Happy New Year!

Thoughts of the Day

The start of a calendar year tends to see investors rush to put their unallocated cash to work. As such, we are likely to see risk assets perform well as the market awaits the US jobs data that will be released later this week. 

We, at TrackRecord, wish you all the best of health and hope that you will seize the many opportunities to achieve your dreams in 2024!!

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Day Ahead

Purchasing Managers Index data from the Euro Area, US, UK and Canada are slated to be released.

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What Happened Yesterday

Market Movements as of New York Close 29 Dec 2023 (1 Jan for Cryptos)
  • The US Treasury Yield curve inversion narrowed to 0.35% as the US 2-year bond yield fell -0.03% to 4.23% while the 10-year bond yield rose +0.04% to 3.88%.
  • The US stock futures traded sideways through the Asian and London trading session on Friday due to lighter volumes.
  • The US stock market opened almost unchanged from Thursday. It then started to face some weakness in the early New York session due to a lower than expected print from the Chicago PMI (46.9 vs 51 expected and 55.8 prev). However, the market eventually recovered some of the losses. Consequently, the S&P 500 closed -0.28% on the day (high: +0.11%, low: -0.66%), the Dow Jones slipped -0.05% (high: +0.13%, low: -0.45%) while the Nasdaq decreased -0.43% (high: +0.12%, low: -0.83%). 
  • The crypto market rose through the weekend due to optimism that the approval for a Bitcoin ETF may be announced as early as this week.
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Headlines & Market Impact

Israel signals tactics shift, troop pullback as US carrier heads home

Notable Snippet: Israel pulled tanks out of some Gaza City districts on Monday, residents said, as it announced plans to shift tactics and cut back on troop numbers, but fighting raged elsewhere in the Palestinian enclave along with intense bombardment.

Israel says the war in Gaza, which has reduced much of the territory to rubble, killing thousands and plunging its 2.3 million people into a humanitarian disaster, has many months to go.

But it also signalled a new phase in its offensive, with an official saying on Monday the military would draw down forces inside Gaza this month and shift to a months-long phase of more localised “mopping up” operations.

The Israeli official said the troop reduction would allow some reservists to return to civilian life, shoring up Israel’s war-battered economy, and free up units in case of a wider conflict in the north with Lebanon’s Iran-backed Hezbollah.

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China’s power sector emissions to surpass 4 billion metric tons in 2023

Notable Snippet: China’s power sector emissions of carbon dioxide (CO2) and equivalent gases will surpass 4 billion metric tons for the first time in a calendar year in 2023, as the country cranks up coal-fired electricity output to new highs.

China’s total emissions from fossil fuel-powered electricity generation hit 3.99 billion tons through October, marking a 5.5% rise from the same period in 2022 and a 22% jump from five years ago, data from think tank Ember shows.

Emissions from coal-fired power hit 3.87 billion tons through October, accounting for just under 95% of the country’s total fossil fuel pollution from electricity production.

While China’s share of global coal use is on the rise, coal’s share within China’s electricity generation mix is declining.

Over the first 10 months of 2023, coal accounted for just under 62% of total electricity generation in China.

That compares to an average share of about 65% over the previous five years, and more than 71% in 2015, Ember data shows.

Beijing has plans to further accelerate the roll out of clean power supplies, led by renewables, over the coming decades and additional cuts to coal-fired generation.

But over the near term coal will retain its pivotal role within China’s electricity generation mix, which may mean additional increases to China’s coal-fired emissions loads in the years ahead.

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China December factory contraction deepens, more stimulus on the cards

Notable Snippet: China’s manufacturing activity shrank for a third straight month in December and weakened more than expected, clouding the outlook for the country’s economic recovery and raising the case for fresh stimulus measures in the new year.

The government has in recent months introduced a series of policies to shore up a feeble post-pandemic recovery, which is being held back by a severe property slump, local government debt risks and soft global demand. But the world’s second-largest economy is still struggling to gain traction.

The official purchasing managers’ index (PMI) fell to 49.0 in December from 49.4 the previous month, an official factory survey showed on Sunday, below the 50-mark separating growth from contraction and weaker than a median forecast of 49.5 in a Reuters poll.

“We must step up policy support, otherwise the trend of slowing growth will continue,” said Nie Wen, an economist at Hwabao Trust. Nie expects the central bank to cut interest rates and banks’ reserve requirement ratios (RRR) in the coming weeks.

“Falling prices have greatly affected companies’ profits and further affected people’s employment and incomes. We may see a vicious cycle,” he said.

China’s central bank said on Thursday it would step up policy adjustments to support the economy and promote a rebound in prices, amid signs of rising deflationary pressures.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord