The typical stock-market Santa rally through December is on hold this month as investors prepare for the final rate review from the Federal Reserve this week.
Wall Street and European stock markets ended Friday largely weaker, while New Zealand’s S&P/NZX 50 index was down 2.4% so far in December in the run-up to the final full week of the trading year.
The Federal Open Market Committee is expected to cut the fed funds rate a quarter-point to a range of 4.25%-to-4.5% when it meets this week, with analysts pondering what the track will look like next year. The yield on 10-year US Treasuries has climbed to a three-week high 4.4%.
Other central banks reviewing monetary policy this year include the Bank of Japan, the Bank of England, Norway’s Norges Bank and Sweden’s Riksbank.
US President-elect Donald Trump is interested in privatising the US Postal Service due to its string of red ink, according to a Washington Post report on Sunday. That may disrupt e-commerce providers that use the federal government service for its final mile, such as Amazon.
Meanwhile, the US Treasury has told Japan’s Nippon Steel that the panel review the proposed US$14.9 billion takeover of US Steel is divided on how to address security concerns, the Financial Times reported on Sunday.
German ructions
European politics remain uncertain with German chancellor Olaf Scholz expected to hold a vote of confidence in parliament on Monday, which may trigger snap elections in the continent’s biggest economy.
The kiwi fell to 54.85 euro cents at 7am in Auckland from 55.10 cents on Friday at 5pm. It was largely unchanged against the greenback, trading at 57.62 US cents from 57.64 cents last week.
Meanwhile, Britain officially joined the Comprehensive and Progressive Trans-Pacific Partnership trade and investment pact, the first European nation to do so. The kiwi traded at 45.65 British pence from 45.53 pence last week.
Locally, partial inflation figures and the performance of services index kick off a heavy data week, which includes September quarter gross domestic product figures on Thursday, which are expected to show the recession deepened through that period.
Merchandise trade figures, business confidence and a dairy auction are also on the cards, while Me Today, Sanford and Napier Port are holding their annual meetings this week.
The government’s half-year economic and fiscal update is expected to show a deteriorating fiscal position when they’re released on Tuesday, with analysts predicting a slower return to surplus and a heavier government borrowing programme.
That said, they don’t anticipate the state of the government’s books will deter the Reserve Bank from continuing to unwind monetary policy, with a 50-basis point cut to the official cash rate still seen as coming in February.
Reporting by Paul McBeth. Image by Alexander Grey on Unsplash.
