Japan's central bank is sticking to its negative interest rate policy, citing a high degree of uncertainty. Despite the recent record-breaking run on Wall Street, the pre-Christmas mood on the stock markets remains subdued overall. On the one hand, expectations of an imminent turnaround in interest rates have been relativised somewhat and, on the other, economic concerns have increased again. The latest survey results from the ifo Institute, which showed a clear deterioration in the mood of German entrepreneurs towards the end of the year, also contributed to this. The attacks on oil transport routes also contributed to the uncertainty.
Japan's central bank did not change its negative interest rate policy and kept the key interest rate at -0.1%. The central bank also kept its yield curve control policy unchanged. The Bank of Japan also warned of "high uncertainties" and said that core inflation would remain above 2% throughout the 2024 financial year. As a result, the yen weakened against the dollar by around 0.5% to 143.50. In contrast, the Nikkei 225 rose by around 1.3%. In Seoul, the Kospi index remained virtually unchanged, while the small-cap Kosdaq index gained 0.69% after reaching its highest level since 22 September on Monday. The Hang Seng Index in Hong Kong fell by around 0.9%. In Australia, the S&P/ASX 200 rose 0.8%, continuing its rise after breaking a six-day winning streak on Monday.
In New York, the Dow Jones Industrial continued its recent record chase, albeit with very little momentum. The Dow reached another record high of 37,393.45 points in the course of trading and then closed at 37,306.02 points, virtually unchanged from Friday's closing level. The S&P 500 rose by 0.45% to 4,740.56 points and the Nasdaq indices gained around 0.6%. Among the individual stocks, the shares of US Steel stood out. The stock rose by around 26% after the largest Japanese steel group Nippon Steel announced its intention to take over its US rival.
Recently, a number of more cautious statements from central bank leaders have led to caution regarding expectations of an imminent turnaround in interest rates. For example, the head of the Federal Reserve in Cleveland, Loretta Mester, said that the current interest rate expectations on the markets were "somewhat premature". On the bond market, the yield on ten-year US government bonds climbed to 3.94%.
Oil prices continued to rise at the start of the week. The background to this is BP's announcement that it is suspending oil shipments through the Red Sea in view of the attacks on oil tankers in the region by the Iranian-backed Houthi rebels.
We received negative news from Germany at the beginning of the week. According to the latest survey results from the Munich-based economic research institute ifo, the mood among German entrepreneurs deteriorated surprisingly towards the end of the year. The Ifo business climate barometer deteriorated from 87.2 to 86.4 points, while economists had expected an improvement to 87.7 points on average. They were also more sceptical about the first half of 2024, with only the service sector seeing a slight improvement in sentiment in December, according to the ifo survey, which is based on a survey of 9,000 companies.
By contrast, the latest economic forecasts for the Swiss economy were somewhat more optimistic. The economists surveyed by the KOF Swiss Economic Institute as part of its "Consensus Forecast" were more optimistic for 2024 than they were three months ago. They are forecasting GDP growth of 1.4% (previously +1.3%). The current year is likely to end with a growth rate of 0.8%. The outlook for inflation is also more optimistic. Average annual inflation is expected to be 1.6% next year, compared to the forecast of 2.1% this year.
Corporate news in focus: Accenture Q1 figures, Easyjet extraordinary general meeting, Fedex Q2 figures.
Economic data in focus: Bank of Japan interest rate decision, China trade balance November (08:00), Germany manufacturing orders October (08:00), Austria consumer prices November (09:00), Eurozone consumer prices November (11:00), USA housing starts and approvals November (14:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.