Bank of Japan’s statements mislead investors. Oil is expected to see a rise in fuel demand ahead of the holidays

This week, markets will also keep a close eye on the results of the central bank meetings of the Fed, ECB, SNB, and Bank of England to see if policymakers support the suspension of the interest rate hike campaign and when they might start to shift to a softer policy.

According to Bloomberg Intelligence, 2024 will be a year of strong fundamental growth for stocks of companies that make chips for generative artificial intelligence.

According to the latest polls, Mexico’s central bank (Banxico) is likely to keep its benchmark interest rate unchanged this Friday for the sixth consecutive time at 11.25%, with discussions of a rate cut not starting until next year. Minutes from the bank’s last monetary policy meeting showed the idea of discussing a key interest rate cut in the first quarter of 2024.

Swap prices show that the chances of an ECB rate cut in Q1 2024 have decreased. In swaps tied to ECB meeting dates, the probability that the ECB will cut the benchmark rate by 25 bps at its March 7 meeting is 58%, down from 67% recorded last Friday.

Crude oil prices recovered from early losses on Monday and posted a slight gain after the American Automobile Association (AAA) predicted a record number of air travelers during the Christmas week, which will have a positive impact on fuel demand. AAA predicted that a record 7.5 million people will use air transportation services between December 23 and January 2.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) gained 1.5%, China’s FTSE China A50 (CHA50) added 0.13% on Monday, Hong Kong’s Hang Seng (HK50) fell by 0.81% on the day, and Australia’s ASX 200 (AU200) was positive 0.06%.

Even late last week, the market was dominated by rumors that the Bank of Japan was planning an exit from negative interest rates. But yesterday, BoJ officials said that they see no need to rush to abandon the negative interest rate policy as there is insufficient evidence of wage growth to support sustainable inflation. Such an approach could undermine investor confidence in the yen and the JP225, so the Bank of Japan should be more consistent.

Japan’s BSI Large Manufacturing Business Conditions Index rose from 5.4 to 5.7 in Q3, the highest reading in 2 years.

Australia’s updated mid-year budget will include about A$10 billion ($6.56 billion) in savings as the government seeks to cut spending in an attempt to contain high inflation. Australian households are under financial pressure from high inflation and rising interest rates, but the vast majority of borrowers can service their loans. That means the RBA has room to keep rates high for longer.