Economic Indicators & Central Banks:
- The Fed’s minutes to the December 12-13 meeting showed some pushback against imminent easing, while still acknowledging the rate cuts penciled in with the dots. The report showed “all” participants said clear progress had been made toward the inflation goal. Rates had likely peaked.
- “Several” thought the policy rate could remain restrictive for some time and peak rates could last longer than expected. Fed’s Barkin said there is still potential for additional rate hikes.
- China services index posted fastest expansion in 5 months amid optimism. Chinese wages in major cities declined by the most on record.
- Japanese manufacturing activity shrank by the most in 10 months in December, as demand ebbed in Asia’s largest advanced economy.
Market Trends:
- Wall Street extended its 2024 declines with weakness in tech shares weighing. The US100 (NASDAQ) slumped -1.18%, dropping for a 4th straight session, with the US500 (S&P500) falling -0.80%, while the US30 (DOW) was off -0.76%.
- JPN225 (Nikkei) dropped the most in two weeks, after the Fed minutes, also due to the powerful earthquake in the northwest on New Year’s Day and the runway collision between turboprop aircraft and Japan Airlines jet, which dragged down some companies.
- ASX fell 0.53% to trade near 7,495. Hopes that the RBA will no longer be raising rates have been partly driven by the Fed’s dovish shift.
- Chinese stocks remained the biggest drag in Asia following the jobs report – CSI 300 down by 0.9% after having slid as much as 1.6%.
Financial Markets Performance:
- The USDIndex rallied from a session low of 102.07 to a peak of 102.40 before dipping to 102. Markets reassessed their expectations of the scale of rate cuts by the Fed this year.
- USDJPY regained ground up to 143.89 as the Japan market reopened.
- Gold slid to $2030 per ounce, in part hurt by the FOMC minutes, with the firmer US Dollar weighing too.
- Bitcoin steadied above 42500 after diving to 40K territory as $400M was liquidated in 2 hours, as Matrixport rebuffed optimistic reports!
- Key Mover: Crude oil perked up and climbed 3.65% to $72.95 per barrel as a shutdown at a Libyan oil field added to the concerns over Mid East tensions and supply. Currently traded above $73. Libya’s major Sharara oilfield, with a capacity of 300,000 bpd, completely shuts down due to protests.
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Andria Pichidi
Market Analyst
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