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Global supply chains again in jeopardy

Attacks by Iran-backed Houthi militias on ships in the Red Sea continue to cause uncertainty and disruption to global trade. Now that several major shipping companies such as MSC, Maersk and Hapag Lloyd as well as oil giant BP have suspended their oil shipments through the Red Sea, a prolonged disruption to global supply chains could lead to price increases for goods, fuel and transport costs. Meanwhile on Wall Street, hopes of an imminent turnaround in interest rates in the US are holding firm. As a result, both the Dow and the Nasdaq 100 reached new record highs. At the same time, the yield on ten-year US government bonds remained below the 4% mark.

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
Oil tanker
© Shutterstock

The record chase continued in New York, fuelled by hopes of significant interest rate cuts next year. The Dow Jones Industrial gained 0.68% to close at 37,557.92 points and the S&P 500 ended Tuesday's trading at 4,7768.37 points, 0.59% higher. The indices on the Nasdaq rose by around 0.5%. After the US Federal Reserve held out the prospect of an easing of key interest rates in the coming year at its last meeting, expectations on the financial markets regarding interest rate cuts have increased. The markets are currently anticipating even greater easing than the Fed had forecast in its projections. Meanwhile, the yield on ten-year Treasuries is quoted at 3.93%.

Asian markets were mostly higher on Wednesday, with Japanese equities extending their gains after the Bank of Japan left its ultra-loose monetary policy unchanged and central bank chief Kazuo Ueda struck a "dovish" tone at the press conference. The Nikkei 225 gained 1.6% today. In China, the People's Bank of China also kept its key interest rates for one-year and five-year loans unchanged at 3.45% and 4.2% respectively. The Hang Seng Index in Hong Kong rose by 1.1%, while the Chinese CSI 300 was the only major Asian market to fall by 0.5%. The South Korean Kospi rose by 1.7%, recording the biggest gain of the day. In Australia, the S&P/ASX 200 ended 0.65% higher, reaching a ten-year high.

A further weakening of the inflation trend can be observed in the eurozone. According to Eurostat, the rate of consumer price inflation in the eurozone fell to 2.4% in November from 2.9% in the previous month, according to revised data. In a monthly comparison, prices fell by 0.6% in November, slightly more than originally calculated. Core inflation also fell significantly. Excluding the often volatile energy and food prices, year-on-year inflation totalled 3.6% in November compared to 4.2% in October. Falling inflation and a gloomy economic outlook for the eurozone are likely to fuel discussions within the ECB leadership regarding the expected initial easing of interest rates next year.

Corporate news in focus: Hornbach Holding Q3, Douglas Q4, General Mills Q2, Micron Technology Q1.

Economic data in focus: Germany Producer Prices November (08:00), UK Consumer and Producer Prices November (08:00), Eurozone Current Account October (10:00), US Current Account Q3 (14:30), Consumer Confidence December and Home Resales November (16:00), Eurozone Consumer Confidence December (16:00), EIA Weekly Oil Report (16:30).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.