Across broader asset classes, the MSCI All Country World Index has climbed more than 21% since January, reaching a record 1,024.29 on Dec. 26, according to data provider LSEG. The global gauge’s advance has been underpinned by expectations of looser monetary policy in major economies and persistent enthusiasm for artificial-intelligence-related shares. However, the final week of the year has seen momentum fade, particularly in U.S. technology names that had previously led gains.
U.S. Market Snapshot
Overnight, Wall Street also posted modest losses. The S&P 500 shed 0.14% to 6,896.24, recording a third consecutive decline. The Nasdaq Composite fell 0.24% to 23,419.08, and the Dow Jones Industrial Average retreated 0.20% to 48,367.06. Futures tied to the three benchmarks were broadly flat in early Asian trade.
Technology shares remained under pressure, with Nvidia falling for a second straight session and software maker Palantir Technologies following a similar pattern. The pullback has trimmed some of the sector’s outsized gains but has not erased the year-to-date outperformance that has been central to 2023’s broader equity rally.
China Data in Focus
December’s improvement in the official PMI offered a tentative sign that recent policy support may be gaining traction. Beijing has rolled out targeted fiscal measures, accelerated local government bond issuance and implemented incremental monetary easing in a bid to stabilize growth. Still, economists continue to debate the strength and durability of any recovery. The International Monetary Fund projects that China’s expansion will slow in 2024 as structural headwinds weigh on domestic demand.
Within the PMI sub-indices, new orders and production both crossed into expansion territory, while export orders remained in contraction, underscoring lingering external demand challenges. The non-manufacturing PMI, encompassing services and construction, stood at 50.4, unchanged from November.
Regional Currency and Commodity Moves
Currency markets were largely range-bound. The Australian dollar hovered near US$0.68, supported by stable commodity prices, while the onshore Chinese yuan was little changed around 7.10 per dollar. Benchmark Brent crude futures traded just above US$78 a barrel, extending a narrow range that has prevailed through much of December amid offsetting signals on supply and demand.
Outlook Heading into 2024
With major Asia-Pacific exchanges shuttered until the new year, investors are poised to monitor a series of early-January data releases, including South Korea’s trade figures and the U.S. Institute for Supply Management’s manufacturing survey. Attention will also focus on the minutes of the Federal Reserve’s December meeting for further clues about the timing and magnitude of potential rate cuts.
Market positioning suggests caution. While the year’s broad gains reflect optimism that inflation is moderating without a sharp downturn in activity, the recent retreat in technology heavyweights highlights sensitivity to any shift in earnings expectations or macroeconomic forecasts. Trading desks also note that liquidity typically thins during the festive period, amplifying intraday price swings.
For China, analysts anticipate additional supportive measures in the first quarter if incoming data fail to confirm a sustained upturn. Fiscal policymakers are expected to prioritize consumer sentiment and job creation, while the People’s Bank of China may opt for further targeted reserve-requirement cuts rather than headline rate reductions.
In Australia, investors await fourth-quarter inflation numbers due in late January, which will guide expectations for the Reserve Bank of Australia’s policy path. The central bank has kept rates steady since early November but has maintained a tightening bias amid persistent price pressures in services.
Globally, the resilience of the MSCI ACWI underscores the role of mega-cap technology stocks and easing financial conditions in buoying risk assets. Whether that pattern persists in 2024 may hinge on corporate earnings delivery and the trajectory of central-bank policy, particularly from the Federal Reserve and the European Central Bank.
Crédito da imagem: Liqun Liu | Construction Photography | Hulton Archive | Getty Images
