2023-12-21 11:01

A look at the day ahead in U.S. and global markets by Alun John. The sharp sell-off in U.S. stocks late on Wednesday jolted those investors who had been sitting back hoping to enjoy the 'everything rally' until the end of the year. It could take until U.S. PCE inflation data on Friday to say definitively whether this was the cold reality of January arriving early, or just a metaphorical late-Christmas morning squabble soon solved by dinner, but Thursday's open will still be interesting to watch. S&P and Nasdaq futures are up around 0.5% at the time of writing, so the initial signs are that Wednesday's mid-afternoon nosedive was just a blip. All three major U.S. stock indexes ended Wednesday 1.3% to 1.5% below Tuesday's close, having been pootling along quite happily until the sudden turn lower. Asian (.MIAPJ0000PUS) and European stocks (.STOXX) sold off in sympathy on Thursday. A fall was not hugely surprising given the scale of the recent rally, but why then and why so sharp has left many market watchers scratching their heads. "The strategists text book would suggest that we point to 'year-end liquidity issues'" said Rabobank European rate strategists in a morning note. Poor results from FedEx - seen as a bellwether for economic activity - couldn't have helped, but as they were released after market close on Tuesday they aren't much use to explain the timing. Analysts are also pointing to markets belatedly responding to attacks on vessels in the Red Sea by Iran-backed Houthi militants, causing exporters to scramble to find alternative routes. Maybe the thing to do is to remember it's nearly Christmas and the S&P 500 (.SPX) is still up 9.5% so far since the start of October, which would be its best quarter in two years. The juggernaut of market euphoria from last week's dovish shift in the Federal Reserve outlook keeps rolling on in the rates market however. The benchmark 10-year U.S. Treasury yield was last at 3.8676%, near the previous session's five-month low of 3.8470%. In Europe, Italy's 10-year yield is at 16-month lows, given another nudge by European Union finance ministers agreeing the latest reform of the bloc's two-decade-old fiscal rules. The day ahead is pretty thin on the data front, with final third quarter GDP data and weekly jobless claims. The last big piece of data before Christmas is Friday's U.S. core PCE price index reading - the Fed's preferred measure of underlying inflation, where another slowdown is expected. Key developments that should provide more direction to U.S. markets later on Thursday: - U.S. weekly jobless claims - Third quarter U.S. final GDP - Canadian retail sales - ECB chief economist Philip Lane speaks on a panel https://www.reuters.com/markets/us/global-markets-view-usa-2023-12-21/

2023-12-21 10:06

KAMPALA, Dec 21 (Reuters) - The Ugandan shilling was flat on Thursday amid thin activity as some businesses started closing for the Christmas and year-end holiday season, traders said. At 0953 GMT, commercial banks quoted the shilling at 3,755/3,765, the same level as Wednesday's closing rate. https://www.reuters.com/markets/currencies/ugandan-shilling-flat-amid-thin-activity-2023-12-21/

2023-12-21 09:50

Key rate kept at 6%, as expected BI predicts Fed will trim rates in H2 2024 Governor says c.bank can better measure FX risks in H2 JAKARTA, Dec 21 (Reuters) - Indonesia's central bank held policy rates steady on Thursday to support the rupiah and keep inflation at bay, but indicated there was room for monetary easing in the second half of 2024. Bank Indonesia (BI) kept the benchmark 7-day reverse repurchase rate (IDCBRR=ECI) unchanged at 6.00%, as widely expected by economists in a Reuters poll. Its two other policy rates were also kept steady. While inflation in Southeast Asia's largest economy has cooled faster than the central bank expected, growth has weakened this year amid shrinking exports driven by falling commodity prices and sluggish global trade. BI has kept monetary policy tight due to volatility in the rupiah exchange rate , which has been hit by capital outflows as the Federal Reserve aggressively hiked interest rates. BI raised Indonesian rates by a total of 250 basis points rate between August 2022 to October. The current level of its policy rate was consistent with BI's focus on rupiah stability to ward off imported inflation and keep the inflation rate within target in the next two years, Governor Perry Warjiyo told a press conference. Global market uncertainty has begun to ease, with policy rates in many central banks already at their peak, Warjiyo said, predicting the Fed would start cutting rates in the second half of 2024 by as much as 50 bps. However, when asked if BI would follow the Fed's footsteps, Warjiyo said: "No. We take (federal funds rate) into consideration but we will not follow. What we aim for is inflation within a 1.5% to 3.5% target range in 2024 and 2025." "We can better measure FX risks in the second semester of next year," he added. "If the rupiah strengthens earlier and inflation can stay low, the room (for easing) may be open, but we will not rush." The central bank said it expects upward bias in volatile food inflation next year due to supply issues, and policymakers will continue to monitor the situation. BI maintained its outlook for GDP, forecasting 4.5%-5.3% for this year and 4.7%-5.5% in 2024. Myrdal Gunarto, economist with Maybank Indonesia, said the earliest BI could trim policy rates was in May or June, as prices would peak during the Eid al-Fitr holidays in April. The magnitude of cuts will likely match the Fed's easing, he added. Capital Economics predicted BI would move before the second half of next year. "...with economic growth set to struggle and inflation likely to remain subdued, we think easing will come sooner than that. We have cuts pencilled in for the central bank’s April meeting," Ankita Amajuri, its economist said in a note. All economists polled by Reuters before Thursday's decision had expected BI would start loosening monetary policy in the third quarter of 2024. The rupiah has strengthened in the past week as dovish comments by Fed policymakers boosted emerging market assets. The rupiah was largely unchanged after Thursday's announcement. https://www.reuters.com/markets/rates-bonds/indonesia-cbank-keeps-interest-rates-unchanged-expected-2023-12-21/

2023-12-21 07:49

SEOUL, Dec 21 (Reuters) - South Korea's parliament on Thursday approved increasing next year's budget by a net 17.9 trillion won to 656.6 trillion won ($503.50 billion). The increase is the smallest in two decades as authorities prioritise fiscal discipline in a U-turn from expansionary expenditure made during the coronavirus pandemic, according to the nation's finance ministry. By restraining spending, President Yoon Suk Yeol's administration plans to bring the ratio of fiscal deficit to GDP back below 3% from 2025. The 656.6 trillion won of fiscal expenditure penciled in for next year will widen the deficit-to-GDP to 3.9% from an estimated 2.6% this year. ($1 = 1,304.0700 won) https://www.reuters.com/world/asia-pacific/south-koreas-parliament-approves-2024-budget-2023-12-21/

2023-12-21 07:32

JOHANNESBURG, Dec 21 (Reuters) - South Africa's rand was little changed in thin trade early on Thursday, ahead of the lull in trading sessions that affects the week between Christmas and New Year. At 0717 GMT, the rand traded at 18.3375 against the dollar , near its previous close of 18.3350. On the stock market, the Top-40 (.JTOPI) and the broader all-share (.JALSH) indices were about 0.3% lower in early trade. There are no major economic events scheduled in South Africa this week and the focus will turn towards U.S. inflation figures on Friday. South Africa's benchmark 2030 government bond was weaker in early deals, the yield up 3.5 basis points to 9.725%. https://www.reuters.com/markets/currencies/south-african-rand-little-changed-thin-trade-2023-12-21/

2023-12-21 07:03

LONDON, Dec 21 (Reuters) - Bankers advising companies on stock market listings are hopeful that the new year will bring a recovery in initial public offerings after the U.S. Federal Reserve signalled it may start reversing the fastest escalation in interest rates in decades. "The IPO markets will be much better in 2024 than they were this year, and my gut tells me that both volumes and breath of access will progress as we move through the year," said Daniel Ludwig, global head of equity capital markets (ECM) at Goldman Sachs. That positive call comes after a tough year for bankers. So far, this year stands to be the second-worst for ECM transactions in the last decade after 2022, with $532 billion raised to date, according to Dealogic data. For IPOs, in particular, 2023 has seen the lowest levels of activity in since 2016. Some of those that listed this year saw their share prices drop in the aftermarket, including chipmaker Arm Holdings and sandal maker Birkenstock. Many of those stocks are now trading above their issue price, amid a global rally in equities fuelled by growing consensus that interest rates have topped out. "There is a clear understanding that we are, at worse, at a pause in the increase of interest rates and, at best, at the beginning of what could be a decline of interest rates," said Stephane Boujnah, CEO of European stock exchange group Euronext. This would prompt investors to shift assets from bonds to shares, he said. The positive forecast from Goldman Sachs' Ludwig for 2024 is still far off the boom times of 2021. That said, the coming year could see Singapore-based fashion group Shein go public at a reported valuation as high as $90 billion, after recently filing paperwork for an IPO in the United States. Buyout group Permira is preparing to list Golden Goose, known for its luxury distressed sneakers, in Milan in a deal that could raise about 1 billion euros ($1.09 billion), sources have said. Dealmakers expect buyout funds to be a vital source of business in the coming months, as these come under pressure to return capital to investors after one of the slowest years for private equity exits in a decade. "The pre-conditions are in place for IPO markets to re-open, and private equity owns large assets which are attractive to public market investors," said Gareth McCartney, global co-head of ECM at UBS. Some asset managers are looking at going public like their portfolio companies, in a bid to finance expansion and allow their owners to sell their stakes. Britain's CVC (CVC.UL) could revive its listing plans after postponing a mooted IPO earlier this quarter, while General Atlantic is reportedly planning a U.S. listing. "Corporate break-ups and spin-offs are also an option for next year," said Andreas Bernstorff, head of ECM at BNP Paribas for Europe, the Middle East and Africa (EMEA). Expected to join are European conglomerates including Bayer (BAYGn.DE), Renault (RENA.PA), Sanofi (SASY.PA) and Vivendi (VIV.PA), which have announced plans to explore potential break-ups and spin-offs of their business divisions. Bankers warned that the market will need to see a few successful IPOs in the new year before it can open up to a wider group of companies. The U.S. presidential election may also limit the amount of time companies have access to the equity capital markets in the second half of 2024. While the IPO market recovers, dealmakers hope to continue raking in fees from arranging stake sales and capital increases at companies that are already publicly traded. "Secondary sell-downs have been a defining feature this year and will continue to be so next year, although to a lesser degree given the high volume in 2023," said James Palmer, head of EMEA ECM at Bank of America. The last few months have seen shareholders sell multibillion-dollar stakes in companies such as Heineken (HEIN.AS) and the London Stock Exchange Group (LSEG.L). Governments have also started to offload holdings in banks rescued during past crises, including Monte dei Paschi (BMPS.MI) and ABN Amro (ABNd.AS). Company boards may also turn to equity and convertible debt as an alternative to refinance upcoming debt maturities, given higher borrowing costs. "I think 2024 has the potential to be very different," Aloke Gupte, co-head of international ECM at JPMorgan. "While volatility is likely to persist, are there reasons to believe ’24 may be better than ’23? Yes, very much so." ($1 = 0.9142 euros) https://www.reuters.com/markets/deals/ipo-hopes-rise-new-year-after-feds-early-holiday-gift-2023-12-21/