Market Talk – January 30, 2024

ASIA:

A Hong Kong court is set to evaluate a winding-up petition for China Evergrande Group, a major Chinese property developer facing financial distress with over $300 billion in liabilities. The case, scheduled for January 29, involves offshore creditors seeking resolution, and its outcome may serve as a critical test for cross-border insolvency arrangements between Hong Kong and Beijing. Evergrande defaulted in 2021, highlighting the broader liquidity crisis in China’s property sector. The court’s decision will be significant, especially since creditors had previously rejected Evergrande’s restructuring proposal in December.

Japanese Prime Minister Fumio Kishida pledged to take comprehensive measures to ensure real income growth and combat deflation. In a policy speech to the lower house of parliament, he emphasized the urgency of addressing economic issues, particularly wage increases. Kishida highlighted the revival of the economy as his administration’s primary mission. Despite not introducing new policies, he underscored the importance of restoring public trust in politics, given a funding scandal that has led to a decline in support for his ruling Liberal Democratic Party (LDP).

The major Asian stock markets had a mixed day today:

• NIKKEI 225 increased 38.92 points or 0.11% to 36,065.86
• Shanghai decreased 52.83 points or -1.83% to 2,830.53
• Hang Seng decreased 373.79 points or -2.32% to 15,703.45
• ASX 200 increased 21.80 points or 0.29% to 7,600.20
• Kospi decreased 1.84 points or -0.07% to 2,498.81
• SENSEX decreased 801.67 points or -1.11% to 71,139.90
• Nifty50 decreased 215.50 points or -0.99% to 21,522.10

The major Asian currency markets had a mixed day today:

• AUDUSD decreased 0.00110 or -0.17 to 0.65988
• NZDUSD increased 0.00010 or 0.02% to 0.61320
• USDJPY increased 0.138 or 0.09% to 147.628
• USDCNY increased 0.00180 or 0.02% to 7.18836

The above data was collected around 15:44 EST.

Precious Metals:

• Gold increased 4.25 USD/t oz. or 0.21% to 2,036.00
• Silver decreased 0.003 USD/t. oz or -0.01% to 23.173

The above data was collected around 15:46 EST.

EUROPE/EMEA:

The ailing condition of the German economy poses a significant challenge for export-dependent countries in Central Europe, still recovering from severe inflation after the COVID-19 pandemic. Traditionally, strong trade links with Germany, particularly its robust auto sector, benefited nations like Hungary, Czech Republic, and Slovakia. However, these ties now threaten to hinder the economies of these countries. Some local companies, dependent on German connections, are diversifying into other global markets and exploring industries such as defense to counterbalance the economic weaknesses in Germany, which is on the brink of another year near recession.

The major Europe stock markets had a green day today:

• CAC 40 increased 36.66 points or 0.48% to 7,677.47
• FTSE 100 increased 33.57 points or 0.44% to 7,666.31
• DAX 30 increased 30.63 points or 0.18% to 16.972.34

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.00101 or 0.09% to 1.08431
• GBPUSD decreased 0.0013 or -0.10% to 1.26940
• USDCHF increased 0.00069 or 0.08% to 0.86179

The above data was collected around 15:50 EST.

US/AMERICAS:

The latest CNBC Fed Survey indicates that the Federal Reserve is expected to cut interest rates fewer times and later than what the market anticipates. Only 9% of the survey respondents see the central bank cutting rates in March, with the majority predicting the first rate cut to come in June. This is in contrast to the futures markets, which have priced in a higher probability of rate cuts, with between five and six cuts expected this year. The survey suggests that the Fed’s interest rate decision is likely to be more aligned with the respondents’ outlook than with the market’s expectations. The debate now revolves around how fast the Fed will move to adjust the rates, with the survey, market, and Fed forecasts all converging on a Funds rate between 3.3% and 3.6% by 2025.

US Market Closings:

• Dow advanced 133.86 points or 0.35% to 38,467.31
• S&P 500 declined 2.96 points or -0.06% to 4,924.97
• Nasdaq declined 118.15 points or -0.76% to 15,509.9
• Russell 2000 declined 15.9 points or -0.76% to 1,996.24

Canada Market Closings:

• TSX Composite advanced 27.81 points or 0.13% to 21,227.87
• TSX 60 advanced 1.51 points or 0.12% to 1,280.27

Brazil Market Closing:

• Bovespa declined 1,099.76 points or -0.86% to 127,402.9

ENERGY:

The oil markets had a mixed day today:

• Crude Oil increased 1.174 USD/BBL or 1.53% to 77.954
• Brent increased 0.729 USD/BBL or 0.89% to 82.559
• Natural gas increased 0.0387 USD/MMBtu or 1.88% to 2.0927
• Gasoline increased 0.0282 USD/GAL or 1.27% to 2.2567
• Heating oil decreased 0.0231 USD/GAL or -0.82% to 2.8108

The above data was collected around 15:52 EST.

• Top commodity gainers: Natural Gas (1.88%), Coffee (2.51%), Orange Juice (4.51%) and Oat (3.22%)
• Top commodity losers: Rhodium (-1.11%), Lumber (-1.65%), Palm Oil (-2.68%) and Cheese (-1.34%)

The above data was collected around 15:58 EST.

BONDS:

Japan 0.712% (-1.4bp), US 2’s 4.36% (+0.033%), US 10’s 4.0490% (-4.2bps); US 30’s 4.27% (-0.069%), Bunds 2.273% (+3.5bp), France 2.760% (+4bp), Italy 3.804% (+6.5bp), Turkey 25.13% (-6bp), Greece 3.268% (+2.8bp), Portugal 2.967% (+3.2bp); Spain 3.149% (+1.7bp) and UK Gilts 3.902% (+2.6bp)