As of Tuesday's stock market close, the Dow Jones Index (US30) was up by 0.48%, while the S&P 500 Index (US500) added 0.46%. The NASDAQ Technology Index (US100) closed positive by 0.70% yesterday. The S&P500 Index (US500) rose to a 20-month high, while the Dow Jones Industrials (US30) and NASDAQ (US100) indices rose to year-to-date highs. Stocks found support after the US Consumer Price Index, released on Tuesday, fell to a 5-month low, boosting hopes that the Federal Reserve will start cutting interest rates in the first half of 2024.
The US Consumer Price Index for November declined to 3.1% y/y from 3.2% y/y, in line with expectations. The November CPI was the lowest in five months and was only slightly above June's 2-year low of 3.0% y/y. The November core CPI report of 4.0% y/y matched expectations and was unchanged from last month.
Economic data shows that a slowing labor market, slowing business activity, and favorable inflation data suggest that monetary policy is likely restrictive enough to bring inflation down steadily to 2% in the coming months. Markets are betting that the Fed will cut rates five times in 2024, with a 25 bps cut possible as early as March or April. However, Powell, who likes to "scare" the markets, is likely to go against these expectations and set a more hawkish tone at today's press conference.
Equity markets in Europe were mostly down yesterday. Germany's DAX (DE40) decreased by 0.02%, France's CAC 40 (FR40) fell by 0.11% yesterday, Spain's IBEX 35 (ES35) was down by 0.78%, and the UK's FTSE 100 (UK100) closed negative by 0.03%. Expectations for German economic growth in the December ZEW survey unexpectedly rose by 4.0 to a 9-month high of 12.8, stronger than expectations of a 0.3 decline to 9.5.
Crude oil prices fell sharply on Tuesday, with crude falling to a 5-month low. Signs of increased Russian crude exports have heightened fears of oversupply. Tanker tracking data showed refined product shipments rose to 3.2 million barrels daily in the four weeks through December 10, up 114,000 barrels a day from the previous week and the highest in five months.
Asian markets were predominantly up yesterday. Japan's Nikkei 225 (JP225) decreased by 0.34%, China's FTSE China A50 (CHA50) added 0.55%, Hong Kong's Hang Seng (HK50) ended the day up by 1.30%, and Australia's ASX 200 (AU200) was positive by 0.35%.
New Zealand passed legislation on Wednesday that returns the central bank's mandate to focus solely on inflation, removing the need to consider employment when making monetary policy decisions. In 2018, the central bank was tasked with a dual mandate of targeting low inflation and full employment but now returns to focusing only on low inflation. Markets see the change in the mandate as a hawkish measure but are unlikely to affect monetary policy decisions in the short term radically.
S&P 500 (US500) 4,643.70 +21.26 (+0.46%)
Dow Jones (US30) 36,577.94 +173.01 (+0.48%)
DAX (DE40) 16,791.74 −2.69 (−0.02%)
FTSE 100 (UK100) 7,542.77 −2.12 (−0.03%)
USD Index 103.89 +0.03 (+0.02%)
- – Japan Tankan Manufacturing (q/q) at 01:50 (GMT+2);
- – Japan Non-Tankan Manufacturing (q/q) at 01:50 (GMT+2);
- – UK GDP (m/m) at 09:00 (GMT+2);
- – UK Industrial Production (m/m) at 09:00 (GMT+2);
- – UK Manufacturing Production (m/m) at 09:00 (GMT+2);
- – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
- – US Producer Price Index (m/m) at 15:30 (GMT+2);
- – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
- – US Fed Interest Rate Decision at 21:00 (GMT+2);
- – US FOMC Statement at 21:00 (GMT+2);
- – US FOMC Press Conference at 21:30 (GMT+2);
- – New Zealand GDP (q/q) at 23:45 (GMT+2).
by , 2023.12.13
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