Investor Enthusiasm Pauses
December 28, 2023
Two opposing themes are vying for the attention of investors: 1) rising hopes that an initial interest rate cut by the Federal Reserve may be only a couple of months away and 2) mounting fear of a broader war in the Middle East.
Yesterday’s equity rally in the United States extended into Asia where share prices closed up 2.5% in Hong Kong, 1.6% in South Korea, and 1.4% in China and Singapore. Australian and New Zealand equities climbed 0.7% and 0.8%, but the Japan’s gain from the day before was trimmed by 0.4% today. Then in Europe, the major stock exchanges are currently in the red but by less than a half percent. U.S. stock futures are generally flat as investors await the release of weekly jobless insurance claims and the advance estimate of the U.S. merchandise trade deficit.
Ten-year sovereign debt yields rebounded five basis points overnight in the U.K., four bps in France and Spain, three bps in Germany and two basis points in the United States.
The DXY weighted dollar index fell another 0.2% and, with an overnight low of 100.62, is not far from its 52-week low of 99.58 touched on July 13 and roughly 11% below its 2022 high. The dollar softened only 0.1% against the euro but shows bigger losses of 1.1% against the Chinese yuan, 0.9% relative to the Japanese yen and 0.7% relative to the Swiss franc.
The Turkish lira touched a fresh record low of $29.4733, which represents a 36.5% decline from its end-2022 level (or alternatively a 57.6% appreciation of the dollar). Turkish hyperinflation from that plunge in Turkey’s currency prompted a dramatic reversal in Turkish monetary policy that has seen the central bank leap from 8.5% at the start of last June to 42.5% after a 250-basis point hike this month.
The price of bitcoin tokens fell back 1.3% overnight. Nevertheless, at $42,921, such had reversed 56% of the drop between November 2021 and September 2022. Prices for oil and gold slid by 0.8% and 0.4% overnight.
The advance estimate of the U.S. November goods trade deficit printed marginally wider at $90.27 billion but was close to the January-October average shortfall of $89.4 billion per month. New jobless insurance claims rose 12k in the week before Christmas, but the 4-week average increase of 212.0k was the lowest in eight weeks.
Other data release highlights on this second to last business day of 2023 included:
- A 3.3% November rise in South Korean industrial production that was the most in a year and a half and associated with a 5.3% year-on-year advance.
- A smaller-than-forecast 0.9% decline in Japanese industrial production last month. This drop followed increases in both September and October. Output was 1.4% lower than in November 2022, and officials continued to characterize the recent trend as “fluctuating indecisively.”
- Retail sales in Japan rose 1.0% on month and 2.3% on year in November.
- Retail sales in Spain last month rose the most (0.9%) in seven months and were 5.2% above their year-earlier level.
- Austria’s manufacturing purchasing managers index, which has been below the 50 neutral level since August of 2022, printed at a 2-month low of 42.0 in December.
- Sweden’s eleven-month trade surplus of SEK 47.3 billion compares favorably with a deficit of SEK 42.6 billion in January-November of 2022.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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