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Weaker US economic data supports the prospect of an interest rate turnaround and brightens stock market sentiment ahead of Christmas

New economic data from the US was weak overall and the prospect of an interest rate turnaround in the US pushed the yield on the benchmark ten-year government bond down to 3.87% - its lowest level in around five months. On Wall Street, stock indices have already recovered after a brief setback in the middle of the week. 
In our last Navigator of the year, we would like to take this opportunity to thank you for your interest. We wish you a Merry Christmas and a successful start to the New Year. The next issue will be published on 3 January 2024. 

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
© MACH Photos / Shutterstock.com

In New York, the share indices recovered on Thursday after the midweek profit-taking and posted solid daily gains. The Dow Jones Industrial closed 0.87% higher at 37,404.35 points, almost making up for the previous day's loss of 1.3%. The S&P 500 gained 1.03% and ended Thursday at 4,746.75 points. On the Nasdaq, the indices rose by around 1.2%. The yield on ten-year Treasuries currently stands at 3.9%. A report in the Wall Street Journal that the US is to consider punitive tariffs on Chinese goods, such as electric cars, attracted attention.

As reported by the Department of Commerce in Washington, the US economy was somewhat weaker in the third quarter than previously expected. Gross domestic product (GDP) increased at an annualised rate of 4.9% compared to the previous quarter, instead of the previously estimated 5.2%. Weaker consumer spending was the main factor here. The Philly Fed indicator also pointed to a gloomy mood in the regional industrial sector. The Philadelphia Fed's business climate barometer fell from minus 5.9 to minus 10.5 points in December (consensus -3.0). In contrast, the weekly labour market data published in the USA was positive. The number of initial jobless claims rose less sharply than expected, indicating that the labour market remains robust.

The Asia-Pacific stock markets were mixed on Friday. The minutes of the Bank of Japan's October meeting showed that the council members debated how they should communicate the change in their interest rate control course. Meanwhile, Japan's headline inflation rate slowed to 2.8% in November from 3.3% in October, registering the slowest pace of inflation since July 2022. Core inflation stood at 2.5%. In Tokyo, the Nikkei 225 recovered and traded 0.1% higher after leading the losses in Asia on Thursday. South Korea's Kospi also gained 0.1%, while the small-cap Kosdaq index slipped 0.6%. In Hong Kong, the Hang Seng Index fell by 1.1%, weighed down by the shares of heavyweights Tencent and NetEase. These came under pressure after China published draft rules to curb excessive gaming and spending. In contrast, the Chinese mainland index CSI 300 rose by 0.3%. In Australia, the S&P/ASX 200 fell slightly.

The Turkish central bank tightened its key interest rate yesterday for the seventh time in a row. This time, as expected, by 250 basis points to 42.5%. Although the pace of rate hikes has slowed, the central bank emphasised that it would maintain its tight monetary policy for as long as necessary to ensure sustainable price stability. The inflation rate in Turkey is currently over 60%.

Corporate news in focus: There are no important company reports on the agenda today.

Economic data in focus: UK GDP Q3 and Retail Sales November (08:00), France Consumer Confidence December (08:45), Spain GDP Q3 (09:00), Italy Consumer and Business Confidence December (10:00), USA Personal Income and Spending November and Durable Goods Orders November (14:30), Uni Michigan Consumer Confidence December and New Home Sales November (16:00).


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