Market Update by Solidecn.com

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France's Manufacturing Sector: A Mixed Outlook for 2024

Solid ECN – In December 2023, France's manufacturing sector showed signs of positive change. The manufacturing climate indicator, a measure of the health of the industry, reached 100, the highest level since July. This increase, up from 99 in November, surpassed expectations of 98. Key factors behind this rise included a more positive view from industrialists about recent production, moving from a negative perception (-9) in the past to a neutral stance (0). Additionally, there was a slight improvement in the inventory of finished goods, with the index moving from 13 to 14.

However, not all aspects were upbeat. The overall order books didn't show any change, remaining at a low level (-17), though foreign orders saw a marginal improvement. Concerns emerged regarding the future, as manufacturers' expectations for their own production dropped slightly, and their outlook on selling prices also deteriorated.

An encouraging sign was the decrease in perceived economic uncertainty, which fell to 25 in December from 28 in November. This suggests that manufacturers are becoming slightly more confident about the economic environment.


France Manufacturing Sector: Economic Implication

Looking ahead, these mixed signals in France's manufacturing sector offer a nuanced view of the economic future. The improvement in the manufacturing climate indicator and the reduction in uncertainty are positive signs, indicating potential growth and stability in the industry. However, the stagnant order books and cautious outlook on production and pricing point to ongoing challenges. The sector might experience moderate growth but will likely continue facing hurdles, such as fluctuating demand and pricing pressures.

Overall, while the immediate future seems cautiously optimistic, the long-term outlook remains uncertain, dependent on both domestic and global economic conditions.

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Fed's Rate Cut Speculation Keeps Gold Near $2,040

On Wednesday, gold's price remained steady at about $2,040 per ounce. This stability is close to the highest it's been in more than two weeks. Despite comments from US Federal Reserve officials, expectations for interest rate reductions next year haven't changed much. Atlanta Fed President Raphael Bostic, echoing other US policymakers, mentioned on Tuesday that there's no immediate need to lower US interest rates, considering the economy's current robustness.

However, the market still anticipates a high likelihood, roughly 75%, of an interest rate cut by March. Looking forward, investors are waiting for the Fed's preferred core PCE price index, set to be released later this week, for more direction. In other news, the Bank of Japan has decided to maintain its very accommodative monetary policy and hasn't hinted at any changes for the coming year. Similarly, the People’s Bank of China kept its key lending rates steady, resisting the push to relax monetary policy further despite a struggling economic recovery.

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Canadian Dollar Peaks Amid Inflation Concerns

Solid ECN – In December, the Canadian dollar reached its highest level since early August, surpassing 1.335 against the USD. This strengthening is a result of persistent inflation within the Canadian economy, which has reignited expectations for a more aggressive monetary policy from the Bank of Canada. Contrary to market anticipations of a slowdown to 2.9%, headline inflation remained steady at 3.1% in November. Moreover, the trimmed-mean core rate, a key measure of inflation, exceeded forecasts by reaching 3.5%.

These figures support the central bank’s earlier predictions that inflation in Canada is likely to stay high for some time. This situation calls for an extended period of tight monetary policy, possibly including additional interest rate increases. In contrast, the Federal Reserve in the United States has signaled a more cautious approach, with policymakers indicating expected rate cuts totaling 75 basis points for the next year. This difference in policy stances has further amplified the Canadian dollar's rise in value compared to the US dollar.

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FTSE 100 Hits 7-Month High on Low Inflation

Solid ECN – On Tuesday, the FTSE 100 experienced a notable increase, rising over 1.5% and reaching a seven-month peak near the 7750 mark. This jump came after the release of inflation data that was lower than expected. The data led to widespread conjecture that the Bank of England might start reducing interest rates as early as March 2023, possibly cutting them by a total of 143 basis points.

The sectors most responsive to interest rate changes were the biggest gainers. Homebuilders saw a 3.6% increase, real estate climbed by 1.4%, and real estate investment trusts (REITs) went up by 1.6%. Additionally, there were significant gains in other areas, with energy stocks growing by 2.5% and banks by 2.1%.

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Nikkei 225 and Topix Index Surge on BOJ's Policy

Solid ECN – On Wednesday, Japan's Nikkei 225 Index saw a significant rise of 1.37%, closing at 33,676, while the broader Topix Index increased by 0.67% to 2,349. This growth continued from the previous session, spurred by the Bank of Japan's decision to maintain its ultra-loose monetary policy. The central bank also avoided any hints of potential changes in the coming year. Governor Kazuo Ueda, in his press conference, emphasized a dovish stance, stating the bank's readiness to implement further easing measures if needed.

Additionally, Japanese stocks were buoyed by positive developments on Wall Street, where optimism grew around the expectation that the US Federal Reserve might begin reducing interest rates next year. This optimism was reflected across almost all sectors in the Japanese market, with notable increases in shares of major companies. Kawasaki Kisen saw a rise of 5.6%, Nippon Yusen surged by 32%, Fast Retailing increased by 3.9%, Shin-Etsu Chemical went up by 4.1%, and Nippon Steel grew by 1.6%.

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Rising Aussie Dollar: A Five-Month High

Solid ECN – The Australian dollar has maintained a strong position, staying around $0.675, which is its highest level in nearly five months. This strength is largely due to the dovish (less aggressive) monetary policies of the US Federal Reserve and the Bank of Japan. These policies have put pressure on the US dollar and the yen, in turn boosting other major currencies, including the Australian dollar, commonly referred to as the Aussie.




Furthermore, the Aussie has been positively influenced by an increase in commodity prices. This rise in prices can be attributed to supply disruptions caused by attacks in the Red Sea. Additionally, the possibility of lower interest rates has also played a role in enhancing the overall demand outlook, thus supporting the Australian dollar's value.

Domestically, the situation is also noteworthy. The latest meeting minutes from the Reserve Bank of Australia (RBA) revealed that the central bank had contemplated raising interest rates for a second consecutive month in December. However, the RBA opted to wait for more data before making such a decision, as there were promising signs regarding inflation.

The RBA has also observed that aggregate demand within Australia has slowed more rapidly than they had anticipated. This slowing of demand is coupled with an observation of an accelerating pace of disinflation (a slowing down in the rate of inflation) in other parts of the world. These factors together contribute to the complex economic landscape that the RBA and the Australian dollar are currently navigating.

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Gold's Rise and Resistance: Fibonacci Analysis

FxNews – In the daily XAUUSD chart, gold recently rebounded from the 50% Fibonacci support level. Now, the metal is trading over the 38.2% Fibonacci support, approaching the resistance zone between $2,047 and $2,057.



Delving deeper with the 4-hour chart, we get a clearer picture of gold's market movements. Here, buyers are striving to keep the price over the 38.2% Fibonacci mark. This bullish trend is backed by various technical indicators. For instance, the RSI indicator is consistently above 50, a good sign for buyers. Moreover, the Awesome Oscillator shows green bars, signaling upward momentum. If this trend continues and the current level holds, we anticipate gold might reach the 61.8% Fibonacci resistance.



Conversely, if gold's price falls beneath its current support, this would challenge the current bullish perspective, potentially leading to a decline in its value.

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BoJ's Steady Policy Boosts Tokyo Stocks

Solid ECN – On Tuesday, the Nikkei 225 index rose by 1.4%, reaching 33,219, its highest point in two weeks. The broader TOPIX index also saw an increase, finishing 0.7% higher at 2,334. These gains followed the Bank of Japan's decision to maintain its ultra-easy monetary policy, with a commitment to keeping interest rates low. The bank, however, did not provide any clues about potential changes to this policy in the next year. Most sectors ended the day lower, except for basic materials, which remained relatively unchanged. Real estate emerged as the standout sector, leading the gains, followed by technology and non-cyclical industries. Among individual companies, Tokyo Electron saw a significant increase of 3.7%, with Fast Retailing and Recruit Holdings both gaining 2.2%.