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Asia-Pacific shares traded higher on Wednesday, although the Bank of Japan (BoJ) announced its decision not to change its yield curve control policy. In a press conference, the BoJ’s Governor Haruhiko Kuroda said that “it’s not long since we decided on our measures in December. It will likely take some more time for the measures to start having an effect on fixing market function.” As expected, the BoJ kept interest rates unchanged.

Morgan Stanley: Chinese equity market likely to be the top performer in 2023

According to a Morgan Stanley report, the Chinese equity market will likely emerge as the top performer in 2023. Morgan Stanley economists suggested that the MSCI China index could reach 80 and the Hang Seng index could rise to 24,500 by the end of 2023. This would mark around a 15% upside from where the market is trading now.

UK December CPI inflation eases to 10.5%

A report published by the Office for National Statistics (ONS) showed that UK Consumer Price Index (CPI) inflation eased to 10.5%, on an annualised basis, in December due to falling fuel and clothing prices. Commenting on the inflation report, ONS economists noted that “although we’ve seen a second consecutive easing, it is fairly modest fall and inflation is still at a very high level with overall prices rising strongly.”

On Wednesday morning, the GBP/USD currency pair refreshed a five-week high, trading at 1.2320.

US Retail Sales report due today

The US Census Bureau will release later today a set of data regarding retail sales in the country in December. Economists expect the report to show a 0.8% drop on a month-to-month basis. It should be noted that US retail sales had slipped by 0.6%, on a monthly basis, in November 2022.

If the US December retail sales figure aligns with market expectations, the US dollar might get a boost. On the contrary, a further drop in retail sales could hurt the US currency which has struggled against the euro and the British pound in the last seven days.

Just twenty days ago (Dec.26th), a Mastercard ServicePlus survey showed that retail sales (excluding cars) increased 7.6%, on an annualised basis, this holiday season, running from November 1st through December 24th. A downbeat sales figure could spark speculation over a new interest rate hike by the US Federal Reserve, which seeks to tighten its monetary policy and control consumer price inflation.

UK Retail Sales likely to have risen in December

On Friday, it will be the UK’s ONS turn to publish a report regarding retail sales in December. Some economists suggest that retail sales figures will come in at –4.2% and +0.4% on a year-to-year and a monthly basis respectively.

A report published a week ago by the British Retail Consortium (BRC) and accountancy firm KPMG created mixed feelings as it showed that like-for-like retail sales jumped by 6.9% on a yearly basis in December but were driven mainly by elevated prices.

High prices are a problem as living costs put a strain on UK consumers’ budget. The Bank of England is on course to tighten its monetary policy by raising interest rates. 

People’s Bank of China decided on interest rates 

Just before the Chinese New Year celebrations, the People’s Bank of China (PBoC) will announce its decision on interest rates on Friday January 20th. Economists forecast the central bank will keep borrowing costs on hold.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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