Market Update

As traders returned from an extended Christmas break with only a few days left in the year, global markets continued their "Santa Rally" during the final trading days of 2023. The surge in markets since mid-December followed major central bank pauses in monetary tightening, with the Federal Reserve hinting at potential rate cuts in 2024, which bolstered investor sentiment.
The past week was relatively quiet for markets, with limited economic data available for investors to digest. The S&P 500 maintained its position near its all-time high. Initial jobless claims increased by 12,000 to 218,000, surpassing consensus expectations of 210,000. Despite the rise, first-time applications for unemployment benefits remained close to historical lows, indicating that companies are reluctant to reduce headcounts amid steady demand. Treasury yields continued to decline, reflecting hopes that inflation has cooled sufficiently for the Federal Reserve to consider rate cuts.
In Japan, stock markets closed higher, driven by expectations of the Bank of Japan (BoJ) maintaining its ultra-low interest rate policy. Although the BoJ considered exiting its stimulus program, board members emphasized a lack of urgency for a shift and emphasized flexibility in waiting for wage data. Governor Kazuo Ueda hinted at potential policy adjustments but stressed the importance of wage negotiations and achieving the 2% inflation target.
Chinese stocks saw a notable increase following the government's announcement of new approvals for online games and assurances regarding potential restrictions in the gaming sector. China's November industrial profits showed double-digit gains, signaling an improvement in manufacturing despite soft demand affecting business growth expectations. Although the 29.5% profit increase in November was positive, industrial earnings for the first 11 months of 2023 showed a year-on-year contraction of 4.4%, an improvement from October's 7.8% decline. Hong Kong's Hang Seng Index had a positive week, rising by 4.3%, driven by significant buying in technology and property shares.
Looking ahead, next week's data includes PMI figures from China, the U.S., the UK, and Ireland. Toward the end of the week, Eurozone inflation data, including Irish inflation figures, and U.S. labor market data, including non-farm payrolls, participation rate, and unemployment rate, are anticipated. Investors will be closely scrutinizing the Federal Reserve minutes from their last policy meeting in December on Wednesday for further insights into the future path of monetary policy.