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Nevin Al Sukari - Sana'a - Wall Street had suffered its biggest drop since September yesterday. There was no obvious catalyst but with holidays fast approaching and a small rise in weekly jobless claims kicking off a flurry of US data neither Asia or Europe offered much resistance. — Reuters pic
LONDON, Dec 21 — Share markets had an end of year wobble today, while bonds completed a remarkable round trip for the year on the consensus view that large parts of the world will be chopping interest rates in 2024.
Wall Street had suffered its biggest drop since September yesterday. There was no obvious catalyst but with holidays fast approaching and a small rise in weekly jobless claims kicking off a flurry of US data neither Asia or Europe offered much resistance.
Europe’s STOXX 600 index fell 0.4 per cent in a broad market sell-off where the region’s car sector skidded over 1 per cent and both tech and travel slipped 0.6 per cent.
Commerzbank brought some cheer as it shares jumped nearly 3 per cent at one point after the European Central Bank approved its €600 million (RM3.07 billion) stock buyback plan.
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US futures were also pointing higher again after yesterday’s 1.3 per cent-1.5 per cent Wall Street whackings and bond markets were still rallying too.
Italy’s 10-year bond yields - which reflect Rome’s borrowing costs - fell to their lowest since August 2022 while benchmark 10-year Treasuries were down at 3.86 per cent, which was almost exactly where they started the year.
It completes a remarkable round trip after they touched 5 per cent back in October when investors where expecting higher-for-longer US interest rates. It highlights how the opposite is now priced in, BofA strategist Elyas Galou said.
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“Everyone expects a soft landing to happen, everyone expects bond yields to be lower and everyone expects Fed rate cuts,” he said, despite the fact the US central bank has only cut rates five times since 1930 when employment was still this low.
In currency markets, the yen rose as far as 142.81 per dollar after Japan lifted its growth projections for the fiscal year to 1.6 per cent.
The dollar index, which tracks the US currency against a basket of other top currencies, barely budged, while Britain’s pound steadied after weaker-than-expected UK inflation numbers on Wednesday had sparked its biggest drop in months.
The euro was at a standstill too, with the debate still raging on when the European Central Bank (ECB) might start cutting euro zone interest rates and whether it or the Bank of England will go first.
“Once we see inflation is clearly converging in a stable manner to our target of 2 per cent, monetary policy might then start to ease. But it’s still too early for that to happen,” ECB Vice President Luis de Guindos told Spanish newspaper 20 Minutos in an interview published on Thursday.
Turkiye
The year’s last big dump of US data saw US third-quarter GDP trimmed back slightly alongside the small rise in weekly jobless claims figures, although this time of year always tends to be volatile.
Turkiye was on the menu too, lifting its key interest rate by 250 basis points to 42.5 per cent as it faces down years of soaring inflation.
It was the seventh straight hike and means rates have now risen by 34 percentage points since June, when President Tayyip Erdogan appointed former Wall Street banker Hafize Gaye Erkan as central bank governor to conduct a sharp pivot towards more orthodox policies.
There was a landmark in the other direction too as the Czech National Bank (CNB) cut its interest rates for the first time in more than three years.
In commodities, global oil benchmark Brent hovered around US$80 (RM372.4) a barrel amid jitters over global trade disruptions and geopolitical tensions in the Middle East following attacks on ships in the Red Sea by Yemen’s Iran-aligned Houthi forces.
Brent crude was last trading at US$79.93 per barrel and US crude ticked up to US$74.45 a barrel.
In Asia overnight, Japan’s Nikkei stock index slid 1.5 per cent from long-term highs, while China’s blue-chips rose 1 per cent, rebounding from a near five-year low hit in the previous session.
Gold, which is up almost 12 per cent this year, was slightly higher too at US$2036.19 per ounce. — Reuters
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