Fundamental And Technical Analysis Report – 15 December 2022

15 Dec 2022

Hong Kong central bank raises rates after Fed hike

Asian stock market closes in red on Wednesday. The Shanghai Composite is down 0.25% at 3176.53 Overall, the Singapore MSCI is down 0.09% at 298.40. Over in Hong Kong, the Hang Seng Index is down 1.42% at 19673.45. In Japan, the Nikkei 225 is down 0.37% at 28156.21., while the Topix index is down 0.18% at 1973.90 South Korea’s Kospi is down 1.60% at 2399.25. Australia S&P/ASX 200 is down 0.64% at 7204.80.

Top News of the Day: –

The Hong Kong Monetary Authority (HKMA) said on Thursday it would raise its base rate charged through the overnight discount window by 50 basis points to 4.75%, hours after the U.S. Federal Reserve delivered a rate hike of the same margin.

The U.S. central bank raised interest rates by half a percentage point. It projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near-stalling of economic growth.

“Rate hike in the U.S. will not affect the financial and monetary stability of Hong Kong,” HKMA Chief Executive Eddie Yue told reporters. “Our monetary and financial markets continue to operate in a smooth and orderly manner. The Linked Exchange rate system (LERS) continues to work well.”

Hong Kong’s monetary policy moves in lock-step with U.S. policy as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.

Market Summary as of 14/12/2022:

European equities Wednesday closing. The DAX futures contract in Germany traded down 0.26% at 14460.20, and CAC 40 futures were down 0.21% at 6730.79. UK 100 futures contract in the U.K. is down 0.09 at 7495.93

In the U.S. on Wall Street, the Dow Jones Industrial Average closed down 0.42% at 33966.35. The S&P 500 is down 0.61% at 3995.32 and the Nasdaq 100 is down 0.76% at 11170.89, NYSE closes 0.43% down at 15494.98.

Top Market News Today:

In the Forex market, GBPUSD is down 0.37% at 1.2380. The USDJPY is up 0.22% at 135.78, and The USDCHF is up 0.24 at 0.9266. EURUSD down 0.35% at 1.0643. EUR/GBP is up 0.01% at 0.8595. The USD/CNY is up 0.19% at 6.9630 at the time of writing.

In the Commodity market, U.S. Gold futures are down by 0.97% by $1,788.58. Elsewhere, Silver futures are down 3.18% at $23.15 per ounce, and Platinum is down 1.83% at $1005.50. per ounce, and Palladium is down 0.86% at $1899.50.

Brent Crude Oil is down 0.96% at $81.91 per barrel.

In the Cryptocurrency Markets, Bitcoin is at 17735.20 down 0.40%, Ethereum is down 1.40% at 1290.02, and Litecoin is at 74.86 down 0.64%, at the time of writing.

Top Market Segment to Watch Out for Today:

OIL: – Oil prices dipped in Asian trade on Thursday as the dollar firmed, while the possibility of further interest rate hikes from global central banks also heightened demand concerns.

Oil price is under pressure today as the Fed’s hawkish guidance for its monetary policy sparked renewed concerns about economic growth again, lifting the U.S. dollar and sending commodity prices down,” said Tina Teng, an analyst at CMC Markets.

Chinese economic data for November were “much lower than expected, further darkening the demand outlook,” Teng added.

Economic News:

US: The Federal Reserve will deliver more interest rate hikes next year even as the economy slips towards a possible recession, Fed Chair Jerome Powell said on Wednesday, arguing that a higher cost would be paid if the U.S. central bank does not get a firmer grip on inflation.

Recent signs of slowing inflation have not brought any confidence yet that the fight has been won, Powell told reporters after the Fed’s policy-setting committee raised its benchmark overnight interest rate by half a percentage point and projected it would continue rising to above 5% in 2023, a level not seen since a steep economic downturn in 2007.

Those rises in borrowing costs would come despite an economy that Fed officials projected will operate at near stall speed through next year, with an annual growth rate of 0.5% and an unemployment rate nearly a full percentage point higher by the end of 2023, well beyond the increase historically associated with a recession.

“We don’t talk about this kind of recession, that kind of a recession. We just make these forecasts,” Powell said in a news conference. “I wish there were a completely painless way to restore price stability. There isn’t, and this is the best we can do.”

He described the slow rate of economic growth penciled in by Fed officials next year as still “modest.”

“I don’t think it would qualify as a recession … That’s positive growth,” the Fed chief said, even though “it is not going to feel like a boom.”

But other aspects of the Fed’s projections, notably a rise in the unemployment rate to 4.6% from the current 3.7%, are consistent with a downturn settling in as the central bank keeps its target policy rate at a “restrictive level” for at least the next two years.

Euro Zone: –

A ninth interest rate hike in a row by the Bank of England looks to be a foregone conclusion on Thursday and investors will be looking for clues on how many more will be needed with the economy sliding into recession but inflation still above 10%.

The Monetary Policy Committee (MPC) has faced both encouraging and worrying news on the economy since a majority voted in early November to raise rates by 0.75 percentage points, the biggest hike since 1989.

Consumer prices rose by less last month than the BoE had expected, according to data published on Wednesday, and business surveys have pointed to fading momentum in the economy.

But basic wages grew at the fastest pace since at least 2001, excluding the pandemic period, according to figures released on Tuesday – probably worrying those officials who see a greater risk of inflation becoming embedded.

Britain’s economy looks set to be the weakest performer among Group of Seven nations in 2023, according to the Organisation for Economic Co-operation and Development.

While the pound has strengthened over the last month, the country’s inflation problem is being compounded by an acute shortage of workers to fill vacancies, leaving the BoE facing a difficult balancing act.

Top Economic Releases Today:

USD: Fed Interest Rate Decision Actual 4.50%, Forecast 4.50%, Previous 4.00% at 00:30
EUR: ECB Interest Rate Decision (Dec) Forecast 2.50%, Previous 2.00% at 18:45
USD: Core Retail Sales (MoM) (Nov) Forecast 0.2%, Previous 1.3% at 19:00
GBP: BoE Interest Rate Decision (Dec) Forecast 3.50%, Previous 3.00% at 17:30
NZD: GDP (QoQ) (Q3) Actual 2.0%, Forecast 0.9%, Previous 1.7% at 03:15