Will U.S. Stocks Get Boxed Again: That is the Question

December 26, 2018

Many, many markets remained closed today for Boxing Day, St. Stephen’s Day (Italy) or a second day of Xmas (Germany and Hong Kong), but stock exchanges in the United States, where the DJIA tanked over 600 points in an abbreviated session on Christmas Eve, reopen and may set the tone for the rest of the week.

Markets whose stock markets did not trade today include Belgium, Ireland, Denmark, Poland, Greece, South Africa, Canada, Finland, Norway, Hungary, Bulgaria, Luxembourg, Austria, Sweden, Iceland, Cyprus, Germany, the U.K., France, Italy, Spain, the Netherlands, Portugal, Switzerland, New Zealand, Hong Kong, and the Baltics.

Shifting tactics and tone, U.S. President Trump expressed confidence in the Fed Chairman and his Treasury Secretary while urging investors to take advantage of reduced equity values, which he believes will be short-lived, and buy the market.

But among markets that did trade today, conditions seem to remain fragile amid concerns about protectionism, the fraying of post-WW2 alliances, and evidence that global growth is slowing. While share prices recovered 0.9% in Japan, 0.5% in India, and 0.7% in Russia, such fell 1.3% in Singapore, 0.4% in the Philippines, 0.7% in Malaysia, 0.5% in Taiwan, 0.6% in South Korea, and 0.3% in China.

The ten-year Japanese JGB yield ticked up a basis point to 0.01%.

WTI oil recovered 1.6%, while gold extended its climb by 0.3% to a half-year high.

The dollar is unchanged against the yuan, kiwi and sterling, up 0.4% relative to the yen and Swiss franc and by 0.1% against the loonie and euro but down 0.3% vis-a-vis the Australian dollar and 0.2% against the peso.

The most significant economic news overnight concerns Bank of Japan policy. In a speech before business leaders, Governor Kuroda backed off the previously stated timetable that the central bank is seeking the restoration of 2% core inflation at the earliest possible time. Instead, officials now are approaching their task in “step by step” fashion. He attached less urgency to raising inflation, since Japanese growth is not floundering as it was when ultra-easy policy was first imposed in 2013. External risks and the rising adverse effects on banks of prolonged very low interest rates also argue for a more balanced approach to the timetable for achieving the 2% inflation target. Kuroda’s remarks echo signs in released BOJ minutes from the late October meeting that reveal a divided Board over the dangers versus merits of the current monetary policy stance.

Spanish producer prices fell 1.0% in November, slashing 1.6 percentage points off the 12-month rate of increase to 3.0%. Such recently crested at 5.3% in September.

Factory output in Singapore jumped 2.8% on month in November, resulting in a 5-month high in the year-over-year rate of increase (7.6%).

Two U.S. releases of note later today will be the monthly Case-Shiller report on house price inflation in 20 major metropolitan areas and the monthly Richmond Fed manufacturing survey.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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