slumped over 30% premarket after the ride-hailing firm reported a surprise fourth-quarter loss and disappointing guidance as margins were pressured by rising costs.
PayPal (NASDAQ:PYPL) stock also fell 1% after the payments heavyweight’s warning of pressure on discretionary spending overshadowed its forecast of full-year profit above expectations. It also announced Chief Executive Dan Schulman will retire at the end of 2023.
4. Michigan consumer sentiment index due
The key U.S. data release due Friday is the Michigan consumer sentiment index for February, a widely-watched gauge of personal consumer confidence in economic activity.
The index hit its highest level in eight months in January as falling energy prices eased fears about inflation, rising to 64.9, its highest since May, from 59.7 in December.
It is expected to edge higher again, to 65.0, at 10:00 ET (15:00 GMT), although the first rise in initial jobless claims in six weeks, according to data released Thursday, offers the potential of a negative surprise.
5. Crude surges on Russian output cut
Crude oil prices soared to new two-week highs Friday after Russia announced plans to cut its March oil production by 500,000 barrels a day in response to international sanctions.
“Russia believes that the mechanism of price caps on Russian oil and petroleum products is an intervention in market relations and an extension of destructive energy policies of the collective West,” Deputy Prime Minister Alexander Novak said Friday in a statement.
This move, which equates to the withholding of around 5% of the country’s January output, threatens to further tighten a market which is expected to see increased demand from China as the world’s largest importer rebounds from its tight COVID-related restrictions.
By 06:00 ET, U.S. crude futures were up 2% at $79.60 a barrel, while Brent crude was up 2.1% at $86.23 a barrel.
The Baker Hughes U.S. oil rig count is due later in the session, and traders will be looking to see if there is an increase so production can rise to compensate. The last time around, Baker Hughes reported 599 rigs.