Morning Wrap (14.12.2023)

Indices continue to rise a day after the Fed's decision, with good market sentiment extending into the next day.

The increases in US500 and US100 contracts are also related to the rollover of contracts that took place at the turn of yesterday and today. Nonetheless, the fuel for the increases continues to be the dovish appearance of Fed Chairman Jerome Powell.

Indices in Asia and the Pacific are also gaining, but the increases are not as dynamic as in the USA. Chinese indices gain 0.40-0.80%, similar to the Australian S&P ASX 200 index. The Nikkei 225 index loses 0.80%.

The Dow Jones Industrial Average closed yesterday at a historically record level, surpassing levels from early 2022.

Goldman Sachs now predicts that the Fed will make three more rate cuts of 25 bp each in March, May, and June.

JPMorgan expects the Fed to make its first interest rate cut in June, compared to July as previously expected, to achieve a target range 125 basis points lower by the end of the year.

Barclays expects the Fed to make three rate cuts of 25 bp each in 2024, starting from June, compared to one rate cut in December 2024 as previously expected.

Swaps are pricing in over 140 basis points of interest rate cuts by the end of 2024.

Chief Cabinet Secretary Hirokazu Matsuno and Minister of Industry Yasutoshi Nishimura were among those who announced their resignations following the revelation of a financial scandal. Four ministers - all from the largest and most powerful faction in the ruling Liberal Democratic Party (LDP), which is being investigated by prosecutors - and several deputy ministers are to be replaced.

Japanese politicians were fired due to allegations of mishandling political funds, undermining public trust in politics. This includes a criminal investigation into the Abe faction of the Liberal Democratic Party, involving suspicions of about 500 million yen in missing fundraising proceeds.

Australian labor market data for November:

• Actual unemployment rate in Australia 3.9% (forecast 3.8%, previously 3.7%)
• Australian participation rate 67.2% (forecast 66.9%, previously 67.0%)
• Employment change 61.5 thousand (forecast 11.5 thousand, previously 55.0 thousand)

New Zealand GDP data came out worse than expected. Actual data showed a year-over-year GDP decrease of -0.6% (forecast 0.5%, previously 1.8%, revised to 1.5%). The quarterly change was -0.3% (forecast 0.2%, previously 0.9%, revised to 0.5%)

Cryptocurrencies also continue to rise. Bitcoin is trading with little change around 43,000 USD, while Altcoins and Ethereum gain, respectively, 0.05% and 0.65%.