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Asia-Pacific markets were set to rise, with Japan planning to extend its record-breaking rally ahead of US inflation data for December.
The country’s benchmark Nikkei 225 crossed the 34,000 mark on Wednesday, a level it has not reached since March 1990. Broad-based topics also reached a 33-year high.
The Nikkei is set to extend its performance, with the futures contract in Chicago at 34,940 and its counterpart in Osaka at 34,860, while the index’s last close was at 34,441.72.
Investors in Asia will also keep an eye on the Bank of Korea, which will announce its rate decision. Economists polled by Reuters expect the bank to keep its benchmark lending rate at 3.5% for the eighth consecutive meeting.
In Australia, the S&P/ASX 200 started the day up 0.31%, recovering from Wednesday’s decline ahead of the country’s November trade data.
Hong Kong’s Hang Seng index futures were at 16,150, indicating a stronger start than the HSI’s close of 16,097.28.
Overnight in the US, all three major indexes gained as traders await fresh US inflation data and earnings release.
Investors will also keep an eye on the US consumer price index report due to be released on Thursday. Economists surveyed by Dow Jones expect the CPI to rise 3.2% year on year in December. The producer price index reading is due on Friday.
The S&P 500 rose 0.57%, while the Dow Jones Industrial Average gained 0.45%. Tech giant Nasdaq Composite closed 0.75% higher at 14,969.65.
— CNBC’s Sarah Min and Alex Haring contributed to this report
Strategist Ed Yardeni says the market is ahead of itself on AI profit estimates and Fed policy easing
Longtime Wall Street strategist and economist Ed Yardeni said stock market investors and analysts are being realistic in estimating the immediate contribution of artificial intelligence tools to corporate profits and the potential pace of policy easing this year by the Federal Reserve. But the gun has been jumped. said Wednesday on CNBC’s “Squawk on the Street.”
“Not only are we seeing enthusiasm by investors, but we’re certainly seeing enthusiasm by analysts,” Yardeni said. “They dramatically increased their earnings expectations for Nvidia,” and that drove the stock’s forward P/E multiple from the low 80s to the low 20s. “But look, it’s a hot stock, and it will likely remain a hot stock as long as AI delivers. I think it’s going to take a little longer for AI to deliver as much as the market expects.”
Yardeni said Nvidia’s performance in the 2020s reminds him of the behavior of Cisco systems in the 1990s. In terms of AI’s contribution to earnings, Yardeni said, “The problem is that the market gets irrationally excited about how much can be achieved in a very short period of time.” “And I’m worried about a kind of parabolic melting.”
Additionally, investors are expecting many more interest rate cuts from the Federal Reserve in 2024, Yardeni said. “I remain of the belief that we are not going to go into a recession – for the third year in a row I’m saying this – and I remain of the belief that we’re probably going to have two to three rate cuts “The second half of the year, not four to five, which the market is discounting.”
– Scott Schnipper
Fed’s John Williams said inflation is falling but policy still needs to be tightened
New York Federal Reserve Chairman John Williams said on Wednesday that inflation data is moving in the right direction but expected monetary policy to remain accommodative.
“My base case is that the current accommodative stance of monetary policy will continue to restore balance and bring inflation back to our 2 percent long-term target,” influential central bank officials said in a prepared speech.
“I expect that we will need to maintain some of the restrictive stance of policy to fully achieve our goals, and dialing back the degree of policy restraint would be appropriate only when we are confident that inflation will remain below 2 percent.” Moving towards a sustained basis,” he said.
Williams said the risks for the Fed remain “two-sided” as it could step back too soon and risk higher inflation or stay on the sidelines for too long and damage the economy.
HSBC expects ‘temporary pause’ in equity rally
Equities ended 2023 on a strong note, with the S&P 500 up 24.2%, the Dow Jones Industrial Average up 13.7% and the Nasdaq Composite up 43%.
But HSBC believes global equities have now outpaced their fundamentals.
“While we remain strategically constructive on equities, we expect a temporary pause in the rally,” the firm wrote. “Global equities have outperformed our machine learning (ML) model predictions by 10% over the past 3 months.”
With “markets increasingly priced for fullness”, the bank said stock valuations could be sensitive to any dovish signals from the Fed or unexpected surprises in inflation.
HSBC said that of all the equity sectors, consumer staples, energy and health care currently look the most attractive. Regionally, it extends to China, the United Arab Emirates and Switzerland.
-Lisa Kailai Hahn
Equity markets ‘higher, but more calm’ in 2024, according to Barclays
Barclays says that after a strong year-end rally in 2023, the market will see some upside in 2024, albeit limited.
“We expect a higher, yet more subdued, equity market in 2024,” said Emmanuel Cau, equity strategist at Barclays. “After an extraordinary year-end rally, the bar for positive surprises has been raised and cyclicals are on top.” Are visible.”
Barclays forecasts a “healthy consolidation” for equities after a sharp equity rally. Kau said valuations and earnings could potentially create some upside potential.
“While rate cuts in the US appear too aggressive to us in the absence of a deep recession, we agree that the direction of travel is towards lower rates,” Cow said.
– Hakyung Kim