DAILY MARKET NEWS - 16-01-2024

Ariff Azraei

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The tech industry is reeling under a surprise tax bill, and thousands of people have already been caught in the layoff storm as R&D investment plummets. A 2022 tax change, forcing amortisation of software development costs, including the salaries of developers, has slammed tech companies with massive tax bills, triggering layoffs, reducing hiring, and dampening R&D that started in 2023 and is expected to climb in 2024. With thousands already jobless and industry giants like Unity and Google announcing further cutbacks, calls to amend the law are growing, but legislative action remains deadlocked.


US markets closed for a holiday while investors will keep a wary eye on bank earnings from Goldman Sachs and Morgan Stanley, hoping to gauge M&A activity. Meanwhile, the World Economic Forum's survey points towards a cautiously optimistic global economy coupled with profit-taking after rallies in Asian markets, which could lead to a lacklustre week as traders await key data releases like Chinese GDP and US retail sales.


Gold's rally plateaued Tuesday, succumbing to a strengthening dollar and rising Treasury yields as investors reined in bets on the Fed's higher for longer policy. Despite market pricing suggesting near-certain rate cuts by March, analysts deem it an overshoot, eyeing hawkish rhetoric from Fed officials this week for confirmation. With the central bank's path still opaque, bullion awaits guidance before rekindling its ascent.


Oil markets remained range-bound, caught between escalating Middle East tensions and weakening global economic growth. While rising tensions in the Red Sea, mainly Houthi threats and the Iranian tanker seizure, gaining dollar strength capped gains. Traders are awaiting key economic data from China and the US this week, with Chinese GDP and US retail sales likely to offer further clues about the future trajectory of oil demand.


Currencies traded cautiously ahead of key economic data releases. The dollar strengthened on potential March rate cuts, sterling dipped with crucial UK data ahead, and the yen slid on easy money expectations. All eyes remain glued to central bank decisions, with bets on early Fed rate cuts slightly cooling, while the yuan awaits fourth-quarter GDP data for clues on China's economic trajectory.
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