Market Talk – December 13, 2023

ASIA:

In November, foreign investors significantly increased their bond purchases in key Asian markets due to a notable decline in U.S. Treasury yields and a shift in expectations for potential Federal Reserve rate cuts. They made their largest monthly net purchase since May, buying a total of $6.36 billion in South Korean, Indian, Malaysian, Indonesian, and Thai bonds. The surge in Asian bond purchases coincided with a sharp fall in U.S. Treasury yields, triggered by less hawkish remarks from Federal Reserve officials and cooler-than-expected October inflation data. The market began anticipating potential Fed rate cuts as early as March 2024. Indian bonds, in particular, attracted $1.78 billion in foreign capital, the highest inflow since August 2017, driven by optimistic economic growth forecasts and the inclusion of local bonds in JP Morgan’s emerging market debt index next year.

A survey by the Monetary Authority of Singapore indicates that Singapore’s GDP growth for 2024 is expected to be lower than previously projected. The survey, based on responses from 25 economists and analysts, forecasts a growth rate of 2.3%, down from the 2.5% estimated in September. The economists also anticipate a decline in headline and core inflation in 2024, with figures expected to be 3.4% and 3%, respectively, compared to the current year. In addition, the survey suggests a slight increase in inflation for 2023, with an estimate of 4.8%, and the outlook for MAS core inflation remains unchanged at 4.1%.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 increased 82.65 points or 0.25% to 32,926.35
• Shanghai decreased 34.68 points or -1.15% to 2,968.76
• Hang Seng decreased 145.75 points or -0.89% to 16,228.75
• ASX 200 increased 22.50 points or 0.31% to 7,257.80
• Kospi decreased 24.61 points or -0.97% to 2,510.66
• SENSEX increased 33.57 points or 0.05% to 69,584.60
• Nifty50 increased 19.95 points or 0.10% to 20,926.35

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.01113 or 1.70% to 0.66703
• NZDUSD increased 0.00729 or 1.19% to 0.62049
• USDJPY decreased 2.518 or -1.73% to 142.912
• USDCNY decreased 0.05331 or -0.74% to 7.13999

The above data was collected around 15:57 EST.

Precious Metals:

• Gold increased 43.75 USD/t oz. or 2.21% to 2,023.19
• Silver increased 1.015 USD/t. oz or 4.46% to 23.765

The above data was collected around 16:00 EST.

EUROPE/EMEA:

Germany’s recently formed coalition pact, aimed at addressing a legal setback to its budget plans, relies predominantly on spending cuts that are expected to further weigh on the already sluggish growth of Europe’s largest economy, according to economists. Finance Minister Christian Lindner, an advocate of fiscal discipline, has pushed for the reinstatement of a cap on new net borrowing in 2024 and filling funding gaps totaling 17 billion euros ($18 billion) through cost savings. The European Central Bank’s restrictive monetary policy to control inflation, coupled with uncertainty about the implications of the recent budget deal, raises the risk of prolonging a shallow recession. The German economy has faced challenges this year, including high energy costs, weak global orders, and record-high interest rates in the Eurozone. Fractious negotiations within the government over next year’s budget, following a constitutional court ruling that created a 60 billion euro ($64.70 billion) hole in public finances, have further dampened the economic outlook.

The major Europe stock markets had a mixed day today:

• CAC 40 decreased 12.33 points or -0.16% to 7,531.22
• FTSE 100 increased 5.67 points or 0.08% to 7,548.44
• DAX 30 decreased 25.69 points or -0.15% to 16.766.05

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00876 or 0.81% to 1.08796
• GBPUSD increased 0.00661 or 0.53% to 1.26271
• USDCHF decreased 0.00351 or -0.40% to 0.87159

The above data was collected around 16:04 EST.

US/AMERICAS:

The Federal Reserve will maintain its key interest rate within a targeted range between 5.25% and 5.5% for the third consecutive time. Additionally, the committee indicated the possibility of at least three rate cuts in 2024. This decision was influenced by easing inflation and a stable economy. The “dot plot,” which reflects individual members’ expectations, suggests the potential for four rate cuts in 2025 and three more in 2026, bringing the rate down to between 2% and 2.25%. The Fed’s decision to hold was widely anticipated by the market, and the announcement of future rate cuts led to a positive response from traders, with stock prices rising. The Fed’s decision reflects a cautious approach to policy tightening, considering multiple factors before any further adjustments. The committee’s decision and future outlook are based on the evolving economic conditions, particularly in relation to inflation and the labor market.

US Market Closings:

• Dow advanced 512.3 points or 1.4% to 37,090.24
• S&P 500 advanced 63.39 points or 1.37% to 4,707.09
• Nasdaq advanced 200.57 points or 1.38% to 14,733.96
• Russell 2000 advanced 66.24 points or 3.52% to 1,947.51

Canada Market Closings:

• TSX Composite advanced 395.61 points or 1.96% to 20,629.45
• TSX 60 advanced 21.53 points or 1.76% to 1,245.58

Brazil Market Closing:

• Bovespa advanced advanced 3,062.05 points or 2.42% to 129,465.08

ENERGY:

The oil markets had a green day today:

• Crude Oil increased 1.306 USD/BBL or 1.90% to 69.916
• Brent increased 1.455 USD/BBL or 1.99% to 74.695
• Natural gas increased 0.0321 USD/MMBtu or 1.39% to 2.3431
• Gasoline increased 0.0528 USD/GAL or 2.67% to 2.0325
• Heating oil increased 0.0464 USD/GAL or 1.85% to 2.5538

The above data was collected around 16:04 EST.

• Top commodity gainers: Gasoline (2.67%), Silver (4.46%), Oat (2.96%) and Coffee (3.30%)
• Top commodity losers: Palm Oil (-1.74%), Wheat (-3.71%), Orange Juice (-2.26%) and Sugar (-2.74%)

The above data was collected around 16:09 EST.

BONDS:

Japan 0.690% (-4.5bp), US 2’s 4.44% (-0.292%), US 10’s 4.0239% (-18.21bps); US 30’s 4.18% (-0.123%), Bunds 2.168% (-6.3bp), France 2.715% (-5.6bp), Italy 3.94% (-6.5bp), Turkey 23.27% (-32bp), Greece 3.425% (-5bp), Portugal 2.944% (-7.5bp); Spain 3.119% (-12.2bp) and UK Gilts 3.832% (-13.7bp)

The above data was collected around 16:14 EST.