MARKET UPDATE

Dollar dips as traders focus on US rate cuts.

The dollar nursed steep losses on Thursday and was headed for a yearly decline, while the Swiss franc perched at a nine-year peak and the euro at a five-month high on expectations that 2024 will bring deep rate cuts.

With the year coming to a close, thin liquidity and limited moves are expected until the New Year.

The dollar index, which measures the U.S. currency against six rivals, fell to a fresh five-month low of 100.76. The index is on course for a 2.6% decline this year, snapping two straight years of strong gains.

Investor focus remains on the timing of the interest rate cuts from the Federal Reserve, with markets pricing in a 88% chance of a cut in March 2024, according to CME FedWatch tool. Futures imply more than 150 basis points of Fed easing next year.

 

Oil prices stabilise.

Oil prices steadied on Thursday after falling sharply in the previous session, as concerns eased about shipping disruptions along the Red Sea route even as tensions in the Middle East continued to rise.

Brent crude futures inched up 10 cents, or 0.1%, to $79.75 a barrel by 0424 GMT, while U.S. WTI crude futures were trading 5 cents lower at $74.06 a barrel. Prices dropped nearly 2% on Wednesday as major shipping firms began returning to the Red Sea.

“Concerns about shipping in the Red Sea have eased, but continued worries about tensions in the Middle East, especially on Iran’s involvement in the region, make it difficult to sell further,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan (OTC:NSANY) Securities.

“The market is likely to try the upside again… maybe in the early new year, also on expectations of a recovery in fuel demand thanks to monetary easing in the United States and higher kerosene demand during the winter in the northern hemisphere,” he said.

Danish shipping company Maersk said it has scheduled several dozen container vessels to travel via the Suez Canal and Red Sea in the coming weeks after calling a temporary halt to those routes this month after attacks by Yemen’s Iran-backed Houthi militia.

 

Asia shares at 5-month highs.

Asian shares scaled five-month peaks on Thursday as market wagers on ever-more aggressive rate cuts extended a huge rally in U.S. stocks and bonds, while also leaving plenty of scope for disappointment in the new year.

The S&P 500 has climbed 14% in just two months to within a whisker of its all-time closing peak, while its price to earnings ratio is up by a quarter on the year at 24.0.

MSCI’s broadest index of Asia-Pacific shares outside Japan added another 1.4%, to be up 11% in two months and at its highest since August.

Japan’s Nikkei was off 0.4% as a rebound in the yen has kept its gains for December to a minimum.

Even Chinese blue chips bounced 2.3%, having generally missed out on the global cheer as foreign investors fretted about economy’s faltering recovery and tensions with the United States.

EUROSTOXX 50 futures added 0.4% and FTSE futures 0.3%. S&P 500 futures edged up 0.1% to another record high, while Nasdaq futures firmed 0.2%.

A lack of major news has not stopped investors from ramping up bets on rapid-fire rate cuts from the Federal Reserve.

 

 

 

 

 

 

 

 

 

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