Thursday's Markets Update (January 4, 2024)

04 Jan 2024 by rate3

On Thursday, the Dow Jones rose, while the S&P 500 and Nasdaq fell, with the Nasdaq experiencing its longest red-candles streak since October. Investors await labor data amidst speculation of interest rate cuts and rising treasury yields. The financial sector rose, but energy and consumer stocks dropped. Early gains were halted as ADP's strong jobs data and unemployment claims increased uncertainty about Fed rate cuts.

Meanwhile, BTC and ETH were in high demand, quickly recovering from yesterday's slump and reaching USD 44.7K and USD 2.3K, respectively.

Additionally, global PMI data indicated that manufacturing and service sector activities continued to contract across most of the world's leading economies, with the notable exceptions of China and Brazil.

Details

According to the Challenger Report in December, employers announced the least number of job cuts in five months, totaling 34,817. However, the annual job cuts in 2023 increased by 98% to 721,677, the highest annual total since 2020. Technology and retail industries experienced the most job cuts, with technology rising by 73% and retail by 274%. Health care/products manufacturers and financial firms also saw significant increases. Job cuts in 2023 were mainly due to market/economic conditions. Employers are expected to remain cautious and cost-cutting in Q1 2024, slowing the hiring process for job seekers.

The S&P Global US Composite PMI edged up to 50.9 in December 2023, indicating a marginal uptick in business activity, the fastest expansion since July. The service sector drove growth, while manufacturing production declined. Service providers experienced a surge in new sales, whereas goods producers faced a faster decline. Employment levels modestly increased, and input costs rose more rapidly, while selling price inflation slowed down.

World Economy

Europe:

On the day the PMI indexes were announced for major EU economies, the data showed that overall manufacturing and service sector activities continued to contract across most countries, though the rate of contraction slowed in some cases.
The exception was Spain, where the composite PMI index rose above the 50 no-change mark to 50.4 in December, up from 49.8 in November, signaling a return to growth. Also in the UK, the composite PMI increased to 52.1, pointing to a second consecutive monthly expansion.
In Italy, the composite PMI rose but remained in contraction territory at 48.6, up from 48.1 previously.
In France, the composite PMI was revised upwards to 44.8, surpassing initial estimates and rising slightly from November, though still indicating ongoing contraction for the seventh straight month in the eurozone's second largest economy.
Germany's composite PMI was also revised up but remained below 50 at 47.4, pointing to a sixth consecutive month of private sector contraction as demand for goods and services continued to decline.
Across the eurozone as a whole, both manufacturing and service sector output declined further in December, with contraction rates consistent with the prior month. Demand weakened while employment fell for only the second time in nearly three years. However, business sentiment and expectations for future growth showed some improvement.

Latin America

In the largest LA economy - Brazil - services PMI fell slightly to 50.5 in December but remained above 50, signaling a third straight month of expansion. New orders and output grew but at a slower pace with employment also up marginally. Input costs rose at the slowest rate in over 3 years while selling prices continued to increase sharply. Firms maintained a positive outlook for growth.
The annual inflation rate in Uruguay picked up to 5.11% in December of 2023 from 4.96% in the previous month. Producer Prices in Colombia decreased 5.79 percent in December of 2023 over the same month in the previous year. Producer Prices Change in Colombia averaged 5.52 percent from 2000 until 2023, reaching an all time high of 35.65 percent in April of 2022 and a record low of -6.55 percent in July of 2023.

Africa

Nigerian stocks hit a record high, with financials, telecoms, and consumer goods leading gains. The market closed 2023 up 46%, buoyed by President Bola Tinubu's market friendly reforms (including the removal of energy subsidies), strong corporate earnings, and new listings.
South Africa's PMI dropped to 49 in December, with the sharpest output decline since May and falling new orders. Supply delays and load shedding impacted sales. Purchase costs rose slowly, hinting at easing inflation. Future output expectations dipped but remained positive.
Egypt's PMI marginally improved to 48.5, still showing contraction. New orders saw the sharpest decrease since May due to currency weakness and inflation. Output fell slightly faster, but employment rose. Input and output cost inflation eased. Business outlook brightened significantly.
Kenya's PMI improved to 48.8, signaling the slowest contraction in four months due to marginally better demand. Manufacturing and construction still struggle with costs and weak demand. Input costs eased, but output charges increased, leading to reduced business optimism.

Asia

China's Caixin Services PMI rose to 52.9 in December, marking the fastest growth since July, driven by a surge in new business and export orders. Employment grew, inflation of input prices increased, while output cost inflation eased. Business confidence improved. At the same time, China's Caixin Composite PMI reached 52.6 in December, the highest since May, with manufacturing and services expanding robustly. New orders surged to a seven-month peak, while new export declines slowed. Employment shrank as input costs rose amid competitive pricing.
Japan's Manufacturing PMI revised to 47.9 in December, indicating the sharpest contraction in factory activity since February. New orders and output declined, with foreign sales dropping significantly. Purchasing was curtailed sharply, while employment remained flat. Input costs rose, optimism improved slightly.
Indian rupee nears record low at 83.4 amid foreign inflows, lenient monetary policy, and costly energy imports due to global disruptions. RBI interventions prevent further decline after foreign investors sell off government bonds.