Summary: The S&P 500 and Nasdaq 100 jumped by 1.5% on the Conference Board Consumer Confidence index rising to an 8-month high and 12-month inflation expectations sliding to the lowest since Sep 2021. Energy stocks led the gains as crude oil prices rose by nearly 3% on a larger-than-expected EIA crude oil inventories drawdown. USDJPY stabilized at 132.40 after the sharp decline the day before.
US equities jumped on a bullish combination in the Conference Board Consumer Confidence survey with consumer confidence improving to an 8-month high and inflation expectations for the next 12 months falling to 6.7% in December from 7.1% in November. S&P 500 and Nasdaq 100 each climbed 1.5%. Nike (NKE:xnys), soaring 12.2% on an earnings beat and upbeat assessment of demand, was the best-performing stock within the S&P500 on Wednesday. All 11 sectors of the S&P500 gained, with energy, industrials, and financials leading. Energy stocks were boosted by a 2.9% rise in crude oil prices. APA (APA:xnys) gained 5.8%. Shares of FedEx climbed 3.4% after reporting a decline in earnings less than feared and plans to cut costs. Carnival rose by 4.7% after the cruise liner reported a smaller-than-expected loss. In extended-hour trading, Micron (MU:xnas) shed 2.1% following the chipmaker reporting FY23 Q1 earnings and Q2 revenue guidance weaker than expectations.
Yields on the 2-year shed 4bps to 4.21% and the 10-year was 2bps richer to 3.66%. The 20-year auction went well with a decent demand from investors.
Hong Kong stocks started the session firmer but fizzled out to finish the session only 0.3% higher in light volume. Textiles manufacturer Shenzhou (02313:xhkg), which supplies to Nike (NKE:xnys) surged 6.7% following Nike’s upbeat outlook guidance, making the stock the top gainer in the Hang Seng Index. Chinese catering stock Haidilao (06862:xhkg) gained 4%; white goods home appliances manufacturer Haier Smart Home (06690:xhkg) climbed 2.9%. In A-shares, CSI300 closed nearly unchanged from the day before. Consumption, lodging, tourism, catering, food and beverage, and Covid drugs gained.
After sliding 3.7% on Tuesday after the BOJ decision, the USDJPY stabilized at around 143.40 for now. EURUSD edged down modestly to 1.0600. AUDUSD gained, rising to 0.6710.
WTI crude jumped 2.9% to USD78.50 following a 5.9 million barrel drawdown on U.S. inventories reported by the EIA. The Biden administration’s plan to replenish the strategic petroleum reserve in February also helped the market sentiment.
Economic data were mixed. The 1-year-ahead inflation expectation in the Conference Board Consumer Confidence survey softened from 7.1% in November to 6.7% in December, the lowest since September 2021. Existing home sales shrank 7.7% M/M in November, the 10th consecutive month of decline. On the other hand, Headline consumer confidence as well as the present situation and expectations components rose in the Conference Board Consumer Confidence survey. The headline consumer confidence improved to 108.2, (vs consensus 101.0; Nov: 101.4), the highest level since April this year.
During a phone call to mark the 50th anniversary of the official diplomatic relationship between China and Australia, Chin’s President Xi told Australian Prime Minister Anthony Albanese that China would seek to “promote a sustainable development of the China-Australia comprehensive strategic partnership”. Meanwhile, Australian Foreign Minister Penny Wong told reporters that China and Australia agreed to continue high-level dialogue on issues including the removal of China’s trade sanctions on Australian goods.
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2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
