2024-01-15 00:33:12
Asian stocks got off to a soft start on Monday, ahead of a week full of geopolitical risks, Chinese economic data and earnings reports from major U.S. banks.
A U.S. holiday made trading difficult, but at least there was progress in averting a looming government shutdown as congressional leaders agreed on another spending bill. relief.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1% after losing 0.8% last week. Japan’s Nikkei held near 34-year highs, after posting dramatic gains of 6.6% last week.
S&P 500 and Nasdaq futures were both down about 0.1% in early trading.
Earnings season continues, with Goldman Sachs and Morgan Stanley among the companies reporting results. Retail sales are the key US data of the week, while the Iowa caucus will take place in frigid weather later on Monday.
Reactions were limited to the victory of Taiwan’s ruling pro-independence Democratic Progressive Party, which essentially left the status quo intact.
Tensions with China were a reminder that geopolitics will weigh on markets this year, with elections around the world and the threat of broader conflict in the Middle East.
“For now, we think China is still focused on economic stability,” said Damien Boey, chief macroeconomic strategist at investment bank Barrenjoey in Sydney.
“The equity risk premium needs to rise globally, but this premium and the risk-free rate are currently being suppressed by central banks’ response functions to falling inflation.
China released economic growth data for the fourth quarter and a set of monthly figures on Wednesday, which are expected to show the recovery remains slow overall.
Underscoring the challenges ahead, China’s central bank is seen likely to cut its one-year medium-term lending facility rate on Monday and inject additional liquidity.
She is not the only one, as markets are betting that most of the world’s central banks will ease policy this year.
COUNT ON RATE CUTS
Futures imply a 79% chance that the Federal Reserve will cut rates as soon as March, as producer price data offset a disappointing consumer price report.
Analysts at Barclays noted that the core personal consumption price index, favored by the Fed, looked likely to be lower than the CPI.
“The core consumer price index continues to move at 0.2% m/m or less, which is weaker than we had expected, with little indication of near-term strengthening ” said Christian Keller, economist at Barclays.
“As a result, we are moving forward our forecast for the Fed’s first rate cut from June to March.
He also suspects Fed Governor Christopher Waller will open the door to easing in a speech on Tuesday.
The World Economic Forum in Davos continues until Friday and includes numerous speakers from the European Central Bank, including President Christine Lagarde.
Over the weekend, ECB chief economist Philip Lane said there would be enough data by June to decide on the first of a likely series of interest rate cuts .
Markets are pricing in easing in April and cuts of 154 basis points in 2024.
This dovish outlook limited the euro’s gains against the dollar and it was idling at $1.0940 on Monday, after barely moving last week. [FRX/]
The dollar performed slightly better against the yen as a series of mixed Japanese data gave the Bank of Japan reason to maintain its ultra-easy policy. The dollar rallied to 145.22 yen and neared last week’s high of 146.41.
The prospect of lower global rates supported gold at $2,047 an ounce, after jumping 1% on Friday. [GOL/]
Oil prices were supported by shipping disruptions in the Red Sea, although concerns about demand this year limited the rally. [O/R]
Brent crude lost 13 cents to $78.16 a barrel, while U.S. crude fell 11 cents to $72.57 a barrel.
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