Weekly Insight 23/12 | Harris Fraser
Research Insights
24 December, 2022
Weekly Insight 23/12

Weekly Insight 23/12

usa ​US

Markets have not made up their mind on the economy and monetary policy path, worries over more potential tightening from the Fed led to markets correcting further. Over the past 5 days ending Thursday, the 3 major indices were down 0.52-3.09%. The US Senate passed a 1.7 trillion bill and is sent over to the House in bids of clearing it before services have to shut down over Christmas. The bill mainly comprised of domestic spending and military spending of around 770 billion and 850 billion respectively, and included a roughly 45 billion aid package to Ukraine, where Russia claims will further raise tensions in the region. In other news, Oil prices posted some recovery, the WTI gained 4.31% over the past 5 days ending Thursday, as expectations for China to return to normalcy outweighs recession fears.

On the economic front, Consumer Board consumer confidence index was 108.3 in December which was much higher than the expected 101.0, and the previous month’s 101.4. Existing home sales in November fell 7.7% MoM, a much larger fall than the expected 5.4%, the actual sales figure in the month was also the lowest since June 2020. Building permits in November was only 1.342 million, also missed expectations of 1.485 million, hitting a new low in 2.5 years. Contrary to the weak housing market, labour market remained tight, with initial and continuing claims coming in lower than market expected. Next week, the week will be shorter due to Christmas holidays, and we will only see sparse data releases. The US will publish the latest pending home sales data for November, as well as the usual labour market data on initial and continuing jobless claims.

 

euro ​Europe

European equities were mixed over the week, markets remained split over the economic and monetary outlook. Over the past 5 days ending Thursday, the French CAC and German DAX were slightly down 0.07-0.52%, while the UK FTSE was up 0.58%. After the rate hike decision in the previous week, ECB Vice President Luis de Guindos echoed the sentiment this week, stating that monetary tightening will continue despite recession overhang, and 50 bps hikes will be the new normal. As for the economic data, IFO business climate was 88.6 in December, which was better than the expected 87.4, and was a further improvement from the 86.4 in November. Eurozone consumer confidence on the other hand slightly missed expectations with the -22.2 in December, which was lower than the expected -22.0, but the figure continued the improvement since the trough back in September. With most of Europe having holidays over Christmas, next week will be a very quiet week on Euro data, with only the latest Economic Bulletin coming from ECB.

 

china​China

China equities were softer as COVID continued to spread in the country, while Hong Kong markets gained. The CSI 300 index was down 3.19% over the week, whereas the Hang Seng Index was up 0.73%. After the pivot in COVID policy, cases continued to mount in China. It was reported that workers with mild cases of COVID are requested to return to work, but traffic data suggest that economic activity across major cities could have fallen. On the policy side, the latest 1 Year and 5 Year Loan Prime Rates (LPR) were kept unchanged. The State Council instructed the further rollout of the stimulative policies, and suggested a more positive outlook for the economy in the coming year. This was also echoed by the PBOC, Governor Yi Gang states that the Bank will support consumption recovery, and assist M&A activity in the property sector. Furthermore, it was reported that China will remove quarantine requirements for travelers in the coming month. Next week, China will be releasing the manufacturing and non-manufacturing PMIs for December, as well as industrial profits data for November.

 

 

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