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Financial Holiday surge in US & Brexit woes

Hong Kong’s Financial gains, UK-Swiss financial ties

Financial markets rally, global stocks surge; US markets hit records, speculation on rate cuts; Brexit’s £3.3bn impact.

U.S. Markets and Rate Cut Euphoria

Wall Street continues its record-breaking streak, propelled by global disinflation tailwinds, setting the stage for potential shifts in 2024. The S&P500 is within 1% of all-time highs, and the Nasdaq 100 marks a 50% surge for the year. Megacap tech giants follow suit, doubling in 2023.

The 10-year U.S. Treasury yields touch lows not seen since July at 3.8830%, triggered by a sharp drop in UK inflation. UK’s annual consumer price inflation falls to 3.9%, below forecasts, leading to speculations of a BoE rate cut in March.

Global Financial Trends and Divergence

MSCI’s all-country stock index reaches its best levels since March last year, while U.S. stock futures take a breather following a profit miss from FedEx. U.S. consumer confidence readings for December and positive housing market indicators add to the mixed market sentiment.

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Central Banks and Monetary Policy

While Chicago Federal Reserve boss Austan Goolsbee acknowledges markets getting “a little ahead of themselves,” Bundesbank chief Joachim Nagel hints at a potential peak in rates, urging caution against speculating on an imminent interest rate cut. Other Fed officials stress maintaining focus on policy plans and not getting overly influenced by market movements.

Japan’s Momentum and China’s Struggles

Asian shares mostly advance on hopes that Japan’s moves to maintain easy interest rates could set a trend globally. Tokyo’s Nikkei 225 surges 1.4%, despite a slight decline in November exports. In contrast, China’s economic concerns deepen, with its benchmark lending rates unchanged, and stocks losing 1% on Tuesday to hit a nearly five-year low.

Global Financial Optimism

Hong Kong’s Hang Seng adds 0.7%, and the Shanghai Composite loses 0.8%. The S&P/ASX 200 in Sydney gains 0.7%, South Korea’s Kospi rises 1.8%, and India’s Sensex climbs 0.3%. The UK and Switzerland sign a post-Brexit agreement around financial services, aiming to deepen ties between their respective financial centers.

Brexit Economic Impact

The UK and Switzerland are poised to ink a financial services deal post-Brexit, boosting ties between financial centers. This agreement, anticipated to facilitate cross-border access, spans insurance, banking, asset management, and capital infrastructure. Despite touted benefits, Brexit’s impact on UK-EU trade remains stark, with an estimated 4% economic output reduction. The City of London, excluded from the post-Brexit EU trade deal, saw billions and thousands of staff relocate for EU operations. Financially, UK-Swiss trade hit £3.3 billion ($4.2 billion) in 2022, signaling strides but underlining ongoing Brexit challenges.

At the tail end of this year we will be sure to capture any important Forex news in our economic blog