Market Recap: Global Stocks on AI rally; Yen Drifting

Economic Indicators & Central Banks:

  • US labor-market data, strong weekly jobless claims, and higher-than-expected retail sales have added pressure against market rate-cut expectations.
  • Markets now pricing a 57% chance of a US rate cut in March, down from 75% a week ago.
  • Central bankers suggest markets are overly being aggressive in pricing rate cuts for 2024, contributing to the Dollar’s resurgence amid turbulence in China’s property and financial markets.
  • Japan’s core inflation slowed to 2.3% in December, its lowest annual pace since June 2022, easing pressure on policymakers and weakening the Yen to 148.44 per dollar.
  • UK: An unexpected rise in British inflation has also led to a pullback in bets on Bank of England rate cuts, supporting the Pound.

Market Trends:

  • The TSMC projection of 2024 revenue growth of over 20% boosted Tokyo Electron and Advantest, contributing to a total 497-point jump in the Nikkei on the day, with respective advances of 6.03% and 8.2%.
  • Chip-related shares, influenced by US peers’ gains, were prominent performers. Its earnings spurred the biggest rally in chipmakers in more than a month on Thursday and pushed the Nasdaq 100 index to close at an all-time high.
  • Chip-industry stocks led a rally in Japan’s Nikkei share average, contributing to a 1.4% daily gain to close at 35,963.27, and a weekly gain of 1.09%.
  • “The better-than-expected results from TSMC could be positive signals on demand recovery,” said An Hyungjin, chief executive officer and fund manager at Billionfold Asset Management Inc. “With strong AI demand, not only the US big tech firms but also most tech firms around the world have to invest in AI and that could be good news to stock markets.”

Financial Markets Performance:

  • The USDIndex is set for a 2nd consecutive weekly gain as signs of strength in the US economy and cautious remarks from central bankers reduce expectations of rapid interest rate cuts.
  • AUDUSD and NZDUSD are on track for their largest weekly gains since November and July, respectively.
  • Bitcoin hit a 5-week low at $40,484 as traders took profits following US approval of spot Bitcoin ETFs. Investors poured $1.9 billion into new bitcoin ETFs in the first three trading days, falling short of some aggressive estimates.
  • Oil prices held steady at a 3-week high amid escalating tensions in the Middle East, where the US and Iranian-backed Houthis engaged in tit-for-tat strikes affecting global shipping.
  • UKOIL hovered around $79 per barrel after a 1.6% rise, while USOIL stood above $74, supported by a decline in US inventories. The US conducted multiple attacks on Houthi targets in Yemen, but shipping remains under threat. President Biden affirmed continued US strikes. Crude prices, marked by volatility, face conflicting factors, including Middle East tensions, Fed rate cut uncertainty, and a well-supplied market forecast by the International Energy Agency.

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Andria Pichidi

Market Analyst

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Having completed her five-year-long studies in the UK, Andria Pichidi has been awarded a BSc in Mathematics and Physics from the University of Bath and a MSc degree in Mathematics, while she holds a postgraduate diploma (PGdip) in Actuarial Science from the University of Leicester.

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