Dow touches 38K while BOJ keeps policy steady

Equities

• In Europe, stock futures indicate a strong opening, especially in the technology sector, echoing the upward trend seen across the Atlantic. This optimism is partly fuelled by anticipation of forthcoming economic data and corporate earnings reports. The US stock market reflected robust investor confidence with the Dow Jones Industrial Average closing at a record high, driven by gains in various sectors including Industrials, Telecoms, and Financials.
• Market strategists maintain a positive outlook for the year, especially if corporate earnings continue to grow. However, this optimism is tempered by concerns from some quarters, such as Morgan Stanley Wealth Management, which cautions about high valuation multiples and ambitious earnings forecasts potentially leading to a market stall in 2024.
• Asian markets present a varied landscape, with Japan's decision to maintain its expansive monetary policy contributing to a mixed response in stock benchmarks. In contrast, China's stock market experienced a downturn due to internal economic factors and concerns about the property sector.

Forex

• The forex market saw lower volatility with the US dollar experiencing a slight dip. This shift occurs amidst anticipation of decisions from several key central banks, including the Bank of England and European Central Bank, which could potentially bring more volatility to the currency markets. The Euro is poised to react to the ECB's upcoming policy meeting, with the market already pricing in a potential interest rate cut.
• The Japanese yen weakened following the Bank of Japan's decision to persist with its easing program. The focus is now on any hints of future policy shifts from the BOJ, which could have significant implications for the yen and broader currency markets. Such decisions are closely watched as indicators of broader economic trends and central bank strategies in response to global economic conditions.

Commodities

• Gold prices are experiencing an upswing, fuelled by strong physical demand, especially in the lead-up to the Lunar New Year holidays. This demand is complemented by speculative buying activities in China, indicating a robust market for the precious metal. Meanwhile, oil futures show mixed moves, reflecting an interplay of factors including technical market corrections and geopolitical tensions, such as the recent drone attacks on Russian oil facilities and escalating tensions in the Red Sea.

Elsewhere

• The US and UK's joint strikes against Houthi targets in Yemen mark a significant escalation in military efforts to address regional conflicts.
• BlackRock's warning about the worsening geopolitical backdrop for financial markets in 2024 raises concerns that current market valuations may not fully reflect these underlying risks.
• The luxury fashion industry makes a bold statement with the acquisition of a prime New York City property by the owner of Gucci and Yves Saint Laurent for nearly $1 billion. This move signals a significant investment in high-end retail space.