Shares began this year mixed, with European benchmarks opening higher yesterday after a lackluster session for the few Asian markets not closed for New Year holidays.
This week brings employment data and minutes from the latest meeting of the US Federal Reserve, as this year begins with persisting uncertainties over the war in Ukraine and over the risk that interest rate hikes meant to tame inflation might lead to recession.
Germany’s DAX gained 0.6 percent in early trading to 14,002.67 and the CAC 40 in Paris added 1.2 percent to 6,550.08.
Photo: AP
Markets in the UK and the US were closed in observance of the New Year’s Day holiday.
In Asia, South Korea’s KOSPI fell 0.5 percent to 2,225.67 and the SENSEX in Mumbai gained 0.5 percent to 61,167.79. Jakarta’s benchmark was flat.
Over the weekend, a report showed that Chinese manufacturing last month contracted for a third consecutive month, in the biggest drop since February 2020, as the country grapples with a nationwide COVID-19 surge after suddenly easing anti-epidemic measures.
A monthly purchasing managers’ index declined to 47.0 from 48.0 in November, the Chinese National Bureau of Statistics said on Saturday.
Numbers below 50 indicate a contraction in activity.
It is uncertain what impact removing strict COVID-19 policies that crimped production for raw materials and goods and discouraged travel would have on the global economy.
The specter of recession in the US and other major economies, as well as a prolonged slump in China, are factors overhanging markets.
“We expect one-third of the world economy to be in recession,” IMF managing director Kristalina Georgieva said in an interview on Sunday with the CBS television network’s Face the Nation.
“And yes ... even countries that are not in recession, it would feel like recession for hundreds of millions of people,” she said.
On Friday, US markets logged more losses in quiet trading, closing the book on the worst year for the benchmark S&P 500 since 2008. Stocks struggled all year as US pandemic stimulus was withdrawn and inflation put increasing pressure on consumers, while central banks raised interest rates to fight high prices.
This week, the minutes of the Fed’s meeting would potentially give investors more insight into its next moves.
The US government would also release its November report on job openings tomorrow. That would be followed by a weekly update on unemployment on Thursday. The closely-watched monthly employment report is due on Friday.
Wall Street is also waiting for corporate earnings reports that are due to start flowing in the middle of this month.
Companies have told investors that inflation would likely crimp their profits and revenue this year, even after they raised prices on everything from food to clothing to offset inflation, helping to pad their profit margins.
In currency dealings, the yen started the year with modest gains as traders weighed the risk of further technical strength amid thin holiday trading.
The Japanese currency yesterday climbed as much as 0.3 percent to ￥130.77 per US dollar in Tokyo trading.
A close below the dollar-yen’s August low of ￥130.41 would open up the door for further declines in the pair, chart watchers have said.
Some investors opened small short US dollar positions on the chance a break occurs in the absence of normal market liquidity, some Asia-based foreign-exchange traders familiar with the transactions said.
The yen has climbed about 16 percent from its October nadir amid government intervention, hopes for slowing US rate hikes and speculation over the possibility of a policy shift from the Bank of Japan this year.
Additional reporting by Bloomberg
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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