Inflation firmed and consumers stepped up spending in January, likely leaving the Federal Reserve on track to keep raising interest rates in coming months to cool price pressures. The personal-consumption expenditures price index—the Fed’s preferred gauge of inflation—rose 5.4% in January from a year earlier, up from 5.3% in December, the Commerce Department said Friday. The core PCE-price index, which excludes food and energy prices, rose 4.7%, also ticking up from December. The central bank aims for 2% annual inflation. Spending by U.S. households rose a seasonally adjusted 1.8% in January from the prior month, the largest increase in nearly two years, and a reversal from a small decrease in December. The spending figure adds to evidence that the U.S. economy remains vibrant. Stronger economic activity and slower progress on inflation than previously expected could keep the central bank raising rates longer than anticipated before the recent reports. U.S. stocks moved lower after the report, with investors expecting the Fed to keep ratcheting up rates. The broad S&P 500, the technology-heavy Nasdaq Composite and the blue-chip Dow Jones Industrial Average all shed between 1% and 1.7% on Friday. The three indexes all dropped more than 2% in the holiday-shortened week, each logging their biggest weekly declines of 2023. The Fed has been raising interest rates to push down inflation. At the start of February, officials raised short-term interest rates by a quarter-percentage point to a level last reached in 2007. They expect to keep raising rates this year, according to the minutes of their most recent gathering, released Wednesday. Solid demand in the economy is keeping upward pressure on inflation. That poses challenges for both businesses and consumers that are facing higher prices this year, and can expect interest rates to keep rising. That could yet lead to an economic slowdown in 2023.

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On Friday, the SMI lost 0.6 per cent to 11,182 points. Among the 20 SMI stocks, there were 13 losers and seven winners. 33.04 (previously: 38.54) million shares were traded. The defensive heavyweights Nestle (-0.3%) and Novartis (+0.2%) outperformed the market. Novartis benefited from a positive commentary by Stifel analysts, who raised the price target and reiterated their Buy recommendation. Swisscom (+0.3%) was also in demand. On the other hand, economic cyclicals were sold - on concerns that interest rate hikes to combat inflation could stifle the economy. ABB slipped by 1 per cent and Geberit by 0.5 per cent. Holcim (-1.1%) could not escape the downward pull, although the cement group had surprised positively with its business figures and outlook. The change at the top of the company, which was also announced, was not well received, however, as analysts at Jefferies noted. Banks mostly did not benefit from the rising market interest rates, which tend to be positive for the sector. Here, the fear that an economic downturn could also affect earnings prevailed. CS now edged 0.2 per cent lower after the recovery on the previous days. UBS shed 0.4 per cent.

The European stock markets closed sharply lower on Friday due to persistent inflation in the United States. The Stoxx Europe 600 index fell 1% to 457.7 points. In Paris, the CAC 40 and the SBF 120 dropped 1.8% and 1.6%, respectively. In Frankfurt, the DAX 40 lost 1.7% while the FTSE 100 in London declined by 0.3%. For the week as a whole, the Stoxx Europe 600 was down 1.4%. Fnac Darty (-9.1%) reported a net loss for the year 2022 and warned that its results would suffer in 2023 due to a distinct rise in its energy bill. The slide of the stock price should be seen in the context of the 8% jump on Thursday in response to speculation that Czech billionaire Daniel Kretinsky would be interested in the cultural products and household appliances retailer. Saint-Gobain (+4.8%) reported what it called "record" results for 2022. The building materials producer has posted a consolidated net profit, group share of 3 billion euros, compared with 2.52 billion euros in 2021, an increase of 19.1%. Valeo (-9.1%) revealed an operating profit 4% below analysts' forecasts for 2022, while its sales came in slightly above expectations. BASF (-7.9% in Frankfurt) warned of 700 job cuts and further cost-cutting measures at its Ludwigshafen site, where its headquarters are located and which is "the world's largest integrated chemical complex" according to the German chemical company. International Consolidated Airlines Group, or IAG (-6.5% in London), expects improved results in 2023 and has unveiled its intention to acquire the 80% of the capital of Air Europa that it does not yet hold, for a sum of 400 million euros.

U.S. stocks pulled back Friday, notching their worst weekly performance of the year, as hot economic data have rekindled worries about restrictive Federal Reserve policy. The S&P 500 fell 42.28 points, or 1.1%, to 3970.04. The technology-heavy Nasdaq Composite dropped 195.46 points, or 1.7%, to 11394.94. The blue-chip Dow Jones Industrial Average shed 336.99 points, or 1%, at 32816.92. Boeing led decliners in the Dow on Friday, with its stock falling $9.98, or 4.8%, to $198.15 after the plane maker halted deliveries of 787 Dreamliner jets because of a documentation issue. Warner Bros. Discovery shares retreated 18 cents, or 1.1%, to $15.55 after the entertainment giant’s quarterly revenue missed expectations and its chief executive warned that the U.S. advertising market remains very challenging. Shares of Carvana dropped $2.07, or 21%, to $8.01 after the online used-car seller reported a wider-than-expected quarterly loss and sales that missed analysts’ estimates. Ford (-1.5%) appointed Sam Wu to head its China operations from 1 March as the US carmaker seeks to regain share in that market. Goldman Sachs (+0.1%) announced on Friday that its board of directors had authorised a new $30bn share buyback programme with no time limit. Adobe's share price fell by 7.6%. The US Department of Justice apparently intends to stop the company's 20 billion dollar takeover of Figma, according to a Bloomberg report. Autodesk slumped 13 per cent after the software company provided a weak outlook. Online hotel and travel booking portal operator Booking Holdings posted the highest revenue in its history last year and earned more than expected. The share climbed by 1.1%.

New week, old adverse conditions: on the Asian stock markets, concerns about interest rates rising further and staying higher for longer continue to be the dominant topic. In this environment, the Nikkei index in Tokyo dropped by a moderate 0.2 per cent to 27,391 points. Seoul follows the weak Wall Street with a minus of 1.2 per cent. The Chinese stock exchanges edged slightly lower. Among the individual stocks, Korea Gas in Seoul shed almost 8 per cent. Despite a better quarterly profit, the company does not pay out a dividend, but instead intends to use the funds to improve its overall financial position.

U.S. government debt yields jumped on Friday after the Federal Reserve’s preferred inflation gauge came in strong for January. The 10-year Treasury note added 7 basis points to 3.947%. The 2-year Treasury note, which is more sensitive to changes in the Fed's key interest rates, increased by 12 basis points to 4.811%, its highest level since 2006.

Stifel raises Novartis target to CHF 106 (97) - Buy

CS lifts Danone target to EUR 51.50 (47) - Underperform

UBS increases Eon target to EUR 10.20 (9.75) - Neutral

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