Japanese index became the best-performing stock index in Asia

Economic news is also contributing to the rally in stock indices. US weekly initial jobless claims rose by 12,000 to 218,000, indicating a weak labor market versus expectations of a rise to 210,000. US home sales for November were unchanged m/m, weaker than expectations of a 0.9% m/m increase.

Tiff Macklem, Governor of the Bank of Canada, has recently started to acknowledge that a rate cut could come in the new year, despite constant warnings that the central bank is ready to raise rates again if progress in curbing inflation stalls. Economists say the path of inflation toward the central bank’s 2% target could be bumpy, which could push back the timing of next year’s interest rate cut. In his year-end speech, Macklem told Canadians that 2024 will likely be a “year of transition.” He warned that the coming quarters will be “difficult for many” as growth slows and consumers are forced to rein in their spending.

ECB Governing Council spokesman Holzmann said it is too early for the ECB to think about cutting interest rates now, and there is no guarantee of a rate cut in 2024.

Crude oil (WTI) and gasoline prices fell sharply on Thursday, with crude falling to its lowest in a week and gasoline falling to a 2-week low. Concerns over slowing energy demand growth in China have weighed on crude oil prices. China Petroleum and Natural Gas Chemical Corporation (Sinopec) forecasts that demand growth for petroleum products in China will slow to 1.7% in 2024 from 16.1% in 2023.

Natural gas (XNG) prices rose sharply on Thursday after weekly US natural gas inventories fell more than expected. The EIA reported that natural gas inventories fell by -87 billion cubic feet last week, more than the expected 79 billion cubic feet.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) was down by 0.42%, China’s FTSE China A50 (CHA50) added 2.60%, Hong Kong’s Hang Seng (HK50) was up by 2.52%, and Australia’s ASX 200 (AU200) was positive by 0.70%.

In Asia, the best-performing major stock market in 2023 was Japan’s Nikkei (JP225), with a gain of 28%, its highest annualized gain in a decade. Taiwan’s stock market is in second place with a year-to-date gain of 26.6%. India’s Nifty index ranks third with a 20% gain in 2023. Thailand’s SET index, on the other hand, has been the worst-performing stock market in Asia this year, with a 15% drop. Hong Kong’s Hang Seng Index (HK50) fell by 14% this year, making it the second-weakest performer. China’s blue-chip stocks are down by 11 % for the year.

Bank of Japan (BoJ) Governor Kazuo Ueda said yesterday that the probability that the Japanese economy will emerge from low inflation and reach its price stability target is gradually improving, although the likelihood is still not high enough. He added that if prices and wages continue to rise, the chances of sustainably achieving the 2% inflation target will increase enough that the Bank of Japan will probably consider changing its monetary policy as early as spring 2024.

China has promised to tighten monetary policy and boost consumer prices, which continued their decline last month. The central bank also promised to ensure reasonable credit growth, increase structural support for technology, infrastructure, and other sectors, and boost public investment to encourage private investment. Such a PBoC statement gave a boost to Chinese stocks yesterday.