2023 In Review: A Look Back at The Highlights of The Year

FxPro Group

Economic

Stocks

Forex

Summary:

The year 2023 commenced after two years of economic uncertainty and heavy inflation across Europe and North America, home to leading financial markets, with major currencies such as the euro and the US dollar, and financial hubs including London, New York, Chicago, Frankfurt, and Toronto.

These continents, where major stock exchanges operate and the S&P 500, NASDAQ, and FTSE 100 indices represent the top stocks of the top listed companies in Britain and the US, witnessed a dynamic interplay of economic recovery, inflation challenges, and policy adjustments.

The European and North American economies had spent 2023 recovering from a sustained period of inflation and cost of living issues (Britain and mainland Europe), and in the US, yet more bank collapses and a close call with state insolvency as the US Government had to raise the debt ceiling to stop it defaulting on its existing commitments, highlighting the country's huge national debt.

Inflation did decline during 2023, but central bank policy on both sides of the Atlantic favoured continued increases in interest rates, despite the US inflation going down from 11% in mid-2022 to around 3.1% now, and the British inflation rate is 3.9% now whereas it was also in double figures during 2022. Now, we move on to looking at specific markets.

Indices – S&P Is The Stellar Performer

With regard to indices, the outright performer during the course of this year has been the S&P 500, which has managed to achieve a return of approximately 24% year-to-date, which is a remarkable increase over its usual average of approximately 10%.

2023 In Review: A Look Back at The Highlights of The Year_1

As far as global indices are concerned, this stellar performance from the companies whose listed stocks are included in the S&P 500 index puts it in second place globally, with only the Nasdaq 100 Index having outshone it. However, it is worth noting that Japan's Nikkei 225, whilst not considered one of the top performers by many analytical publications, has done well with a gain of 26.35% year-to-date. Thus, depending on the rankings referred to, the S&P 500 ranks between second and third place in terms of annual performance – but the point is that it has more than doubled its annual average in 2023.

What is fascinating about this is that just seven companies, those being Apple, Google's parent Alphabet, Meta Platforms (formerly Facebook), Microsoft, NVIDIA, Amazon.com, and Tesla, had driven the S&P 500 index to its stratospheric growth during the first six months of 2023.

What a contrast to the previous year's tech stock doldrums!

The High Volatility of the Oil Market

In commodities markets, international relations, politics, and, in the case of the past two years, wars in regions with oil-producing significance are historically major factors causing market volatility.

Just almost two years on from the beginning of the war between Ukraine and NATO allies and Russia, which is an OPEC+ country and one of the world's largest suppliers of energy products, there is now another war, this time in the Middle East which involves Israel backed by Western NATO allies, with oil-producing nations such as Iran being in the background.

With such instability in the geopolitical sphere, oil prices have been volatile this year. There was notable volatility all year in oil markets; however, by mid-October 2023, the war in the Middle East had caused oil prices to climb to $94 a barrel.

2023 In Review: A Look Back at The Highlights of The Year_2

It also reignited fears among oil traders and economists that markets could breach the $100 a barrel mark.

This did not happen, and prices slowed again. By the beginning of December, the focus was on whether oil-producing countries would scale back production a bit more in order to bolster demand.

These volatile peaks this year have been sudden and shorter-lived than in 2022 when they were noticeably longer. In mid-2022, it was entirely possible to pull into a fuel station in France and pay 2.20 euros for a litre of unleaded fuel!

Tech Stocks – The Enthusiasm Is Back

2023 heralded a return to the forefront of tech stocks. This was reflected heavily in the strident performance of the S&P 500 index in the United States; however, when looking at the entirety of US-listed technology stocks, which are largely listed on New York's Nasdaq exchange, it would be fair to call 2023 the year of an absolute resurgence. Nasdaq Composite gained over 40% in value year-to-date.

This performance has overshadowed the period of time during 2021 and 2022 when somewhat risky entries into the Nasdaq listings by SPAC companies were de rigueur, and the ensuing year of 2022 was a year of total decline in tech stocks.

This has reversed, and Nasdaq's performance in 2023 demonstrates a return to favour of tech stocks, and not one mention of the four-letter acronym SPAC has been uttered for almost two years now. Stability, it seems, is back on track.

The bricks-and-mortar FTSE100 index in the United Kingdom has once again demonstrated that institutional stability gained by the tracking of age-old blue-chip corporations listed on the London Stock Exchange is a bastion of buoyancy. There are a series of financial services giants included in the FTSE 100, along with engineering stalwarts, housebuilders, entertainment and retail conglomerates and scientific corporations.

2023 In Review: A Look Back at The Highlights of The Year_3

Perhaps rather surprisingly, Hargreaves Lansdown, Britain's largest retail financial services company, was deleted from the FTSE 100 index in the last quarter of 2023. However, the index itself has performed with average results this year.

The euphoric surge of 2021, when it reached 7,000 points for the first time, was not replicated in 2023, and despite some degree of celebration when it approached 8,000 during the earlier part of 2023, this was short-lived and never replicated.

Stability and steadiness are the order of the day when it comes to Britain's stock markets. It is a different animal to the US tech sector, and far more grey suit, and less Silicon Valley.

Australian Dollar: Association With Commodities?

Now we move to currencies, and whilst on the subject of commodities, we can start with the Australian dollar.

2023 In Review: A Look Back at The Highlights of The Year_4

During the first month of 2023, there was a steady rise in AUD/USD and many traders considered at the time that AUD/USD was going to be considered one of the most preferred currency pairs for traders in the commodities market, which makes sense given Australia's highly important mining and mineral extraction industry which trades its raw materials on Australia's commodities markets.

Toward the end of this year, the AUDUSD was moderately volatile. The AUDUSD pair moved from its high point in early 2023 of 0.71 on the 26th of January through a series of moderate spikes but an overall downward move during the second half of the year, resting at 0.63 on the 3rd of October.

The Cable – Volatility Is Back

The GBP/USD pair, often referred to as 'The Cable,' has been very volatile this year, which is interesting given that both the US and Britain have been faced with similar economic matters such as fighting inflation, post-lockdown debts, and energy price increases far beyond the percentage of retail price inflation. Just in the past month alone, the GBP/USD went from 1.25 to 1.27. These currencies are often not volatile at all. Thus, a movement of a few cents in either direction is a matter to consider when measuring the market sentiment.

EUR/USD: Similar Policies, Different Movements

The EUR/USD pair has experienced higher and lower moments during the course of this year, and despite the European Union member states having experienced similar challenges and been subject to similar geopolitical matters as the United States and Britain, there has been some movement between the euro and the US dollar.

2023 In Review: A Look Back at The Highlights of The Year_6

By mid-July, during the height of summer, the EURUSD pair was up to 1.12, which is a considerable uptick from the low point of 1.05 at which it began the year. Interestingly, the European Central Bank had held off from making interest rate increases during 2022, something that was being watched very closely, whilst the US and British monetary policy was staunchly in favour of continued increases.

Of course, the ECB ultimately gave way and did increase rates, but far less frequently than its Anglosphere counterparts, whose major currencies are traded against the euro.

Overall, the European economy has done quite well during 2023, and the energy-related matter of natural gas supplies being in jeopardy due to political sanctions appears to have largely resolved itself. As the final two weeks of 2023 are in swing, the EURUSD stands at 1.09, which is not as high as the summer but a little higher than its low entry in January this year.

Bank Demises – Business As Usual

In the US, there have been a few economic issues that have dented investors' and economic analysts' confidence. The aforementioned bank-related toxicity in which some large, well-established banks became insolvent was a major event of 2023.

Silicon Valley Bank collapsed after 50 years in business, and the surrounding contagion saw the end of some smaller regional banks like First Republic Bank, which got mopped up by JPMorgan after its demise.

Credit Suisse, one of the world's largest Tier 1 investment banks, with a substantial market share in interbank FX currency dealing, finally went bankrupt, and whilst that is a Swiss bank, the effect of its demise was mostly felt on Wall Street. Oddly, the US dollar has not been too adversely affected by these catastrophes, despite them following a similar set of circumstances to the ones that caused the global financial crisis in 2008/2009.

This time, the news passed, and the US dollar has remained very strong. There has been absolutely no talk of the world's reserve currency being usurped by another major, even during the period earlier this year when the country had to increase its debt ceiling to be able to continue to service its national debt, which is higher than the United Kingdom's national debt in terms of percentage debt to GDP ratio, and with the UK having had no such issue in servicing its commitments.

Overall, the US dollar has held up very well indeed over not just 2023 but also previous years, despite lockdowns, involvement in wars, and spiralling national debt. It is clear that the hard-working nature of the American public has kept productivity high.

Monetary Policy: Interest Rate Hikes Blighted 2023

Almost absolutely unified in terms of monetary policy, the Bank of England and the US Federal Reserve have been continuing to increase interest rates even during a period in which inflation is decreasing. There has been some talk of stopping the interest rate increases, but this has not yet materialised. The cost of maintaining existing commitments for large corporations has increased due to having to service loans at higher rates, but as is clear from the stock market performance of larger, well-capitalised corporations, this has not hampered their performance at all.

Britain has lived through Brexit-related wranglings and the shortest prime ministerial term in history, whereas the US lived through almost going bankrupt. Despite the media sensationalism, however, both countries are in overall good shape as far as everyday life is concerned for most people.

Volatility in the currency markets appears to be originating from news-driven trading, which is perhaps why it is so sudden and changeable.

It's been a fascinating year. A year of rebuilding the economy from bizarre policy and a year of battling global headwinds. What will 2024 bring?

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Economic

Japan’s labor market has shown remarkable stability in November, with the job-to-applicants ratio hovering at 1.28, a marginal decrease from the previous month's 1.30. This signifies that there were 128 jobs available for every 100 job seekers, underscoring the ongoing challenge for employers to fill positions. The data, released by the labor ministry on Tuesday, comes as companies prepare for annual wage negotiations, adding pressure on them to enhance compensation packages.

The internal affairs ministry's separate report echoed the resilience of the labor market, revealing that the unemployment rate remained at 2.5% in November. Notably, the number of employed individuals increased by 560,000 compared to the same period last year, marking the 16th consecutive annual rise. The rise in female workers by 420,000 further emphasizes the positive trend.

Japan's November Unemployment Rate Holds Steady at 2.5%_1

Bank of Japan Governor Kazuo Ueda, addressing the labor conditions, pointed out that relative to the previous year, conditions have tightened, contributing to wage growth and increased workplace efficiency. Ueda's focus on upcoming spring wage negotiations reflects the importance of sustained positive indicators, fostering optimism for another year of historic salary increases.

Economists cautiously welcomed the data, with Masato Koike from Sompo Institute Plus stating, "We cannot say the results were strong enough to influence the outcome of the spring wage negotiations, but they at least indicate that the labor market remains tight." Ueda's commitment to scrutinizing forthcoming data aligns with the positive impression created by these results.

While Japan's labor conditions have eased somewhat since the peak of the pandemic, the country's jobless rate remains the lowest among OECD nations. The job-offers-to-applicants ratio, which dipped during the pandemic, has since edged higher, signaling a potential shift where workers, buoyed by salary increases, may be voluntarily seeking better opportunities.

The impact of labor shortages is most pronounced in the services sector, as indicated by the BOJ's tankan survey, revealing workforce tightness in nonmanufacturing at levels not seen in over three decades. This shortage has led to a record number of bankruptcies due to manpower constraints, especially in the construction and logistics sectors, according to Teikoku Databank.

The recent surge in service prices in November, the fastest since 1993, excluding sales tax hikes, further underscores the upward pressure on wages. As demand continues to rise, tightness in the labor market increases the likelihood of aggressive wage increases during the upcoming negotiations, scheduled to conclude in March.

Despite the overall positive outlook, the unexpected dip in the job offers-to-applicants ratio raises concerns. Bloomberg economist Taro Kimura suggests that wobbly domestic demand and a gloomy global growth outlook may have contributed to businesses hesitating to ramp up hiring. Policymakers at the Bank of Japan may interpret this as a potential signal of a hiring slowdown, warranting cautious monitoring.

Japan's steadfast labor market is poised to influence robust wage negotiations in the coming months. The nation's ability to maintain low unemployment rates amidst global uncertainties positions it as a stable player in the international economic landscape.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Saif

Economic

As the United States steers through the economic landscape of 2023, the prevailing sentiment among economists is one of guarded optimism. Contrary to initial predictions of an impending recession by the year's end, the nation finds itself on the precipice of what some experts herald as the much-anticipated "soft landing." However, as the 2024 presidential election looms, a pervasive sense of economic apprehension still lingers across the country.

At the close of 2022, ominous clouds of recession cast their shadows, with leading economists and banks foretelling a downturn in 2023. Yet, the unfolding narrative diverged from this grim prophecy. Inflation receded, buoyed by consistent job growth and a surge in manufacturing investments. Notably, strides were made in narrowing racial wage and net worth gaps, accompanied by resilient consumer spending.

Despite these positive strides, the economic tableau presents a tale of contrasts. Mortgage rates maintain their ascent, student-loan payments resume, and inflation persists in essential facets of daily life, including food, shelter, and recreational expenditures such as subscriptions and concerts.

Shannon Seery Grein, Vice President and Economist at Wells Fargo, offers a nuanced perspective on the coming months. While Wells Fargo anticipates a slight economic downturn in 2024, Seery Grein underscores the resilience of households and businesses, mitigating the severity of any potential recession. She notes, "If the economy does indeed fall into recession next year, we anticipate the contraction to be mild by historic standards, largely due to the decent financial position of households and some Labor-Hoarding effects among businesses."

Looking ahead, economists express a collective desire for a relatively uneventful 2024, often humorously describing it as "boring." J.P. Morgan Asset Management, Goldman Sachs, and S&P Global align in their predictions of GDP growth hovering around or slightly above 2%, marking the economy's "final descent to a soft landing." Wells Fargo adds granularity to this outlook, anticipating the core Personal Consumption Expenditures Price Index, closely monitored by the Federal Reserve, to average an annual rate of 2.2% in the fourth quarter of 2024. Navigating Economic Crossroads The US Outlook in 2024_1

Navigating Economic Crossroads The US Outlook in 2024_1

U.S. Bureau of Labor Statistics

In conclusion, the economic trajectory of the United States in 2024 reflects a delicate balance between optimism and caution. While the prospect of a "soft landing" instils hope, challenges persist in the form of elevated mortgage rates, resuming student loan payments, and lingering inflation. As the nation navigates these crossroads, the resilience of households and businesses may prove instrumental in steering the economy towards a mild recession, ensuring a stable course into the future.

To stay updated on all economic events of today, please check out our Economic calendar

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Stocks

Final week of 2023 to leave much anticipation for Santa Claus rally

Last week, the S&P 500 pushed on with its eighth straight week of gains to register its longest winning streak since 2017, as incoming economic data continues to validate dovish market expectations priced for 2024. We have the last US inflation data for the year – the US core Personal Consumption Expenditures (PCE) price index on Friday, which saw another downside surprise for November (3.2% versus 3.3% forecast). The lower-than-expected read marked the seven straight month where inflation has either met or came in below market consensus, which has been in line with the Federal Reserve (Fed)'s aim of wanting to see further inflation progress for a policy pivot.

As we head into the final week for 2023, which is also the period for the renowned 'Santa Claus rally', attention will be on whether risk sentiments can overcome the mid-week volatility displayed last week. For the S&P 500, this will leave the 4,780 level of resistance on watch ahead. As both the Dow Jones Industrial Average (DJIA) and Nasdaq have touched their respective all-time highs this year, there has been much anticipation for the S&P 500 to deliver as well.

For now, extreme overbought technical conditions still do not offer an ideal risk-reward ratio at current levels, as the relative strength index (RSI) and moving average convergence/divergence (MACD) on the daily chart hovers at its extreme levels. Market bulls may make a final attempt to end off 2023 on a high note amid the holiday-shortened week, with any successful break above the 4,780 level ahead potentially leaving sight on its all-time high at the 4,812 level. But heading into 2024, it may call for some near-term cooling as dovish expectations seem priced for perfection. On the downside, the 4,700 level may be immediate support to hold, where recent dip-buying were sighted.

In terms of market breadth, the percentage of S&P 500 stocks above their respective 50-day and 100-day moving averages (MA) continue to hover at extreme overbought levels. The Fear & Greed Index also remains at 'extreme greed' levels, while other sentiment indicator such as the National Association of Active Investment Managers (NAAIM) Exposure Index is also near previous peaks.

Sector performance

Over the past week, sector performance has been more mixed, with an uneven showing in the performance for the 'Magnificent Seven' stocks. Notably, a 6.6% weekly gain in Alphabet and 5.5% gain in Meta Platforms did the heavy-lifting for the communication services sector to be the top performing sector. On the other hand, some weakness in Apple (-2.0%) and semiconductors (Nvidia -0.1%, Broadcom -0.7%) dragged the technology sector slightly into the red. The consumer discretionary sector was also weighed by a muted showing from Tesla (-0.4%) and a plunge in Nike's share price (-11.1%), which far overrode the resilience from Amazon (+2.3%). Overall, the S&P 500 managed to eke out a 0.3% gain with seven out of 11 S&P 500 sectors in the green. Defensive sectors in the likes of consumer staples and utilities continue to underperform, which still revealed broad risk-on appetite in place. As we round up the year, year-to-date performance has shown a clear comeback in growth sectors, as the Fed's peak hawkishness translated to renewed traction for the 2022 growth laggards. The energy sector has switched places as well, with its top outperformance in 2022 unwinding this year to join the ranks of the defensives in the red. S&P 500 Momentum Report_3

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IC Markets

Forex

Commodity

Stocks

Cryptocurrency

DXY

The DXY (US Dollar Index) chart currently shows an overall bearish momentum, indicating a potential for price to make a bearish continuation towards the 1st support.

The 1st support level at 101.46 is identified as an overlap support. Further below, the 2nd support level at 100.67 is noted as a swing-low support that aligns with the 78.60% Fibonacci projection level, further reinforcing its importance as a potential key support level.

To the upside, the 1st resistance level at 101.87 is identified as an overlap resistance that aligns with the 38.20% Fibonacci retracement level. Higher up, the 2nd resistance level at 102.61 is also marked as an overlap resistance, suggesting a potential barrier for further upside movement.

EUR/USD

The EUR/USD chart currently exhibits an overall bullish momentum. In this context, there is a potential scenario for price to make a bullish continuation towards the 1st resistance.

The 1st resistance level at 1.1065 is identified as a swing-high resistance that aligns with the 61.80% Fibonacci projection level. Higher up, the 2nd resistance level at 1.1139 is also noted as a swing-high resistance, suggesting a potential barrier for further upside movement.

To the downside, the 1st support level at 1.1013 is identified as an overlap support. Further below, the 2nd support level at 1.0943 is marked as a pullback support, further reinforcing its importance as a potential key support level.

EUR/JPY

The EUR/JPY chart currently exhibits a bearish overall momentum, suggesting a potential scenario for a bearish continuation towards the 1st support.

The 1st support at 155.62 is identified as a pullback support and coincides with the 61.80% Fibonacci Retracement, indicating a historical area where buying interest has been present.

Additionally, the 2nd support at 153.91 is considered a multi-swing low support, providing an additional layer of potential support for the ongoing bearish trend.

On the resistance side, the 1st resistance at 158.17 is associated with a pullback resistance and aligns with the 61.80% Fibonacci Projection, highlighting a potential barrier where selling interest could intensify.

Furthermore, the 2nd resistance at 159.16 is linked to an overlap resistance and the 61.80% Fibonacci Retracement, adding extra layers of potential resistance for the price.

An intermediate support level at 156.62 is also identified, corresponding to an overlap support. This level may act as a potential area where buying interest could provide support for the price.

EUR/GBP

The EUR/GBP chart currently exhibits a bullish overall momentum, suggesting a potential scenario for a bullish continuation towards the 1st resistance.

The 1st support at 0.8650 is identified as an overlap support and coincides with the 23.60% Fibonacci Retracement, indicating a historical area where buying interest has been present.

Additionally, the 2nd support at 0.8602 is considered a pullback support, providing an additional layer of potential support for the ongoing bullish trend.

On the resistance side, the 1st resistance at 0.8689 is associated with an overlap resistance and the 61.80% Fibonacci Retracement, highlighting a potential area where selling interest could intensify.

Furthermore, the 2nd resistance at 0.8725 is linked to a pullback resistance and the 78.60% Fibonacci Retracement, adding extra layers of potential resistance for the price.

GBP/USD

The GBP/USD chart currently exhibits a neutral bias. In this context, there is a potential scenario for price to fluctuate between the 1st support and the 1st resistance.

The 1st support level at 1.2612 is identified as an overlap support that aligns with the 61.80% Fibonacci retracement level. Further below, the 2nd support level at 1.2502 is marked as a swing-low support, further reinforcing its importance as a potential key support level.

To the upside, the intermediate resistance at 1.2746 is identified as a pullback support while the 1st resistance level at 1.2781 is identified as a multi-swing-high resistance that aligns with the 127.20% Fibonacci extension level. Higher up, the 2nd resistance level at 1.2872 is noted as a pullback resistance that aligns with the 161.80% Fibonacci extension level, suggesting a potential barrier for further upside movement.

GBP/JPY

The GBP/JPY chart currently displays a bearish overall momentum, indicating a potential scenario for a bearish continuation towards the 1st support.

The 1st support at 180.09 is considered significant as it represents a multi-swing low support and aligns with a Fibonacci projection, indicating a historical area where buying interest has been present.

Additionally, the 2nd support at 178.59 is identified as another multi-swing low support and coincides with the 127.20% Fibonacci Extension, providing an additional layer of potential support for the ongoing bearish trend.

On the resistance side, the 1st resistance at 182.29 is associated with a pullback resistance, the 61.80% Fibonacci Projection, and the 61.80% Fibonacci Retracement, highlighting a potential area where selling interest could intensify.

Furthermore, the 2nd resistance at 184.05 is linked to a multi-swing high resistance, adding an extra layer of potential resistance for the price.

USD/CHF

The USD/CHF chart currently exhibits an overall bearish momentum. In this context, there is a potential scenario for price to make a bearish continuation towards the 1st support.

The 1st support level at 0.8527 is marked as a multi-swing-low support that aligns with the 100.00% Fibonacci projection level. Further below, the 2nd support level at 0.8453 is noted as a swing-low support that aligns close to the 78.60% Fibonacci projection level, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 0.8561 is identified as an overlap resistance. Higher up, the 2nd resistance level at 0.8630 is also marked as an overlap resistance that aligns with the 38.20% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

USD/JPY

The USD/JPY chart currently exhibits an overall bearish momentum. In this context, there is a potential for price to break under the intermediate support and drop towards the 1st support.

The intermediate support level at 142.02 is identified as a pullback support that aligns close to the 78.60% Fibonacci retracement level. Further below, the 1st support level at 141.51 is noted as a multi-swing-low support, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 144.54 is noted as a swing-high resistance. Higher up, the 2nd resistance level at 145.37 is marked as a pullback resistance that aligns with the 78.60% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

USD/CAD

The USD/CAD chart currently exhibits an overall bearish momentum, indicating a potential for a break under the 1st support and drop towards the 2nd support.

The 1st support level at 1.3261 is identified as an overlap support. Further below, the 2nd support level at 1.3163 is noted as a multi-swing-low support, further reinforcing its importance as a key support level.

To the upside, the intermediate resistance level at 1.3321 is identified as a pullback resistance that aligns with the 23.60% Fibonacci retracement level. Higher up, the 1st resistance level at 1.3367 is also marked as a pullback resistance that aligns with the 38.20% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

AUD/USD

The AUD/USD chart currently exhibits an overall bullish momentum. However, there is a potential scenario for price to make a bearish reaction off the 1st resistance and drop towards the 1st support, especially if price breaks below the intermediate support.

The 1st resistance level at 0.6818 is identified as a swing-high resistance. Higher up, the 2nd resistance level at 0.6893 is noted as a multi-swing-high resistance, indicating its potential significance as a barrier for further upward movement.

To the downside, the intermediate support level at 0.6776 is identified as an overlap support while the 1st support level at 0.6732 is also noted as an overlap support. Further below, the 2nd support level at 0.6673 is also marked as an overlap support that aligns with the 50.00% Fibonacci retracement level, further reinforcing its importance as a key support level.

NZD/USD

The NZD/USD chart currently exhibits an overall bullish momentum. In this context, there is a potential scenario for price to make a bullish continuation towards the 1st resistance.

The intermediate resistance level at 0.6343 is identified as a pullback resistance. Higher up, the 1st resistance level at 0.6402 is also marked as a swing-high resistance, indicating its potential significance as a barrier for further upward movement.

To the downside, the 1st support level at 0.6308 is identified as an overlap support. Further below, the 2nd support level at 0.6249 is also noted as an overlap support, further reinforcing its importance as a key support level.

DJ30

The DJ30 chart currently displays a bullish overall momentum, suggesting a potential scenario for a bullish continuation towards the 1st resistance.

The 1st support at 37151.74 is considered significant as it represents an overlap support, indicating a historical area where buying interest has been present.

Additionally, the 2nd support at 36298.13 is identified as another overlap support and is associated with the 23.60% Fibonacci Retracement, providing an additional layer of potential support for the ongoing bullish trend.

On the resistance side, the 1st resistance at 37808.77 is linked to the 161.80% Fibonacci Extension, indicating a level where buying interest could intensify. This level suggests a potential target for the bullish continuation.

GER40

The GER40 chart currently exhibits a weak bearish momentum with low confidence, suggesting a potential scenario for a bearish continuation towards the 1st support.

The 1st support at 16490.00 is considered significant as it represents an overlap support, indicating a historical area where buying interest has been present.

Additionally, this support level coincides with the 23.60% Fibonacci Retracement and the -27% Fibonacci Expansion, providing multiple layers of potential support for the ongoing bearish trend.

The 2nd support at 16062.00 is identified as a pullback support and is associated with the 38.20% Fibonacci Retracement, adding an extra layer of potential support for the anticipated bearish movement.

On the resistance side, the 1st resistance at 16961.70 is linked to the swing high resistance and the 127.20% Fibonacci Extension, indicating a level where selling interest could intensify and potentially halt or reverse the bearish trend.

US500

The US500 chart currently demonstrates a bullish overall momentum, supported by various factors contributing to the upward movement.The price could potentially continue its bullish trend towards the 1st resistance.

The 1st support at 4699.2 is considered strong, representing a multi-swing low support level.

Additionally, the 2nd support at 4601.9 is identified as an overlap support, coinciding with the 23.60% Fibonacci Retracement, providing a solid foundation for potential price bounces.

On the resistance side, the 1st resistance at 4771.7 is associated with a swing high resistance, indicating a level where selling interest might increase, potentially causing a temporary pause or reversal in the bullish trend.

Furthermore, the 2nd resistance at 4817.0 is linked to a swing high resistance and the 161.80% Fibonacci Extension, highlighting a potential challenge for the price to surpass these levels.

BTC/USD

The BTC/USD chart currently reflects a neutral overall momentum, suggesting a potential scenario for price fluctuation between the 1st resistance and 1st support levels.

The 1st support at 40715 is identified as a swing low support and coincides with the 50% Fibonacci Retracement, making it a significant level where historical buying interest has been present.

Additionally, the 2nd support at 38437 is considered an overlap support, providing an extra layer of potential support for the cryptocurrency. This level aligns with the 78.60% Fibonacci Retracement, adding further significance to this support zone.

In terms of intermediate support, the level at 43090 is identified as an overlap support and coincides with the 38.20% Fibonacci Retracement, providing an additional layer of potential support during price fluctuations.

On the resistance side, the 1st resistance at 44490 is associated with a swing high resistance and marks a level where selling interest may intensify, potentially causing a temporary halt or reversal in price.

Furthermore, the 2nd resistance at 45999 is linked to the 127.20% Fibonacci Extension, presenting a formidable challenge for the price to surpass.

ETH/USD

The ETH/USD chart currently demonstrates a bullish overall momentum, suggesting a potential scenario for a bullish continuation towards the 1st resistance.

The 1st support at 2175.19 is identified as a pullback support, representing a historical area where buying interest has been present. This level also coincides with the 78.60% Fibonacci Retracement, adding significance to the support zone.

Additionally, the 2nd support at 2120.29 is recognized as a swing low support and is associated with the 61.80% Fibonacci Retracement, providing an extra layer of potential support for the cryptocurrency.

In terms of intermediate support, the level at 2262.98 is considered an overlap support and aligns with the 38.20% Fibonacci Retracement, providing an additional layer of potential support during price fluctuations.

On the resistance side, the 1st resistance at 2333.06 is linked to a swing high resistance, indicating a level where selling interest may intensify, potentially causing a temporary pause or reversal in the bullish trend.

Furthermore, the 2nd resistance at 2383.94 is another swing high resistance, presenting a formidable challenge for the price to overcome.

WTI/USD

The WTI chart currently exhibits an overall bullish momentum, suggesting a prevailing uptrend. However, there is a potential scenario for price to fall towards the 1st support.

The 1st support level at 72.60 is identified as an overlap support that aligns with the 38.20% Fibonacci retracement level. Further below, the 2nd support level at 71.32 is marked as a pullback support, reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 75.35 is identified as an overlap resistance that aligns close to the 61.80% Fibonacci retracement level. Higher up, the 2nd resistance level at 79.40 is noted as a multi-swing-high resistance, further indicating its potential significance as a barrier for further upward movement. Technical Outlook and Review_17

XAU/USD (GOLD)

The XAU/USD chart currently demonstrates a bullish momentum, indicating a potential for price to break above the intermediate resistance and make a bullish continuation towards the 1st resistance.

The intermediate resistance level at 2,069.33 is identified as a pullback resistance. Higher up, the 1st resistance level at 2,087.79 is also marked as a pullback resistance that aligns close to the 61.80% Fibonacci retracement level, further indicating its potential significance as a barrier for further upward movement.

To the downside, the intermediate support level at 2,047.93 is identified as a pullback support that aligns with the 23.60% Fibonacci retracement level while the 1st support level at 2,016.90 is marked as an overlap support that aligns close to the 50.00% Fibonacci retracement level. Further below, the 2nd support level at 1,976.18 is noted as a pullback support, reinforcing its importance as a key support level. Technical Outlook and Review_18

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Thomas

Economic

Stocks

Energy

The global economy slowed but remained resilient, skirting what many feared would be an inflation and commodity price-driven recession this year.

Although growth is estimated to be even slower in 2024, the worst is perhaps over and headwinds are expected to ease, analysts say.

The consistently high interest rates are expected to come down, although inflation, trending down, is still not in the 2 per cent target range of most central banks in the world.

Many analysts expect the next major monetary policy move in 2024 from the US Federal Reserve will be a rate cut, although they remain divided on when the Fed is likely to slash its benchmark rate and by how many basis points the regulator will lower it.

While inflation and rates trending down will bode well for growth in the latter half of next year, risks remain that can hamper economic momentum.

Geopolitical tensions, the health of the US and Chinese economies, volatility in oil prices, widening growth divergence, worryingly high global debt levels, and the mounting cost of climate are among the factors that will determine if the global economy has a soft landing next year.

Recession fears

The entirety of this year was defined by muted growth, dotted with geopolitical shocks and an abrupt banking crisis that threatened to derail growth. The continuation of the sharpest monetary policy tightening in decades to subdue consumer prices also took the wind out of sails.

The International Monetary Fund expects global economic growth at 3 per cent this year, slower than the 3.5 per cent expansion recorded in 2022, remaining below the historical world growth average, the Washington-based fund said in its World Economic Outlook in October.

For next year, the IMF expects global gross domestic product to expand by 2.9 per cent, while the World Bank estimates 2.4 per cent growth and the Organisation of Economic Co-operation and Development forecasts it at 2.7 per cent.

Both the IMF and the World Bank anticipate growth to remain slow and uneven, especially in emerging and developing economies.

"Looking at 2024, we anticipate uncertainty to persist, with sub-trend growth projected across the world’s economies," State Street Global Advisor said in its 2024 Outlook report.

"While the path to a soft landing appears viable, with growth decelerating but not collapsing, the effects of monetary policy tightening are still working their way through the system."

In addition, escalating geopolitical tensions and continuing macroeconomic headwinds will continue to test economies and 2024 will "likely be a year in flux with many factors pressuring the path to global recovery", State Street, one of the biggest global asset managers, said.

Although the global economy will grow at a slower pace next year, it is unlikely to face a recession.

"This time last year there were widespread fears of a recession that was expected to happen this year. Not only did that recession not happen, but we’ve ended up with above-potential GDP growth," Nora Szentivanyi, global economist at JP Morgan, said.

The global economy, as of the fourth quarter this year, is tracking 2.8 per cent year-on-year growth.

"I think we can safely say that the global economy has gone through this year being a lot more resilient than anticipated, because of strong private sector fundamentals – healthy balance sheets and a little bit of government support as well," Ms Szentivanyi said.

However, despite recent progress, "the path to a soft economic landing remains challenging", Michael Strobaek, chief investment officer at Swiss private bank Lombard Odier, said.

"The historical evidence argues against ruling out a recession, but we do not expect to see a severe US downturn this time."

Among the main concerns next year is geopolitics outweighing economic risks in the wake of a flare-up in the Israel-Gaza war or a deterioration in the US-China relationship.

"We think the bigger dangers in 2024 will be geopolitical, which have more potential to throw expectations off track," William Davies, global chief investment officer at asset manager Columbia Threadneedle Investments, said.

"These pressures impact companies directly, as finding alternative energy supplies or building new supply chains will be costly."

The global economy, he said, "appears to be travelling on a path guided by low or even slowing growth, falling inflation and high interest rates".

However, sceptics believe a deeper recession is possible due to lingering high interest rates.

"Investors should prepare for that middle road between those outcomes, which I think is the most likely scenario over the next six months," Mr Davies said.

Inflation and rates outlook

US inflation eased in November but was higher than some market expectations, cooling any hopes that the Fed would cut interest rates early next year.

The Consumer Price Index (CPI) rose 0.1 per cent last month. On an annual basis, inflation rose 3.1 per cent, down from 3.2 per cent in October.

Core CPI rose 4 per cent annually, unchanged from October.

The Fed left interest rates unchanged at its last policy meeting of the year. Interest rates are now at 5.4 per cent, a 22-year high, up from close to zero in March last year.

However, the central bank has indicated that it would cut interest rates more than once next year.

"According to activity on Fed funds futures, the Fed should gently start cutting the rates by May; that possibility is given around 75 per cent probability, slightly less than 80 per cent before [the latest] CPI print, while the probability of a March hike fell to around 44 per cent from nearly 50 per cent on that mini spike in monthly headline inflation," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

"In summary, rate cut bets are being placed for a rate cut in March or May 2024."

High interest rates should remain in place at least through the first half of 2024, and the European Central Bank is likely to be the first to cut rates midyear, with the Fed following suit in September, Mr Strobaek said.

"The global economy should then start to benefit from lower borrowing costs. If inflation proves sticky, or strong growth persists, that scenario would be at risk."

Lawrence Golub, chief executive of Golub Capital, a $60-billion US-based private credit company, said they are very confident that the reported inflation in the US will continue to be low, "maybe not 2 per cent, the Federal Reserve's target but more generally heading in that direction".

"Combine that with there being a presidential election and the Fed not wanting to seem to be taking political sides. In this particular cycle … unless there's a surprise on CPI, they absolutely are going to have to cut [rates] and cut multiple times," he told The National.

"The forward curves show about 100 to 120 basis point reduction over the next 12 months, and I see the first cut in the spring," he said.

Demand fears weigh on oil

Oil prices, which touched nearly $140 a barrel following Russia’s invasion of Ukraine last year, have taken a beating this year, despite supply cuts made by the Opec+ alliance and record crude demand from China, the world’s second-largest economy.

Brent prices are down nearly 8 per cent since the start of the year.

Analysts blame the fall in prices on concerns of non-compliance by some producing countries and fears that the Opec+ group would unwind its production cuts in the second quarter.

On November 30, the group announced voluntary production cuts of 2.2 million barrels per day for the first quarter of 2024.

"With market liquidity drying up as we approach the end of the year, prices are likely to stay volatile and further lows cannot be excluded," UBS strategist Giovanni Staunovo said in a research note.

Record production in the US and higher crude supply from Iran have eased concerns of a tight crude market in the fourth quarter.

"We classify the year 2024 for the energy complex as one of balance with bearish skews," MUFG, Japan’s largest lender, said in a research note.

However, global oil markets will remain supported by "tight" micro fundamentals, Opec+ driven cuts and effective hedging value against negative geopolitical supply shocks, the bank said.

Opec expects oil demand to expand by 2.2 million bpd next year, nearly double the International Energy Agency’s estimate of a growth of 1.1 million bpd.

Meanwhile, natural gas prices are expected to be stable next year on high European gas stocks and lower demand growth in the US, MUFG said.

Dutch Title Transfer Facility gas futures, the benchmark European contract, were trading at €34.17 ($37.67) per megawatt hour on December 22 after falling about 60 per cent since the start of the year.

What’s in store for stock markets?

This year so far has turned out to be a great year for equity investors after a dismal 2022.

Developed market equities are up almost 20 per cent year-to-date in total return terms.

"That said, digging below the surface, the rally has been mainly driven by a few mega-cap technology stocks in the US," Mathieu Racheter, head of equity strategy research at Julius Baer, said.

The so-called "Magnificent 7" – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla – did the heavy lifting in equities this year, he said.

"After the phenomenal outperformance, consensus has shifted towards expecting a mean reversion, ie the rest of the market catching up and outperforming the cohort in 2024," he said.

"We disagree with that notion and believe the outperformance is sustainable beyond 2023."

However, despite a stellar year, investors will closely be watching geopolitics that can potentially derail the stocks rally next year.

"Another wild card is the US elections. It is hard to predict the effect, if any, it will have on the markets – and it is that very unpredictability that is the problem. Markets hate uncertainty," Mr Davies at Columbia Threadneedle Investments said.

The UK may also go to the polls, with January 2025 the very latest Prime Minister Sunak can wait until he calls a ballot.

"Investors with exposure to European assets will also be watching political developments across the EU, too, as so-called populist parties and their leaders continue to make inroads," Russ Mould, investment director at AJ Bell, said.

Monetary policy and economic growth will remain key drivers of financial markets in 2024. However, "we do not underestimate the risks from geopolitics, energy, strategic competition between the US and China, and a high-stakes, highly polarised US presidential election", Mr Strobaek said.

"Equities are likely to be supported by mid-single-digit earnings growth and rate cuts in the second half of 2024, but growth is slowing and valuations appear, on aggregate, demanding versus other asset classes," he said.

"Equity markets can deliver positive – although very volatile – returns in the late stages of an economic cycle. Such a scenario would be consistent with a gradual rise in equity indices, but also with a quality bias given lingering uncertainty over the macroeconomic backdrop."

Meanwhile, restrictive financial conditions and slowing growth will continue to add pressure to indebted corporate borrowers, including some governments, Lombard Odier believes.

"We think bonds represent one of the strongest risk-adjusted opportunities in what we expect to be a volatile 2024," Mr Strobaek added.

Mounting cost of climate change

In all the talk of economic growth, a key element that has taken centre-stage globally is the rising cost of climate disasters.

If left unchecked, climate change could cost the global economy $178 trillion over the next 50 years, or a 7.6 per cent cut to global GDP in the year 2070 alone, Deloitte said.

The Cop28 climate conference in Dubai highlighted the massive investment efforts required for scaling up global climate financing.

By 2030, emerging markets and developing economies will require $2.4 trillion every year to address climate change, the Climate Policy Initiative said.

At the UN summit, the UAE launched a $30 billion fund for clean energy, backed by major US institutional investors such as BlackRock, Brookfield and TPG.

The money will go towards a new private investment vehicle, Alterra, which aims to raise $250 billion globally in the next six years to create a fairer climate-finance system.

But the challenge remains significant.

"We struggle to see how the finance for mitigation and adaptation efforts, which may cost $4 trillion to $5 trillion a year, can be made available quickly at affordable cost," consultancy Wood Mackenzie said in a research note.

"The current increases in renewables development costs due to higher cost of capital and supply chain bottlenecks are amplifying the challenge," it said.

Source: The National News

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Economic

What's going on?

Following several drone attacks from Houthi militants on merchant vessels, most of the world's largest container liners – including MSC, Maersk, CMA-CGM, Hapag Lloyd, Evergreen and HMM – began avoiding the 30km wide Bab al Mandeb sea strait to the Red Sea and the Suez Canal, which handles some 12% of global trade. They detoured their ultra large container vessels around Cape of Good Hope from mid-December.

Roughly half of the shipped freight through the canal comprises containerised goods, making it the most important artery for container trade. The trade lane is also a vital corridor to ship oil and oil products from the Persian Gulf to Europe and the US. Rerouting around the Cape adds some 3,000-3,500 nautical miles (around 6,000 km) to the journeys connecting Europe with Asia. At a speed of 14 knots, this means around 10 days is added to the duration of the trip. Since almost all container vessels are detoured, this could push up vessel capacity consumption by over 20-25%, which would turn overcapacity into a short-term shortage.

An international coalition has been created by the US to provide naval escorts, but the risks won't disappear immediately, and the rerouting continues.

Container rates on the rise and delays upcoming, but impact is all about how long it lasts

The massive re-routing of vessels will lead to significant delays on arrival in ports. And this will also have knock-on effects on connecting vessels and the turnaround of vessels. In European ports like Rotterdam (most calls for ultra large container vessels from Asia), but also Antwerp and Hamburg, this could lead to new congestion and delays in delivery further down the line in the first quarter. The weeks ahead of the Chinese New Year are busy in container shipping, but at least for shippers and consumption in Europe, the first quarter is quieter, and inventories are still relatively high. Nevertheless, the mounting delays could turn into shortages or waiting times for some consumer products in the first part of the year.

After spiking at unprecedented levels at the end of 2021, container rates returned to their pre-pandemic levels and even below over the course of 2023, as the high demand from the pandemic retreated and a range of newly delivered vessels created overcapacity. But the Red Sea crisis pushed up container global container rates again. For the US, the combination with the Panama Canal's low water restrictions even complicates supply lines to the East Coast. However, an important difference between the pandemic era and the Suez Canal blockage of the Evergiven in 2021 is that the demand-supply balance is currently far less strained. This will most likely prevent rates from reaching multiples again, but it all depends on how long the situation lasts.

Unexpectedly higher freight rates and also more complicated pricing for shippers in 2024

For shippers, freight charges are increasingly opaque as several surcharges add to bold port to port rates. The current situation in the Red Sea region leads to emergency contingency adjustment charges. This also further complicates next to other price supplements, such as peak season surcharge and 'emissions surcharge' following the start of the European emissions trading system (ETS). Either way, for shippers and eventually also for consumers, 2024 starts with higher-than-expected freight rates.

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