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At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.42%, while the S&P 500 Index (US500) was down by 0.15% on Tuesday. The NASDAQ Technology Index (US100) closed positive by 0.09%.

Lower expectations for a Fed interest rate cut in March weighed on equities as swap markets show that the probability of a 25 bps Fed rate cut at the March 19-20 FOMC meeting fell to 67% from the 100% probability last month.

The US trade deficit unexpectedly narrowed to negative $63.2 billion in November from $64.5 billion in October, which was better than expectations of an increase to negative $64.9 billion and a positive for Q4 GDP. The reduction of the deficit is a positive factor for the strengthening of the national currency.

In November 2023, Canada recorded a trade surplus of CAD 1.6 billion, down significantly from a surplus of CAD 3.2 billion in the previous month and below market expectations of CAD 2 billion. The surplus was driven by a 1.9% increase in imports to CAD 64.2 billion.

Equity markets in Europe were mostly down yesterday. Germany's DAX (DE40) was down by 0.17%, France's CAC 40 (FR 40) fell by 0.32% on Tuesday, Spain's IBEX 35 (ES35) lost 1.46%, and the UK's FTSE 100 (UK100) closed negative by 0.13%.

The Eurozone unemployment rate for November unexpectedly fell to a record low of 6.4%, indicating a stronger labor market. German industrial production for November unexpectedly declined by 0.7% m/m, weaker than expectations of 0.3% m/m. Industrial production declined for the sixth consecutive month. ECB Governing Council representative Centeno said yesterday that good news on Eurozone inflation allows the ECB to cut interest rates sooner than expected.

According to the World Bank, the global economy is experiencing its worst growth rate in 30 years. Global economic growth is projected to slow for the third consecutive year in 2024, falling to 2.4% from 2.6% in 2023, according to the latest World Economic Outlook report released on Tuesday. It also points out that escalating conflicts (Russian invasion of Ukraine, conflict in the Middle East) could have significant implications for energy prices, which could affect both inflation and economic growth.

Asian markets traded yesterday without any unified dynamics. Japan's Nikkei 225 (JP225) was up by 1.16% for the day, China's FTSE China A50 (CHA50) was down by 0.46%, Hong Kong's Hang Seng (HK50) decreased by 0.21%, and Australia's ASX 200 (AU200) was positive by 0.93%. Japan's Nikkei 225 (JP225) jumped to a 34-year high on Wednesday amid growing expectations of a delay in the Bank of Japan's policy tightening plans.

Japanese household spending fell by 2.9% y/y in November, weaker than expectations of 2.3% y/y and marking the ninth consecutive month of spending declines. Tokyo's Consumer Price Index for the decade fell to 2.4% y/y from 2.7% y/y in November, better than expectations of 2.5% y/y and the slowest rate of increase in 1.5 years, dovish for BOJ policy.

In Australia, the monthly consumer price index (CPI) came in at 4.3% y/y in November, the slowest pace since January 2022. This is down from October's 4.9% reading and below market forecasts of 4.4%. If the fourth quarter inflation report due out at the end of January paints a similar picture for consumer prices, markets may move expectations for the first-rate cut by the Reserve Bank of Australia (RBA) in June since August this year.

S&P 500 (US500) 4,756.50 −7.04 (−0.15%)

Dow Jones (US30) 37,525.16 −157.85 (−0.42%)

DAX (DE40)  16,688.36 −28.11 (−0.17%)

FTSE 100 (UK100) 7,683.96 −10.23 (−0.13%)

USD Index  102.53 +0.32 (+0.31%)

News feed for 2024.01.10:

• – Australia Consumer Price Index (m/m) at 02:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 16:15 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – US FOMC Member Williams Speaks (m/m) at 22:15 (GMT+2).

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