Stock markets edged higher, European bond yields dropped and the dollar remained firm in light trading today amid warnings from the International Monetary Fund’s managing director that a third of the world will fall into recession in 2023.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.06 per cent, just short of an index of global shares, which climbed 0.16 per cent.
The pan-European STOXX 600 index climbed 0.6 per cent, retracing little of the nearly 12 per cent it lost in 2022, bludgeoned by central banks’ aggressive monetary policy tightening.
However, traders were reticent to trust early-year starts in stock and bond moves with many markets closed for a holiday and ahead of a host of economic numbers due this week.
Inflation data from Europe, minutes from the December US Federal Reserve meeting and US labour market numbers were some of the highlights that Danske Bank chief analyst Piet Haines Christiansen said would be worth watching.
“I would be cautious over interpreting any moves this morning,” said Christiansen.
Markets in the United States, Britain, Ireland, Singapore, Japan, Hong Kong and Australia were shut.
Christiansen expected the new year to kick off with a renewed focus on central banks and inflation. Traders would be vigilant for any signs of an approaching recession, he said.
Buoyant stock prices in Europe might be due, he said, to survey results published today, which pointed towards a rebound in optimism among euro zone factory managers.
S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) bounced to 47.8 in December from November’s 47.1, matching a preliminary reading but still below the 50 mark separating growth from contraction.
Elsewhere, the dollar edged almost 0.2 per cent higher against a basket of major currencies, while the pound and euro fell 0.4 per cent and 0.2 per cent respectively.
“There is an attempt by the dollar index to pull higher today but we do see that it is losing a good part of the strength it gained last year,” said Ulrich Leuchtmann, Reuters cited head of forex research at Commerzbank.
“After the last Fed meeting, the market was not convinced that the Fed won’t cut rates later in 2023. It’s going to be an interesting year.”
US Treasuries will resume trading tomorrow after a public holiday today. The benchmark 10-year yield climbed around 27 basis points (bps) last week and over 200 bps last year, ending 2022 around 3.88 per cent.
German government bond yields today tumbled from their highest levels in more than a decade amid more hawkish signals from the European Central Bank (ECB).
ECB President Christine Lagarde said euro zone wages were growing quicker than earlier thought, and the central bank must prevent this from adding to already-high inflation.
Germany’s 10-year bond yield fell 8.4 bps to 2.47 per cent, after hitting its highest since 2011 at 2.57 per cent on Friday.
Oil markets were closed but prices in 2023 are set for small gains, as a darkening economic backdrop and Covid-19 flare-ups in China threaten demand growth and offset the impact of supply shortfalls caused by sanctions on Russia, a Reuters poll showed on Friday.
The new year is going to be “tougher than the year we leave behind,” IMF Managing Director Kristalina Georgieva said yesterday on the CBS Sunday morning news programme Face the Nation.
“Why? Because the three big economies — the US, EU and China — are all slowing down simultaneously,” she said.
