Market 01/23: Market no longer expects FED to cut rates in March 2024

Japan: BoJ maintains negative interest rate, keeps 2% inflation target

At the end of 2-day meeting, BoJ maintains short-term interest rate -0.1% and 10-year interest rate at 0%=, maintains yield curve control as reference.

• Fiscal year inflation forecast (from April) down to 2.4% (from 2.8%). → Price increases may continue to exceed 2% target as has happened since April 2022.

• JPY continues to weaken: USP/JPY hits 148.12, down -5% this year.

  • Strong US economic data also contributes to pushing USD/JPY higher amid expectations for early Fed rate cuts.

• Meanwhile, Nikkei index up +0.6% to 34-year high, up +9.9% year-to-date.

As Viet Hustler pointed out in 2024 economic outlook:

BoJ will continue waiting for the results of the labor union's "shunto" wage negotiations in March before making any pivot decision.

Fed Richmond manufacturing index plunges to lowest since Covid

Fed Richmond manufacturing index plunges to -15 (lower than expected -8), reaching lowest level since Covid period.

• New orders down to -16 from -14.

• Employment plunges from −1 to −15.

• Recorded wages see slight increase.

China considers $278 billion rescue package for stock market

China targets purchasing ~2000 billion CNY (~$278 billion) domestic stocks on Hong Kong market to stabilize the market.

• In recent days, Chinese stocks have plunged to 5-year lows despite PBoC calling to stop short selling.

  • CSI China 300 Index has fallen 45% from 2021 peak.

• After rescue package news: Hang Seng Index up 3.8%.

• Moody's issues negative assessment on credit ratings of Asian countries due to: slow China economic growth rate + tightening capital sources + geopolitical risks.

• After a series of sell-offs, China's stock market cap is lower than the US by 38,000 billion USD - the highest ever.

The market no longer expects the Fed to cut interest rates in March/2024.

• Market expectations for an interest rate cut in March have dropped sharply from 90% two weeks ago to only ~42%.

• The probability of an interest rate cut from the Fed's next meeting next week has now dropped to about ~2%.

• JPMorgan also believes that investors expecting early rate cuts will be disappointed.

Some other news:

1. Yesterday, the Dow Jones Industrial Average closed above 38,000 for the first time in history. S&P500 also closed at an all-time high.

2. Airbus A330 flight canceled after passenger discovered 4 missing quick-release fasteners on the wing.

3. According to the Ukrainian Defense Minister, Belgium will provide military aid to Ukraine of 611 million euros (665 million USD) this year.

   • this figure is larger than the total amount Belgium has aided Ukraine since the war began - 496 million euros (540 million USD).

4. The US Supreme Court allows border agents to remove barbed wire on the Texas-Mexico border after a 5-4 vote.

=> big victory for Biden in the dispute with Governor Abbott over border policy.

5. Bitcoin drops below 39,000 USD for the first time this year, down about 20% from the Bitcoin ETF launch date.

6. Food giant Archer Daniels Midland (ADM) drops sharply -21% in the session after CFO suspended following accounting investigations. 2023 earnings forecast cut, Q4 results also delayed.

• Looking back at 01/05: a trader bought 10,000 ADM put options, Strike: 65, expiring in February, at 0.75 USD, total transaction value 750,000 USD.

  • Currently, these options are trading at 12.10 USD → Profit over 11 million USD.

7. India surpasses Hong Kong to become the world's 4th largest stock market with total market cap reaching 4.33 trillion USD.

8. Netflix will broadcast WWE’s Raw from next year in an effort to boost revenue by curbing password sharing and pushing users to paid memberships.

9. Amazon aims to launch online car shopping after piloting Hyundai car sales on the Amazon platform for employees.

10. United CEO expresses doubts about 737 Max 10 orders after recent Boeing incidents.

• The entire Boeing 737 Max 9 fleet was recently grounded at the beginning of the month.

• Max 10 is the largest model and not yet certified by the FAA.

• United Airlines expects to record a loss in Q1 due to FAA grounding Max 9 planes during the month.

• United currently owns 79 Max 9s, more than any other airline.

11. Bank of England expected to make the biggest interest rate cut in 16 years next week after easing inflation signs.

    

12. Procter & Gamble Co. shares rose +5% on Tuesday after strong earnings from product price hikes.