Dear Investors,
Japan & China Markets – T.Rowe Price (9 Must Updates)
Nikkei rose to its highest level since 1990
Boosted by a strong domestic corporate earnings season, with manufacturers’ earnings benefiting from weakness in the yen and easing supply chain constraints.
Expectations that U.S. interest rates had peaked also supported sentiment and notably pushed growth stocks higher.
10 year japanese government bond – where are we?
The yield on the 10-year Japanese government bond (JGB) rose to 0.77%, from 0.72% at the end of the previous week.
The BoJ reduced its JGB purchase operations for the second straight week.
In the currency markets, despite initially strengthening to its highest level in over two months amid general weakness in the greenback, the yen finished the week broadly unchanged, trading at around JPY 149 against the USD.
China – news on monetary policy
Chinese banks left their one- and five-year loan prime rates unchanged, as expected, after the People’s Bank of China (PBOC) kept its medium-term lending rate on hold the prior week.
China remains an outlier among global central banks as it has maintained a looser monetary policy to shore up a slowing economy.
China economic growth in 2024
Many economists anticipate that Chinese government advisers may propose an economic growth target of around 5% in 2024 at the annual Central Economic Work Conference in December.
The gauge will be aimed at promoting job growth and to ensure long-term development goals remain on track.
Where Japan economy is going? – RBC (9 Economic Updates)
Where could go rates next year?
We think that a December hike remains unlikely and that some further moderation in economic data, in the coming months, probably ensures that rates have now reached their peak.
We doubt rates will fall before this rate drops below 3% and this still seems unlikely before the second half of next year.
Japan economy evolution
The Japanese economy is evolving on a positive trajectory, and this is set to continue in 2024.
Core inflation remains at 4% and we highlight scope for price pressures to continue to become more broad-based.
The BoJ chooses to look more at domestic inflation and there has been a sense that Ueda still wants to take his time in normalising policy
Looking ahead
We are rapidly reaching the point where the year-end will be suddenly upon us.
Sometimes we can see positive trends build in the run up to Christmas, though this year we remain more circumspect.
Not dissimilar market conditions with 90s
For those of us with longer memories, we will recall current market conditions as not dissimilar to the 90s and we think this may continue to be the case as we look ahead.
Nevertheless, the combination of higher volatility meeting lower seasonal liquidity will have the capacity to catch some unsuspecting investors out.