• World stocks climbed higher on Thursday (28/12/23), as expectations of interest rate cuts drove a rally in US stocks, while US Treasury yields and the Dollar rebounded slightly from 5-month lows. On Wall Street itself, the DJIA and others posted a slight gain of 0.1% – 0.2% and all indices recorded a 9-week winning streak, in what has been a very impressive recent swing rally. The DJI and S&P500 have already bagged 13% and 24% gains in 2023, respectively, with the S&P500 just 0.5% away from reaching its previous high in January 2022, when the PER currently stands at 24x. The Nasdaq Composite has surged 44% this year, driven by a rebound in mega-cap technology stocks. More broadly, MSCI’s world stock index, which tracks stocks in 47 countries, edged up 0.08%. European stocks were slightly lower in Thursday’s trading, but have stood firm near 23-month highs and recorded a 12.5% gain this year. From Asia, MSCI’s index for Asia Pacific excluding Japan also managed to gain 1.4%, on the back of rising Chinese stocks that pushed the index up 7.4% in the 4th quarter alone.
• Underlying this global bullish sentiment is the expectation that the Federal Reserve will soon be able to start cutting interest rates earlier in 2024, supported by last week’s Initial Jobless Claims data which increased by 12k to 218k, signaling the labor market continued to loosen during the 4th quarter. The market has priced in an 88% chance that the first pivot could occur in March 2024, according to the CME FedWatch survey, starting a series of rate cuts totaling 150bps next year. Goldman Sachs expects three consecutive US rate cuts in March, May, and June, followed by one each quarter until the Fed Funds Rate reaches 3.25% – 3.5% in Q3 of 2025. Therefore, Goldman Sachs stated that they expect 5x cuts in 2024 and 3x cuts in 2025.
• Analysts see that most investors are paying more attention to the Fed’s expectations that it has more power to move world currencies than signals from other central banks such as the ECB. This is mainly because the Fed also has a greater impact on the overall global risk environment, which is now favoring riskier assets, thereby reducing interest in the USD. No wonder the US Dollar weakened against the Japanese Yen, having slumped around 4.6% this month so far. However, the Dollar still rallied sharply this year as the Bank of Japan (BoJ) maintained its super-loose policy. In an interview on Wednesday, BOJ Governor Kazuo Ueda said he is in no hurry to abolish the loose monetary policy as inflation risks are well above 2% and the pace of acceleration is also fairly slow.
• COMMODITIES: OIL prices fell as more shipping companies expressed readiness to transit the Red Sea route e.g. Denmark’s Maersk (although Germany’s Hapag Lloyd is still hesitant to cross the Red Sea and will opt for an alternative route via the Cape of Good Hope), easing fears of supply disruptions as tensions in the Middle East continue to rise. On the other hand, data from the Energy Information Administration stated that US crude stockpiles fell by 7.1 million barrels, far above the forecast of minus 2.7 million barrels only; so the scarcity of oil in the US slightly limited the overall drop in oil prices. US crude or WTI is down about 3% to USD 71.90 per barrel and Brent is at USD 78.38, down 1.59% today.
• Meanwhile, GOLD prices weakened, pressured by rising US Dollar and Treasury yields after gold hit its highest level in more than three weeks during the session. Although gold prices on the spot market fell 0.5%, they still stood at USD 2,066 per ounce.
• JCI continued its year-end rally to the highest closing point of the year at 7303, one step away from the all-time high level of around 7355-7377, which becomes NHKSI RESEARCH’s YEAR END TARGET. So far JCI has managed to climb 6.6% from the beginning of the year. Foreign funds seem to be eager to flood the Indonesian market with yesterday’s Foreign Net Buy figure recorded at IDR 1.06 trillion (RG market), bringing the YTD figure to IDR 6.54 trillion (RG market). On this last trading day of 2023, it can thus be concluded that global capital markets have finally experienced window dressing in this challenging year and better economic growth awaits in 2024.
• ITMG: Capex Doubles in 2024
• ERAA: Injecting Subsidiary’s Capital
• GAINS: Establish AMP
Domestic & Global News
• Industrial Confidence Index Slumps to 51.32 in December 2023
• Maersk Restores Container Ship Sailing Schedule to Suez Canal
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