Recent decisions by central banks have significantly influenced global markets. In December 2023, the Bank of Japan (BoJ) and the Bank of Canada maintained key interest rates, while the European Central Bank (ECB) sustained multi-year high rates to combat inflation. Analysts expect these measures to continue. Key economic indicators, including manufacturing and services sector data, GDP, and inflation figures, will provide insights into the near-term market outlook.
In the final meeting of the year, the Bank of Japan (BoJ) unanimously decided to maintain its key short-term interest rate at -0.1% and 10-year bond yields at around 0%. Analysts are anticipating that the central bank will continue with the current interest rate levels in its upcoming meeting on January 23, 2024.
In December 2023, the Bank of Canada kept the overnight rate at 5%, marking the third consecutive meeting with unchanged rates. Analysts project a continuation of the current levels.
In the European Union, the European Central Bank (ECB) sustained interest rates at multi-year highs for the second consecutive meeting in December 2023. This included signaling an early conclusion to its remaining bond purchase scheme as part of efforts to combat high inflation. Analysts are expecting a continuation of these interest rate levels at the ECB’s upcoming meeting on January 25, 2024.
Turning to economic indicators, Germany’s manufacturing Purchasing Managers’ Index (PMI) increased from 42.6 to 43.3 between November and December 2023. In contrast, the UK and the US saw decreases in manufacturing PMIs, from 47.2 to 46.2 and 49.40 to 47.90, respectively. Forecasts for January 24, 2024, indicate anticipated manufacturing PMIs of 43.7 for Germany, 46.7 for the UK, and 47.6 for the US.
Shifting to the services sector, Germany experienced a decline in its PMI from 49.6 to 49.3 between November and December 2023. In the same period, the UK’s services PMI increased from 50.9 to 53.4, and the US witnessed a rise in its services PMI from 50.8 to 51.4. Forecasts for January 24, 2024, suggest expected services PMIs of 49.1 for Germany, 53.0 for the UK, and 51.0 for the US.
In the United States, the American economy expanded at an annualised rate of 4.9% in the third quarter of 2023, slightly below the 5.2% second estimate but matching the initially reported 4.9% in the advance estimate. Looking ahead to the advance GDP release for the fourth quarter on January 25, 2024, analysts expect a slower growth rate of 2%.
Finally, in the realm of inflation, Core PCE prices in the U.S., excluding food and energy, recorded a 0.1% increase from the previous month in November 2023. With data for December 2023 set to be released on January 26, 2024, analysts are forecasting a growth of 0.2%.
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