Key events to watch in the week ahead: 25 – 31 December 2023

This week’s overview

Pushback on rate cuts by Federal Reserve (Fed) members this week has seen some shrugging off, as the trend of easing US inflation and soft landing hopes continue to leave the major US indices eyeing their respective all-time high. Nevertheless, extreme overbought technical conditions do reveal considerable risks in opening fresh longs at current level, as sentiments touched ‘extreme greed’ levels and near-term market breadth reached overextended levels, which may call for some cooling.

As we head into the Christmas holiday break, markets could witness some tapering in trading volume in the upcoming shortened trading week. The economic calendar may see some winding down as well, but with three notable data releases to place on the radar ahead.

26 December 2023 (Tuesday, 1pm SGT): Singapore’s consumer price index (CPI)

Thus far, the broader trend for Singapore’s inflation remains on the downside, with headline inflation easing from its peak of 7.5% in September 2022 to the current 4.7%. Likewise, core inflation has also eased from its peak of 5.5% to the current 3.3%, which validates the Monetary Authority of Singapore’s (MAS) decision to keep its monetary policy settings unchanged in October this year after five rounds of tightening.

That said, with the recent inflation figures delivering its first uptick since the start of the year, more clarity will be sought on whether the disinflation trend will continue. Thus far, economists expect Singapore’s headline and core inflation to ease to 3.4% and 3% respectively in 2024.

27 December 2023 (Wednesday, 7.50am SGT): Bank of Japan (BoJ) summary of opinions

The recent BoJ meeting concluded with a dovish takeaway, as policymakers maintained its ultra-accommodative policy settings and offered little clues on a policy-exit timeline. Further wait-and-see seems to be the central bank’s stance into year-end, while policymakers continue to be on the lookout for more conviction of a sustained, broad-based increases in both wages and prices.

The upcoming summary of opinions to conclude the year will be on watch to provide fresh views for inflation and economic growth, which may be key to move the dial around rate hike expectations for the BoJ next year. For now, market rate expectations are priced for the BoJ to scarp its negative-rate policy in the second quarter of 2024.

31 December 2023 (Sunday, 9.30am SGT): China’s National Bureau of Statistics (NBS) manufacturing and non-manufacturing Purchasing Managers' Index (PMI)

Chinese equities have been underperforming this year, as market participants failed to find the conviction for a turnaround in China’s economic conditions just yet. Thus far, signs of recovery remains short-lived, as its official manufacturing PMI dipped back into contractionary territory since October 2023 while its services PMI eased from its peak of 58.2 in March 2023 to the current 50.2 – an 11-month low.

Ahead, November manufacturing PMI is expected to moderate further to 49.5, with weak data likely to keep stimulus calls alive. Until there has been a sustained trend of recovery to provide conviction that the worst may be over, market participants will continue to hold reservations over buying any dips, as seen over the past one year.