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Marketmind- Don't look to US kickoff for positive 2024 signal

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LA Post: Marketmind- Don't look to US kickoff for positive 2024 signal
January 02, 2024
Alden Bentley - Reuters

By Alden Bentley

(Reuters) - A look at the day ahead in Asian markets.

Wall Street greeted 2024 with a bout of stock and bond selling suggesting ambivalence is nudging aside year-end optimism about a soft landing and disinflation. Confidence that the Federal Reserve could start it's pivot away from tightening in March incentivised last month's S&P 500 run at record highs, and one of the steepest quarterly drops in benchmark yields in almost three years.

While such caution in the U.S. could spill over into Japanese shares when Tokyo trading reopens Wednesday, bulls there have their own list of buying justifications, from a 7% fall in the yen to the confidence shown in Japanese shares by Warren Buffett's Berkshire Hathaway in 2023.

They could take a cue from South Korea's benchmark KOSPI which ended the first trading day of the year Tuesday with a 0.55% gain and hit a 19-month high.

The Nikkei's 28% yearly gain was the biggest in a decade and it ended the year less than 1.0% shy of the 33-year high set in November. Still, there is little in the way of major Japanese economic data due this week for motivation. The same is true for indicators from other big Asian markets, where perhaps Thailand's December CPI reading due Wednesday is the stand out.

The yen weakened in overseas markets on Tuesday after its dalliance with five-month highs last week. Dollar/yen rose 0.8% to 141.97. Against China's yuan the dollar rose 0.36% to 7.1510. The Australian dollar was down 0.72% at US$0.6762.

The main driver of the week will likely be Friday's December U.S. payrolls report which will help market participants guess the timing of any Fed rate cuts. The Fed is widely seen holding rates at its January meeting, traders expect a near 70% chance of a 25-basis point cut in March, according to the CME Group's FedWatch tool.

The S&P 500 fell 0.56% on Tuesday and the tech-heavy Nasdaq swooned 1.63%. The Dow squeaked out a 0.07% gain.

U.S. Treasury yields popped higher as traders lowered expectations for rate cuts in 2024. But with Japan closed, the largest foreign owner of Treasuries was out of the market.

"Things may have gotten a little ahead of themselves, whether it's equity valuations or expectations of Treasury rate cuts," said David Albrycht, chief investment officer at Newfleet Asset Management. "People have become really complacent that the Fed is going to execute a soft landing but it's still not clear."

Here are key developments that could provide more direction to markets on Friday:

- Thailand CPI (December)

- China Business Surveys, PMI (December)

- U.S. FOMC Minutes (December)

(Compiled by the Global Finance & Markets Breaking News team)

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