DAILY MARKET NEWS - 12-12-2023

Ariff Azraei

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The Federal Reserve's upcoming meeting on December 13th is expected to hold interest rates steady at 5.5%, but uncertainty persists on whether this marks the peak rate for the current cycle. While markets are betting on rate cuts as early as March 2024, Fed officials caution it's premature to pivot towards policy easing given inflation still far from target and a resilient labour market. Though economic growth is slowing, the latest job data beat expectations and points to persistent wage pressures, supporting the Fed's higher-for-longer stance. Further inflation trends and labour data will determine if markets' dovish hopes for 2023 will be realised or push the Fed to additional hikes.


The U.S. stock market started the week strong, ahead of a crucial week that will feature the Fed’s policy meeting and inflation data. The Dow and the S&P 500 hit intraday highs, while the Nasdaq lagged behind as big tech stocks took a breather, although all broke major resistance levels. M&A activity was in focus, with Cigna ending its merger bid with Humana, Macy’s receiving a buyout offer, and Occidental Petroleum buying CrownRock.


Gold prices remained subdued on Tuesday as investors awaited crucial data and policy decisions from major central banks. The metal faced downward pressure from a strong U.S. jobs report and expectations of less dovish Fed stance. However, some support came from geopolitical tensions and inflation concerns.


Oil prices rose slightly on Tuesday amid inflation and interest rate uncertainties in the U.S. and a missile attack on a tanker in the Red Sea. However, the market remained under pressure from oversupply concerns. The oil market also awaited monthly reports from OPEC and the IEA, as well as the outcome of the COP28 climate talks.


The dollar remained firm on Tuesday as traders awaited key U.S. inflation data and a Fed meeting that could signal the timing of rate cuts in 2024. Most Asian currencies were subdued, with the yen recovering slightly and the yuan stable ahead of a CEWC meeting of Chinese leaders. The Australian dollar bounced back, while the Indian rupee stayed near record lows amid high inflation risks.