World markets are entering an eventful week as investors eagerly await key decisions from central banks and closely monitor ongoing developments affecting major economies. The most significant factor influencing markets this week will undoubtedly be the decision by the U.S. Federal Reserve on interest rates, scheduled to be announced on Wednesday. Meanwhile, the Bank of England will also be announcing its rate decision on Thursday, adding to the anticipation.
In Asia, markets opened with mixed reactions to the news that China Evergrande, the world's most indebted property developer, has been ordered by a Hong Kong court to be liquidated. This development had a contrasting effect on Chinese markets, with Hong Kong shares rising while benchmarks in Shanghai and Shenzhen sank. The Hang Seng in Hong Kong recorded a gain of 0.8%, but the Shanghai Composite index fell by 0.9% and the Shenzhen Component index slipped over 2%.
European markets began the week with a lack of direction. France's CAC 40 remained nearly unchanged, while Germany's DAX experienced a slight decline of 0.5%. Conversely, Britain's FTSE 100 saw a modest increase of 0.2%. In the futures market, the S&P 500 showed a slight upward movement of 0.1%, with the Dow Jones Industrial Average remaining stable.
Adding to the intricacies of this week, China's securities regulators temporarily suspended the lending of specific shares for short selling. This move aims to support the declining stock markets in China. The affected shares refer to Restricted Stock, which is usually allocated to employees or certain strategic investors with sales restrictions.
Moving to other Asian markets, Tokyo's Nikkei 225 saw a gain of 0.8%, while South Korea's Kospi jumped by 0.9%. The Australian S&P/ASX 200 also experienced a positive trend, rising by 0.3%. In Bangkok, Thailand's SET rose by 0.8%.
The imminent decision by the U.S. Federal Reserve will play a pivotal role in shaping market sentiment this week. Market experts speculate that the Fed's policymakers could indicate their inclination towards cutting rates by adjusting the language in the statement that follows each meeting. In December, the statement still suggested a willingness to consider further rate increases. However, any modification or removal of such language could signal a change in approach, with a focus on rate cuts instead. The Fed has been gradually raising interest rates to curb inflation, and investors will be keen to decipher any indications of a shift in this policy.
On Friday, major U.S. indices delivered mixed performances. The S&P 500 experienced a slight decline of 0.1%, while the Dow Jones Industrial Average managed a modest gain of 0.2%. However, weakness in the technology sector dragged the Nasdaq composite down by 0.4%.
In terms of economic data, a report on Friday revealed that the preferred inflation measure used by the Fed behaved as expected in December. The overall inflation rate, as measured by this indicator, remained unchanged at 2.6%, aligning with November's rate. This data prompted some fluctuation in treasury yields in the bond market but ultimately resulted in minor increases. On Monday, the yield on the benchmark 10-year Treasury ticked down marginally to 4.10%.
In the energy market, benchmark U.S. crude experienced a slight decline of 35 cents, reaching $77.66 per barrel in electronic trading on the New York Mercantile Exchange. The international standard, Brent crude, also saw a decrease of 37 cents, settling at $82.58 per barrel.
Currency markets exhibited slight movements, with the U.S. dollar slipping against the Japanese yen to 147.71 yen from 148.11 yen. Similarly, the euro showed a minor decline, costing $1.0825 compared to its previous value of $1.0846.
As investors brace themselves for the central bank decisions, key developments in China, and ongoing economic indicators, the global markets are poised for an eventful week ahead. The outcomes of these events and decisions will undoubtedly shape market sentiment and determine the trajectory of various asset classes in the near term.
