Fresh highs for the DAX index this morning but it’s chop-chop still for shares in London as the FTSE 100 drifts further away from the 7,700 level. Taylor Wimpey shares declined 3.5% early doors after saying it would build fewer homes this year.
Wall Street finished Tuesday with modest gains close to record highs. Durable goods orders were down. US consumer inflation expectations also ticked down to the lowest since March 2020. Oil drifts along its 200-day line still, yields are barely moving, and Bitcoin marches higher with a third white soldier.
UBS is out with a note claiming to have identified 10 potential surprises for 2024. Surprise 1: Generative AI does actually increase productivity growth to 2.5%, fueling a 20% return from equities. Surprise 6: Neither Biden nor Trump are elected President. Surprise 7: “Peace in Ukraine.” We talked about AI and about the prospect of peace in Ukraine in our recent podcasts.
BofA: “An all-time high is not a sell signal ... it’s worth remembering equity markets efficiently reflect earnings growth through time. Stock prices don’t have memories ... so, barring a major de-rating, 2024 could be a strong year for equities.”
And here is Barclays, raising its S&P 500 price target to 5300 from 4800: “The US economy continues to defy rates headwinds in 2024, much as mega-cap Tech continues to defy even the most bullish earnings targets ... US exceptionalism extends into the new year.”
No Black Swan — the Reserve Bank of New Zealand (RBNZ) left rates on hold and said the current policy is restrictive enough. As detailed previously, there had been some sense that the New Zealand central bank may opt for a hawkish surprise. However, whilst there was no hike, the central bank did indicate that rates would need to be higher for longer.
As there had been some suspicion of a hike, the cautious tone from the RBNZ left the New Zealand dollar nursing some heavy losses overnight.
The dollar was well bid on Wednesday, with DXY futures hitting a one-week high in the wake of the RBNZ decision.
EUR/USD also shipped some ground to breach its 200-day line, after rejecting the move to 1.0865 yesterday.
Similarly large reversal for GBP/USD as the dollar caught a tailwind.
And Australian CPI inflation came in lower than expected at 3.4%, underlining a move dovish antipodean outlook.
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