Market Talk – January 5, 2024

ASIA:

China’s central bank is likely to expand the pledged supplementary lending (PSL) tool further to support the struggling property sector. This follows a recent injection of 350 billion yuan ($49.1 billion) through PSL, aimed at catalyzing investments in real estate, boosting credit expansion, and driving first-quarter economic growth. The People’s Bank of China extended the funds to policy banks in December, including the China Development Bank, Export-Import Bank of China, and Agricultural Development Bank of China. The move brings the outstanding balance of the PSL facility to 3.2522 trillion yuan, marking the first monthly increase since November 2022 and the third-largest single-month PSL injection on record. PSL, initiated in 2014, provides low-cost and long-term funding to policy banks, originally intended to support urban redevelopment.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 increased 89.13 points or 0.27% to 33,377.42
• Shanghai decreased 25.17 points or -0.85% to 2,929.18
• Hang Seng decreased 110.65 points or -0.66% to 16,535.33
• ASX 200 decreased 5.00 points or -0.07% to 7,489.10
• Kospi decreased 8.94 points or -0.35% to 2,578.08
• SENSEX increased 178.58 points or 0.25% to 72,026.15
• Nifty50 increased 52.20 points or 0.24% to 21,710.80

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.00080 or 0.12% to 0.67133
• NZDUSD increased 0.00080 or 0.13% to 0.62420
• USDJPY increased 0.134 or 0.09% to 144.754
• USDCNY decreased 0.01020 or -0.14% to 7.16626

The above data was collected around 16:24 EST.

Precious Metals:

• Gold increased 1.44 USD/t oz. or 0.07% to 2,044.70
• Silver increased 0.175 USD/t. oz or 0.76% to 23.165

The above data was collected around 16:24 EST.

EUROPE/EMEA:

British mortgage rate cuts this week are raising concerns about the impact on bank profit margins, adding pressure to a sector struggling to meet shareholder expectations. Home loan prices have been falling since July, with speculation about the Bank of England reducing its base interest rate. The recent significant drops in key mortgage rates in the new year have led analysts to question whether banks can meet forecasts for net interest margin (NIM), a crucial measure of their earnings from lending. Bank of America analysts have reduced their earnings estimates for UK banks in 2024 by 7-12%, attributing it to sharp declines in market interest rate expectations that will squeeze profit margins. Simultaneously, increasing competition among banks for mortgage business and deposits is dampening potential returns for bank shareholders.

The major Europe stock markets had a negative day today:

• CAC 40 decreased 29.94 points or -0.40% to 7,420.69
• FTSE 100 decreased 33.46 points or -0.43% to 7,689.61
• DAX 30 decreased 23.08 points or -0.14% to 16.594.21

The major Europe currency markets had a mixed day today:

• EURUSD decreased 0.00036 or -0.03% to 1.09394
• GBPUSD increased 0.00382 or 0.30% to 1.27172
• USDCHF increased 0.0003 or 0.04% to 0.85030

The above data was collected around 16:27 EST.

US/AMERICAS:

The US economy added 216,000 jobs in December, surpassing the 170,000 jobs forecast by Refinitiv economists. The unemployment rate held steady at 3.7%, indicating a resilient labor market in the face of economic uncertainties. The job gains were observed in government, health care, social assistance, and construction, while the transportation and warehousing sectors experienced job losses. The report also highlighted a 0.4% increase in average hourly earnings, which was higher than expected, and a steady unemployment rate of 3.7%.

US Market Closings:

• Dow advanced 25.77 points or 0.07% to 37,466.11
• S&P 500 advanced 8.56 points or 0.18% to 4,697.24
• Nasdaq advanced 13.77 points or 0.09% to 14,524.07
• Russell 2000 declined 6.58 points or -0.34% to 1,951.14

Canada Market Closings:

• TSX Composite advanced 66.2 points or 0.32% to 20,937.55
• TSX 60 advanced 3.65 points or 0.29% to 1,265.64

Brazil Market Closing:

• Bovespa advanced 743.74 points or 0.57% to 131,969.65

ENERGY:

The oil markets had a green day today:

• Crude Oil increased 1.75 USD/BBL or 2.42% to 73.940
• Brent increased 1.396 USD/BBL or 1.80% to 78.986
• Natural gas increased 0.0656 USD/MMBtu or 2.33% to 2.8866
• Gasoline increased 0.001 USD/GAL or 0.05% to 2.1111
• Heating oil increased 0.0323 USD/GAL or 1.25% to 2.6207

The above data was collected around 16:28 EST.

• Top commodity gainers: Natural Gas (2.33%), Crude Oil (2.42%), Brent (1.80) and Heating Oil (1.25%)
• Top commodity losers: HRC Steel (-4.43%), Canola (-2.18%), Oat (-3.29%) and Rapeseed (-1.97%)

The above data was collected around 16:32 EST.

BONDS:

Japan 0.601% (-1.6bp), US 2’s 4.40% (+0.013%), US 10’s 4.0514% (+6.04bps); US 30’s 4.21% (+0.071%), Bunds 2.143% (+3.8bp), France 2.68% (+2.7bp), Italy 3.829% (+2.9bp), Turkey 25.47% (+26bp), Greece 3.353% (+8.1bp), Portugal 2.916% (+3.9bp); Spain 3.174% (+7.1bp) and UK Gilts 3.789% (+6.2bp)

The above data was collected around 16:36 EST.