InvestMacro

By JustMarkets

As of Tuesday’s stock market close, the Dow Jones Index (US30) was up by 0.68%, while the S&P 500 Index (US500) added 0.59%. The NASDAQ Technology Index (US100) closed positive by 0.66%. Meanwhile, the Dow Industrials (US30) and NASDAQ (US100) indices rose to new all-time highs. Stocks rose on Tuesday as bond yields fell amid optimism of a Fed rate cut. FRB Richmond President Barkin opined that the Fed will cut interest rates if inflation progress continues. His colleague, FRB Atlanta President Bostic, also supported speculation that the Fed will cut interest rates soon. Markets rate the odds of a 25 bps rate cut at 10% at the next FOMC meeting on January 30-31 and 83% at the next meeting on March 19-20.

The US real estate news on Tuesday was mixed. On the upside, construction starts unexpectedly rose by 14.8% m/m to a 6-month high of 1.56 million in November, which was stronger than expectations for a decline to 1.36 million. Building permits in November, an indicator of future construction, conversely fell by 2.5% m/m to a 4-month low of 1.460 million, which was weaker than expectations for a decline to 1.465 million.

Boeing (BA) is up more than 1% after Deutsche Lufthansa AG ordered 40 Boeing 737-8 Max airplanes.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.56%, France’s CAC 40 (FR40) gained 0.08%, Spain’s IBEX 35 (ES35) added 0.52%, and the UK’s FTSE 100 (UK100) closed positive by 0.31%.

Unlike the US Fed, ECB policymakers are more hawkish. ECB Governing Council representative Kazaks said yesterday that the ECB needs to keep interest rates at current levels for some time to ensure that wage growth slows and prevents new risks to inflation, so it is too early to declare victory over inflation and, therefore, not the time to cut interest rates. His colleague Simkus noted that while Eurozone consumer prices were a positive surprise in November, the medium-term outlook has not changed much, so expectations of a quick interest rate cut may be too optimistic. The ECB’s hawkish stance will have a positive impact on the Euro and a negative impact on European indices.

For oil quotations, the situation is in the direction of continued growth. Firstly, the rally of US indices indicates confidence in economic prospects, which supports energy demand and crude oil prices. Secondly, geopolitical risks support crude oil prices after several major shippers stopped shipping crude oil through the Red Sea due to attacks on ships in the region. Third, OPEC+ countries are still on track to cut production, which reduces supply in the global market.

Asian markets were mostly up on Tuesday. Japan’s Nikkei 225 (JP225) gained 1.41% yesterday, China’s FTSE China A50 (CHA50) rose by 0.15%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.75%, and Australia’s ASX 200 (AU200) increased by 0.84%.

Yesterday at the BoJ press conference, BoJ Governor Ueda said that the side effects of negative rates are not serious enough to warrant an immediate policy adjustment, and there is little chance that the BoJ will announce a rate hike next month. As a reminder, the BOJ voted 9-0 to keep the policy rate at minus 0.1% and maintain the 10-year JGB yield target at around 0% and said it would patiently continue to ease monetary policy amid extremely high uncertainty in economic activity and prices.

China left benchmark lending rates unchanged during its monthly fixing on Wednesday, matching market expectations. The one-year prime rate (LPR) was kept at 3.45%, while the five-year LPR was left unchanged at 4.20%. Last week, the People’s Bank of China (PBOC) increased liquidity injections through medium-term loans while keeping the interest rate unchanged. However, market watchers still expect Beijing to continue easing monetary policy in the new year to support a faltering economic recovery as deflationary pressures push up real borrowing costs.

New Zealand Central Bank governor Adrian Orr said on Wednesday that unexpectedly weak third-quarter economic data was a challenging situation for the RBNZ. Gross Domestic Product (GDP) data released last week showed that the New Zealand economy unexpectedly contracted by 0.3% in the third quarter, while historical growth figures were also revised down significantly. Thus, there is a growing likelihood that the RBNZ will start considering options for a rate cut as early as spring 2024.

S&P 500 (US500) 4,768.37 +27.81 (+0.59%)

Dow Jones (US30) 37,557.92 +251.90 (+0.68%)

DAX (DE40) 16,744.41 +93.86 (+0.56%)

FTSE 100 (UK100) 7,638.03 +23.55 (+0.31%)

USD Index 102.14 −0.42 (−0.41%)

• – Japan Trade Balance (m/m) at 01:50 (GMT+2);
• – China PBoC Loan Prime Rate at 03:15 (GMT+2);
• – German GfK Consumer Confidence (m/m) at 09:00 (GMT+2);
• – UK Consumer Price Index (m/m) at 09:00 (GMT+2);
• – UK Producer Price Index (m/m) at 09:00 (GMT+2);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• – US Existing Home Sales (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

At Monday’s stock market close, the Dow Jones Index (US30) added 0.01%, while the S&P 500 Index (US500) was up by 0.45%. The NASDAQ Technology Index (US100) closed positive by 0.61%. Meanwhile, the S&P 500 (US500) rose to a 23-month-high, the Dow Industrials (US30) set a record high, and the NASDAQ (US100) climbed to a 2-year-high.

Goldman Sachs yesterday raised its target for the S&P 500 by the end of next year to 5,100 from a mid-November forecast of 4,700, saying the Fed’s dovish policy rate last week and lower consumer prices will allow real yields to fall and support equity valuations. Markets estimate the odds of a 25 bps rate cut at 8% at the next FOMC meeting on January 30-31 and 76% at the next meeting on March 19-20.

Fed President Cleveland Mester issued a dovish statement yesterday, indicating that financial markets are “slightly ahead” of policy normalization, targeting an interest rate cut early next year.

Canada will release its inflation report today. Core inflation is expected to fall from 3.1% to 2.9% year-over-year. The overall inflation rate will also fall from 4.2% to 4.0% y/y. But it should be noted that the Bank of Canada (BoC) is more focused on median indicators. The median CPI is now at 3.6% y/y and is forecast to fall to 3.3% y/y. At its last meeting, the Bank of Canada left the key rate unchanged at 5.0% and kept the possibility of further tightening open, stating that it remains concerned about high inflation, although it recognized the easing of price pressures and slowing economic growth. Thus, a further slowdown in inflation would increase the probability of a rate cut as early as 2024 (currently, the probability of a 25 bps rate cut in January 2024 is around 27%) and therefore negatively impact the Canadian currency.

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) was down by 0.60%, the French CAC 40 (FR40) fell by 0.37%, the Spanish IBEX 35 (ES35) lost 0.40%, and the British FTSE 100 (UK100) closed positive by 0.50%.

A spokesperson for the ECB Governing Council yesterday, Kazimir, said the following: “The policy mistake of premature easing would be more significant than the risk of staying tight for too long.” His colleague, Vasle, added: “Market expectations for interest rate cuts are premature in my view, both with regard to the start of cuts and the totality of the moves.” Thus, the ECB is trying to maintain a more hawkish tone than the US Fed, which could be positive for the euro but negative for European indices.

Crude oil and gasoline prices rose to two-week highs on Monday and closed with moderate gains. The main bullish factor for crude on Monday was geopolitical risks after BP joined Equinor and Euronav in suspending crude shipments to tankers across the Red Sea due to increased attacks on ships in the region. Attacks on oil tankers in the Middle East are forcing shippers to divert cargoes around the southern tip of Africa instead of going through the Red Sea, disrupting crude supplies. At least fourteen merchant ships have been attacked or approached in Yemen by Iran-backed Houthi militants in the Red Sea since Israel’s war with Hamas began in October.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) lost 0.64% yesterday, China’s FTSE China A50 (CHA50) added 0.11%, Hong Kong’s Hang Seng (HK50) was down by 0.97%, and Australia’s ASX 200 (AU200) was down by 0.22%.

The Nikkei 225 Index (JP225) rose by 1.2% after the Bank of Japan’s meeting on Tuesday. The Bank of Japan (BoJ) kept its ultra-soft monetary policy unchanged and maintained its forward guidance as part of its expected decision. The decision matched market expectations, but some investors were waiting for signs that the dovish Central Bank might signal a possible move away from negative interest rates. However, the BoJ did not provide information on its plans to tighten monetary policy in 2024. Market attention will now shift to Governor Kazuo Ueda’s press conference later in the day.

The minutes of the December meeting of the Reserve Bank of Australia (RBA) showed that while the Bank considered another interest rate hike, it decided against the move pending new data on the economy.

S&P 500 (US500) 4,740.56 +21.37 (+0.45%)

Dow Jones (US30) 37,306.02 +0.86 (+0.01%)

DAX (DE40)  16,650.55 −100.89 (−0.60%)

FTSE 100 (UK100) 7,614.48 +38.12 (+0.50%)

USD Index  102.51 −0.04 (−0.04%)

• – Australia RBA Meeting Minutes (m/m) at 02:30 (GMT+2);
• – Japan BoJ Interest Rate Decision at 05:00 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 05:00 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+2);
• – US Building Permits (m/m) at 15:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

At Friday’s stock market close, the Dow Jones Index (US30) was up by 0.15% (+2.90% for the week), while the S&P 500 Index (US500) closed at its opening price (+2.74% for the week). The NASDAQ Technology Index (US100) closed positive by 0.35% (+3.30% for the week). The Dow Jones Industrials Index (US30) set a new record, and the Nasdaq 100 (US100) climbed to a 2-year high.

Hawkish comments from the Fed on Friday lent support to the dollar. New York Fed President Williams said the question now is whether the bank has sufficiently constrained the economy. That said, talk of a rate cut in March is now premature. Also, Atlanta Fed President Bostic said that policymakers still need a few more months to see enough data to gain confidence that inflation will continue to decline, and he expects the Fed to start cutting interest rates in the third quarter of 2024 if inflation declines as expected.

The US economic reports on Friday dampened hopes that the Fed could provide a soft landing for the economy. Empire’s index of overall business conditions in the US manufacturing sector for December fell by 23.6 to a 4-month low of 14.5, weaker than expected. US manufacturing output for November rose by 0.3% m/m, weaker than expectations of 0.5% m/m. The S&P US Manufacturing PMI for December unexpectedly declined by 1.2 to 48.2, weaker than expected to 49.5 and the weakest reading in 4 months.

The US equity funds stepped up their buying of stocks. Bank of America (BoA) reported that according to EPFR Global, US equity funds received $25.9 billion in the week ended December 13, marking the ninth week of inflows and the longest streak in two years. This indicates that investors continue to invest in the stock market in anticipation of the holiday rally (Santa Claus Rally). Market volatility on Friday was higher than usual due to the expiration of monthly and quarterly options and futures contracts, which is known as the “triple witching.” In addition, many indices rebalanced on Friday. According to Tier1Alpha, about $3.1 trillion in contingent open interest is scheduled to expire or roll over into the new year.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) decreased by 0.01% (-0.05% for the week), France’s CAC 40 (FR 40) added 0.28% (+0.83% for the week), Spain’s IBEX 35 (ES35) lost 0.75% (-1.18% for the week), and the UK’s FTSE 100 (UK100) closed negative by 0.95% (+0.29% for the week).

The S&P Eurozone Manufacturing PMI for the decade was unchanged at 44.2, weaker than expectations of a rise to 44.6. The S&P Manufacturing PMI for December unexpectedly declined, falling by 0.6 to 47.0, weaker than expectations of a rise to 48.0. The Eurozone economy continues to struggle and could enter a technical recession in the coming weeks. According to the HCOB, the Eurozone economy is not showing any clear signs of recovery. On the contrary, it has been contracting for six consecutive months. The probability that the Eurozone has been in recession since the third quarter remains very high. If the Eurozone falls into recession and inflation continues to fall, the ECB may have to change course on interest rates and start preparing the market for a series of cuts next year. Swaps tied to ECB meeting dates are predicting a 25 bps probability of an 8% rate cut for the ECB’s January 25 meeting and 57% for the March 7 meeting.

UK inflation data will be released tomorrow. If inflation comes in below forecast, the Bank of England (BoE) will be pressured to consider an earlier rate cut, and this will put pressure on the British Pound in the coming weeks.

Silver prices came under pressure on Friday on concerns over demand for industrial metals after US manufacturing output data for November, S&P’s US manufacturing PMI for December, and Jibun Bank’s Japanese manufacturing PMI for December were weaker than expected.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) gained 0.94% for the week, China’s FTSE China A50 (CHA50) declined 2.01% over five trading days, Hong Kong’s Hang Seng (HK50) jumped by 3.98% for the week, and Australia’s ASX 200 (AU200) added 3.44% for the week.

The Bank of Japan’s (BoJ) monetary policy meeting will take place as early as tomorrow. The Bank of Japan has held the benchmark rate at 0.1% for a decade now, hoping to stimulate investment and borrowing to promote sustainable growth. One goal is to bring inflation to the 2% target. But while inflation is rising, wages have not kept pace, and central bank governor Kazuo Ueda remains cautious about taking major steps at a time of deep uncertainty about the global economic outlook.

S&P 500 (US500) 4,719.19 −0.36 (−0.01%))

Dow Jones (US30) 37,305.16 +56.81 (+0.15%)

DAX (DE40)  16,751.44 −0.79 (−0.01%)

FTSE 100 (UK100) 7,576.36 −72.62 (−0.95%)

USD Index  102.59 +0.64 (+0.63%)

• – Germany Ifo Business Climate (m/m) at 11:00 (GMT+2);
• – New Zealand Trade Balance (q/q) at 23:45 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.