February 2, 2023

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Nikkei 225 falls more than 2% after Bank of Japan expands yield target, yen strengthens

Japanese financial stocks rose after the Bank of Japan announcement

The Bank of Japan keeps interest rates steady and extends yield curve control

The central bank said in a statement that the Bank of Japan has kept benchmark interest rates steady and announced that it will adjust the range of yield curve control.

He said the Bank of Japan will widen the volatility range for 10-year Japanese government bond yields from its current increase of minus 0.25 percentage point to plus and minus 0.5 percentage point.

The adjustment aims to “improve market performance and encourage smoother shaping of the entire yield curve, while maintaining accommodative financial conditions,” the Bank of Japan said.

The Japanese yen strengthened more than 2% to settle at 133.37 against the US dollar after the announcement.

– Jihe Lee

China keeps the main lending rates unchanged

The People’s Bank of China kept the main interest rates for the one-year and five-year loan unchanged in December, according to an announcement.

The central bank maintained the one-year loan prime rate at 3.65% and the five-year loan prime rate at 4.30%, in line with expectations in a Reuters poll.

The offshore and onshore Chinese yuan were relatively flat at 6.9808 and 6.9783 against the US dollar, respectively.

– Jihe Lee

S&P expects oil prices to rise to $121 as China fully reopens

Standard & Poor’s predicted that oil prices could also reach $121 with China’s full reopening, adding that prices are preparing to stabilize at $90 a barrel for 2023.

Oil prices are likely to see “one big boost” from China fully reopening to $121 a barrel, nearly touching the March highs after Russia’s invasion of Ukraine, said S&P Vice President Dan Yergin.

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Yergin added that the rise in prices will be fueled by the pressure resulting from the lack of investment currently observed in oil and gas.

“Our base case for 2023 is $90 for Brent, but you have to look at other cases,” he said, adding that the oil outlook is primarily clouded by three uncertainties — further increases from the Federal Reserve, China’s demand, and Russia’s reaction to The maximum price for its oil agreed upon by the European Union.

– Lee Ying Chan

Far fewer cryptocurrencies and more business applications in the space in 2023, says EY

There will be far fewer cryptocurrencies in the space as the world is still shaken by the collapse of FTX, Paul Brody, Global Blockchain Leader at EY, said on CNBC.Squawk Box Asia‘ Tuesday.

“The shift next year will be around what business applications you can do in this environment,” Brody said. “I expect to see a lot of stablecoin use cases.”

He also expects a more regulated environment in the next two years and companies are expected to be more careful about regulations.

“There will be more explicit requirements so that companies can only serve those countries in which they are located and are regulated,” he said.

“It will make it easier for them [crypto] companies to apply the rules specifically to the individual user.”

– Sheila Chiang

View RBA minutes A range of options were considered in December

Minutes from the Reserve Bank of Australia’The December meeting showed that the central bank had considered a number of options for its interest rate decision, including a full pause in increases.

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“The Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate.” Minutes He said.

RBA board members also noted the importance of “acting consistently”, adding that the central bank will continue to consider a range of options for next year as well.

– Jihe Lee

CNBC Pro: Is China ready for a rebound in 2023? Wall Street professionals weigh in — and reveal how to trade it

What’s next for China after it has rolled back a slew of Covid-19 measures?

Market professionals weigh the prospect of a recovery in the world’s second largest economy and uncover opportunities for investors.

CNBC Pro subscribers can read more here.

– Xavier Ong

The Bank of Japan expected to keep interest rates steady

Bank of Japan expected to stay Interest rates held steady at -0.10%, according to a Reuters survey of economists.

The interest rate decision is expected after the end of the central bank’s monetary policy on Tuesday.

Separately, the Japanese government and the Bank of Japan are said to aim to revise a statement adhering to a 2% inflation target as soon as possible, according to the Kyodo NewsCiting government sources.

Jihe Lee

Evercore ISI says the Fed is over-raising interest rates

The Fed is likely to over hike interest rates to tame inflation and could end up tipping the US economy into recession, Ed Hyman of Evercore ISI wrote in a note on Sunday.

Hyman writes that the federal funds rate is now 6.5% against core personal consumption expenditures of 4.7% over the year and bond yields of 3.5%.

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“It’s not just the Fed tightening: the European Central Bank, the Bank of England, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps more profoundly, the money supply is shrinking.”

In addition, Evercore’s Economic Diffusion Index is approaching recession territory along with other indicators such as the company’s surveys, inflation data, and layoff announcements. Wages gains are starting to slow and rising rents are showing early signs of abating, indicating that inflation is likely to run its course.

“In any case, 87 percent of American voters are worried about a recession,” Hyman said.

– Carmen Renick

The S&P 500 headed into its worst December in four years

The S&P 500 is down more than 6% this month, as Wall Street struggles heading into the end of the year. That puts it on track for its worst monthly performance since September. It would also be its biggest drop in December since 2018, when it fell by 9.18%.

Stocks closed lower for the fourth straight day

Recession fears and disappointed hopes for a year-end rally weighed on stocks on Monday, sending them to a fourth straight negative close.

The Dow Jones Industrial Average fell 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47, and the Nasdaq Composite fell 1.49% to 10,546.03, dragged down by Amazon shares, which fell 3%.

– Carmen Renick