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A smorgasbord of central bank decisions, China’s cautious tightening, and the U.S. tax overhaul hits a late-stage roadblock. Here are some of the things people in markets are talking about.
A quintet of central banks in Europe delivered rate decisions on Thursday, headlined by the ECB, which — like the Federal Reserve — revised up its forecast for growth next year. President Mario Draghi unveiled projections that show inflation is seen running below 2 percent in 2020, underscoring the need for continued stimulus. The euro slumped against most G-10 currencies on the day. The Norges Bank, for its part, signaled that it looks due for a "slightly earlier first increase" of its policy rate, propelling the krone to the top of the G-10 leader board. Mark Carney's Bank of England stood pat after its November hike; likewise, the Swiss National Bank maintained its deposit rate at -0.75 percent. A smaller-than-anticipated 50 basis point lift to Turkey's late-liquidity window amid accelerating inflation spurred the lira's biggest decline against the U.S. dollar in six weeks.
Following the Fed
The People's Bank of China also made its own adjustments in the wake of the Federal Reserve's Wednesday hike, raising a variety of rates by 5 basis points. Analysts believe the cautious monetary tightening was intended to signal policymakers' desire to avoid delivering any shock to domestic markets that would materially affect real activity. The move largely stole the spotlight from data showing annual growth in industrial output and fixed asset investment slowed in November, while consumer spending picked up steam. Perhaps more importantly, Chinese behemoth HNA Group Co. met with Chinese lenders to talk about securing funding, an indication that the nation is looking to tame, rather than eliminate, so-called "grey rhinos."
Tax Reform Is Taxing
The Russell 2000 Index suffered its biggest loss in more than a month after Republican Senator Marco Rubio refused to support tax overhaul legislation unless the refundable portion of the child tax credit is increased. The S&P 500 Index and Dow Jones Industrial Average also declined. A strong advance in U.S. retail sales for November failed to buoy the greenback. West Texas Intermediate futures rose more than 1 percent to break above $57 per barrel.
The risk-off mood looks to be carrying over to the Asian session. Nikkei 225 futures are down ahead of the open, with S&P/ASX 200 futures also in the red. The MSCI Asia Pacific Index had inched higher on Thursday. The Japanese yen rose against most of its peers, typically a negative for domestic equities. However, the new favorite currency for Japanese retail investors may not even be a currency at all: Deutsche Bank thinks that Mrs. Watanabe is behind the surge in bitcoin.
It’s a fairly light day for economic data out of the Asia-Pacific region to close out the week. Japan's fourth-quarter Tankan surveys for manufacturers and non-manufacturers, due out at 8:50 a.m. Tokyo, are the day's top releases. The indexes for both sectors are anticipated to show improvements relative to the third quarter. November trade figures out of Indonesia are projected to show the monthly surplus narrowed slightly to $844 million from $895 million, with imports and exports continuing to grow at a double-digit pace. We may also get an update on India's trade balance for November, with the monthly deficit forecast to narrow to $13.25 billion from $14 billion.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Beijing keeps building in the South China Sea.
- The surge in bitcoin may be down to Japanese retail investors.
- The hunt for Asia’s top FX trade for 2018.
- The fate of the Australian government could be sealed this Saturday.
- Passive investing will overtake active in 2019.
- Samsung looks to introduce a smart speaker by July.
- The top 50 wines under $50.