The Nikkei’s 28% yearly gain was the biggest in a decade and it ended the year less than 1.0% shy of the 33-year high set in November. Still, there is little in the way of major Japanese economic data due this week for motivation. The same is true for indicators from other big Asian markets, where perhaps Thailand’s December CPI reading due Wednesday is the stand out.
The yen weakened in overseas markets on Tuesday after its dalliance with five-month highs last week. Dollar/yen <JPY=EBS> rose 0.8% to 141.97. Against China’s yuan <CNH=D3> the dollar rose 0.36% to 7.1510. The Australian dollar <AUD=> was down 0.72% at US$0.6762.
The main driver of the week will likely be Friday’s December U.S. payrolls report which will help market participants guess the timing of any Fed rate cuts. The Fed is widely seen holding rates at its January meeting, traders expect a near 70% chance of a 25-basis point cut in March, according to the CME Group’s FedWatch tool.
The S&P 500 <.SPX> fell 0.56% on Tuesday and the tech-heavy Nasdaq <.IXIC> swooned 1.63%. The Dow <.DJI> squeaked out a 0.07% gain.
U.S. Treasury yields popped higher as traders lowered expectations for rate cuts in 2024. But with Japan closed, the largest foreign owner of Treasuries was out of the market.
“Things may have gotten a little ahead of themselves, whether it’s equity valuations or expectations of Treasury rate cuts,” said David Albrycht, chief investment officer at Newfleet Asset Management. “People have become really complacent that the Fed is going to execute a soft landing but it’s still not clear.”
