Japanese financial shares rise after Bank of Japan announcement
S&P sees oil prices rising to $121 after China fully reopens
Oil prices could also reach as high as $121 after a full reopening in China, S&P forecast, adding that prices were poised to settle to $90 a barrel by 2023.
Oil prices are likely to see “one big bump” since China fully reopens to $121 a barrel, nearing their March peak after Russia’s invasion of Ukraine, S&P Vice President Dan Yergin said.
He added that the rise in prices will be fueled by efforts caused by a lack of investment in oil and gas, Yergin added.
“Our base case for 2023 is $90 for Brent, but you have to look at other cases,” he said, adding that the outlook for oil was clouded primarily by three uncertainties — more Fed hikes, Chinese demand and Russia’s reaction to the above the oil price limit agreed by the European Union.
— Lee Ying Shan
Bank of Japan keeps rates steady, extends yield curve control range
The Bank of Japan kept its benchmark interest rates steady and announced it would modify its yield curve control range, the central bank said in a statement.
The BOJ will widen the range of fluctuations in the yield on 10-year Japanese government bonds from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points, it said.
The adjustment aims to “improve the functioning of the market and encourage a smoother formation of the entire yield curve, while maintaining flexible financial conditions,” the BOJ said.
The Japanese yen gained more than 2% to 133.37 against the US dollar after the announcement.
– Jihie Lee
A range of Reserve Bank of Australia options were considered in December
Minutes from the Reserve Bank of Australia’s December meeting showed the central bank considered a number of options for its cash rate decision, including a complete pause in hikes.
“The board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; an increase of 25 basis points; or without changing the cash rate,” the minutes said.
RBA board members also pointed to the importance of “consistent action”, adding that the central bank will continue to consider a range of options for the coming year as well.
– Jihie Lee
China keeps key lending rates unchanged
The People’s Bank of China kept one-year and five-year loans unchanged in December, according to the announcement.
The central bank kept the primary interest rate on one-year loans at 3.65% and on five-year loans at 4.30%, in line with expectations in a Reuters poll.
The offshore and onshore Chinese yuan were relatively steady at 6.9808 and 6.9783 against the US dollar, respectively.
– Jihie Lee
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— Xavier Ong
The Bank of Japan is expected to keep rates steady
The Bank of Japan is expected to keep interest rates at -0.10%, according to a Reuters poll of economists.
A decision on the rate is expected after the central bank’s two-day monetary policy meeting ends on Tuesday.
Separately, the Japanese government and the BOJ reportedly intend to revise a statement committing to a 2 percent inflation target at the earliest possible date, Kyodo News reported, citing government sources.
— Jihie Lee
Fed is overdoing rate hikes, Evercore ISI says
The Federal Reserve is likely going too far with raising interest rates to tame inflation and could push the U.S. economy into recession, Evercore ISI’s Ed Hyman wrote in a weekly note.
The federal funds rate is now 6.5% versus a core PCE of 4.7% annualized and a bond yield of 3.5%, Hyman wrote.
“And it’s not just the Fed tightening: the ECB, BoE, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps more deeply, the money supply is shrinking.”
In addition, Evercore’s Economic Diffusion Index is edging into recession territory along with other indicators such as company surveys, inflation data and layoff announcements. And wage growth has begun to slow, and high rents are showing early signs of easing, signaling that inflation is likely to have run its course.
“Either way, 87 percent of American voters are worried about a recession,” Hyman said.
– Carmen Rajnik
The S&P 500 had its worst December in four years
The S&P 500 is down more than 6% this month, as Wall Street struggles as the year ends. That led to the worst monthly performance since September. That would also be its biggest December drop since 2018, when it fell 9.18%.
Shares close down for the fourth day in a row
Recession fears and dashed hopes for year-end growth weighed on stocks on Monday, sending them to a fourth straight negative close.
The Dow Jones Industrial Average fell 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47 and the Nasdaq Composite shed 1.49% to 10,546.03 weighed down by Amazon shares, which fell 3%.
– Carmen Rajnik