​ ​US

US markets saw higher volatility ahead of the much anticipated Fed meeting, the 3 major equity indices were down 1.71-2.45% over the past 5 days ending Thursday. The US Federal Reserve concluded the monetary meeting on Wednesday, announcing a 50 bps hike as markets have expected. President Jerome Powell mentioned that there is still ‘ways to go’ on fighting inflation, citing the tight job market as one of the issues at hand. The updated Fed Dot Plot also showed members turning slightly more hawkish, with the median rate expectations for 2023 pushed higher from 4.50-4.75% in September to 5.00-5.25%. However, markets seems to be at odds with Fed projections, at the time of writing, interest rate futures suggest rates to peak in June, and rate cuts to take place in the second half of 2023, and rates to end the year at the 4.5% level.

As for the economy, retail sales in November contracted 0.6% MoM, which was worse than the market expected 0.1% contraction. Industrial production also contracted 0.2% MoM, lower than the expectations of a flat figure. CPI figures on the other hand continued to show signs of easing, as the November headline CPI was 7.1% YoY, lower than both the market expectations of 7.3% and the October figure of 7.7%. Core CPI also showed a similar trend, down to 6.0% YoY in November, and was lower than both market expectations and the previous month figure. However, the labour market continues to show tightness, with the latest initial jobless claims falling to 211K. Next week, the US will be releasing further data including durable goods for November, as well as University of Michigan Sentiment Index and Consumer Board consumer confidence index in December, alongside the usual high frequency labour market data.

 ​Europe

European markets edged lower, with the UK, French, and German indices losing 0.62-1.95% over the past 5 days ending Thursday. The ECB held their monetary meeting on Thursday, announcing a rate hike of 50 bps. ECB President Chirstine Lagarde rejected prospects of an ECB pivot, and stated that markets should expect the Bank to raise rates ‘at a 50 bps pace for a period of time’, until monetary conditions are sufficiently restrictive. The ECB also discussed plans on Quantitative Tightening in 2023, which would likely start from March at the pace of around 15 billion Euros per month. The Bank of England also held their monetary meeting on Thursday, raising rates by 50 bps as expected. Governor Andrew Bailey stated that inflation might have peaked, and the UK has already entered recession, lowering expectations on the terminal rate. As for economic fundamentals, the German ZEW economic sentiment was -23.3 is December, which was slightly better than the expected -26.4. The UK CPI in November eased to 10.7% YoY, which was lower than expected and first retreat from the peak of 11.1%. Next week will be a quiet week on data, with Germany releasing the IFO business climate index for December, and Eurozone to release the latest consumer confidence in December.

​China

While China continued to ease COVID restrictions, there are worries over a possible surge in cases. Over the week, the CSI 300 was down 1.10%, while the Hang Seng Index was 2.26% lower. Chinese vice Premier Liu He stated that new measures are being considered to support the property sector, and to rebuild market confidence. Over in Hong Kong, Chief Executive John Lee believes that the Mainland China Border reopening will likely happen in 2023. On the economic front, Chinese data continued to disappoint. Industrial production in November was 2.2% YoY, missing market expectations of 3.5%, retail sales in November contracted 5.9% YoY, which also missed estimates of a 4% contraction. Fixed asset investments YTD were 5.3% YoY, which is lower than both market expectations and the previous value. Next week will be a quiet week for Chinese data, with the 1 Year and 5 Year Loan Prime Rates (LPR) as the only releases worth watching, both are expected to remain unchanged.