Talk of cutting oil supplies to Russia jumps
The dollar remains ahead of US inflation data
S&P500 set for worst year since 2008 financial crisis
Inflation in Japan has jumped to a 40-year high
By Huw Jones
LONDON, Dec 23 (Reuters) – Global shares were mixed on Friday as the final trading week of the year ended, with U.S. inflation data reminding how inflation and interest rates fundamentally changed the thinking of investors in the past. 12 months.
Oil prices rose on expectations of lower Russian oil supplies, helping to offset concerns about a slowdown in U.S. oil demand as a lingering cold Arctic storm threatens travel through the season. Christmas.
The dollar continued to rise as strong US data bolstered the case for ‘tighter’ monetary policy from the Federal Reserve, reversing a two-decade long slide, and making it harder for investors to predict whether when will the pivot in politics come.
The MSCI All Country stock index was down 0.15%, down about 20% this year.
The benchmark has reversed all gains of 17% in 2021 after the central bank raised interest rates to eliminate decades of inflation fueled by the war in Ukraine that pushed up prices. the energy.
The STOXX index of 600 European companies rose 0.2%, still down more than 12% for the year after gaining 22% in 2021.
Eren Osman, director of wealth management at Arbuthnot Latham & Co, said the “seismic shift” in the interest rate landscape this year should prompt investors. to review strategic allocations and prepare for further disruption.
“You’ve got funding right now in the single digits of high quality paper and investors now need to look at that,” Osman said.
This year’s shift from negative to positive correlation between stocks and bonds — meaning they both fall or rise together instead of moving in opposite directions — may also remain in place. ‘now said Osman.
The U.S. Conference Board’s primary index on Thursday, a gauge of future U.S. economic activity, fell for the ninth straight month in November, pointing to the possibility of a recession in 2023. United States.
“We think we will see a slowdown, it may be mild. I think the focus of the market in the first half of the year is really around the money,” Osman said.
The US stock index was little changed.
The S&P 500 index is set to fall more than 18% this year, its worst performance since the global financial crisis in 2008.
Friday’s release ahead of Wall Street’s opening bell of US personal expenditure (PCE) data, often referred to as a measure of inflation, will be closely watched.
This will provide further indication of whether inflation will continue, although the Fed is expected to raise rates in 2023.
Economists polled by Reuters expect core PCE prices to rise 0.2% for November, while forecasting a 4.7% rise for the year to November.
Fed Chairman Jerome Powell said the Fed will provide more rate hikes in 2023 even as the economy slips into recession.
In Asia, Chinese stocks fell 0.3%, while Hong Kong stocks fell 0.4% as China grapples with the spread of the COVID-19 virus, after Beijing dismantled its strict zero-covid-19 policy to contain the virus. .
In the currency market, the Japanese yen rose 0.2% against the dollar to 132,640. It is on track for its third biggest weekly gain this year of more than 3%, after the central bank shocked markets on Tuesday by amending its policy on government bonds.
“Investors should prepare for a rapid appreciation of the yen against the dollar once the market sees the monetary policy of Japan and the guidance of the US,” said Mizuho analyst.
Data on Friday showed Japan’s core consumer price inflation in November hit a new 40-year high, bolstering market expectations that the Bank of Japan will once again raise interest rates. big campaign next year.
The dollar index, which measures the U.S. currency against its six peers, was slightly lower at 104.34.
The euro fell slightly to $1,060. Sterling last traded at $1.2048, little changed on the day.
Meanwhile, oil prices rose on expectations of lower Russian crude exports from the Baltic region in December.
US crude rose 1.3% to $78.52 per barrel and Brent was $81.92, up 0.9% on the day.
(Reporting by Huw Jones; Additional reporting by Ankur Banerjee; Editing by Jacqueline Wong and Edwina Gibbs)