As the year-end approaches, Asian shares encountered a pause on Thursday, marked by a late and sharp selloff on Wall Street, leaving investors puzzled. Possible factors contributing to this pause include investors winding down activities for the year or securing profits ahead of Friday’s U.S. inflation data. Despite a 1.5% decline on Wednesday, the Nasdaq 100 boasts a 51% gain for the year.
Oil experienced a slight slip, with market anxiety prevailing as shippers strive to navigate the Red Sea amid a series of attacks. Washington has initiated efforts to enhance security at this maritime bottleneck, yet concrete details remain scarce.
Toyota Motor shares faced a significant slump as Japan’s transport ministry inspected a subsidiary due to safety concerns spanning decades.
The market’s euphoria, stemming from last week’s dovish shift in the Federal Reserve outlook, continued in the rates market. This sentiment was further supported by a swift cooling of British inflation. The 10-year U.S. Treasury yield stood at 3.8622%, nearing the previous session’s five-month low and reflecting a 116-basis-point decline from October’s peak.
Similarly, the two-year yield, indicative of near-term interest rate expectations, hovered near a seven-month trough. Wednesday saw a more than 18-basis-point dive in two-year gilt yields after data revealed a more substantial drop in British inflation than anticipated.
Fed funds futures indicate expectations of over 150 basis points in cuts for the upcoming year. Similar sentiments are emerging around the Bank of England, with more than 100 basis points of cuts priced in for 2024.
The last major data release before Christmas is Friday’s U.S. core PCE price index, the Fed’s favored gauge of underlying inflation, where another deceleration is anticipated.
Key Developments for Thursday:
- U.S. weekly jobless claims
- UK CBI distributive trades (December)
