Nikkei 225 falls more than 2% after Bank of Japan widens yield target range, yen strengthens

S&P sees oil prices rising to $121 on full China reopening

Dan Yergin says our 2023 base case for Brent is $90

Oil prices could also reach as high as $121 when China reopens, S&P predicted, adding that prices are set to stabilize at $90 a barrel for 2023.

S&P Vice President Dan Yergin said oil prices would see “a big rally” from China as a whole, after Russia’s invasion of Ukraine nearly touched March highs.

He added that pressures from underinvestment currently seen in oil and gas will push prices higher, Yergin added.

“Our base case for 2023 is $90 for Brent but you have to look at other cases,” he said, adding that the outlook for oil is mainly surrounded by three uncertainties – further hikes from the Fed, demand from China and reaction from Russia. Its oil price ceiling agreed by the European Union.

-Li Ying Shan

Bank of Japan holds rates steady, widens yield curve control band

The Bank of Japan kept its benchmark interest rates steady and announced it would change its yield curve control band, the central bank said in a statement.

The BOJ will widen the volatility range of the 10-year Japanese government bond yield from its current range of plus and minus 0.25 percentage points to plus and minus 0.5 percentage points, it said.

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The adjustment, the BOJ said, is intended to “encourage a smoothing of the entire yield curve while improving market performance and maintaining favorable financial conditions.”

The Japanese yen strengthened more than 2% to 133.37 against the US dollar following the announcement.

– Jihya Lee

Reserve Bank of Australia minutes show a range of options were considered in December

Minutes of the Reserve Bank of Australia’s December meeting show the central bank considered a number of options for its cash rate decision, including a complete pause in hikes.

“The board considered several options for a cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate,” the minutes said.

RBA board members also noted the importance of “continuing work” and added that the central bank will continue to consider a range of options for the coming year as well.

– Jihya Lee

China keeps key lending rates unchanged

The People’s Bank of China kept its one-year and five-year loan prime rates unchanged in December, according to an announcement.

The central bank kept its one-year loan prime rate at 3.65% and its five-year loan prime rate at 4.30%, in line with expectations in a Reuters poll.

The offshore and onshore Chinese yuan were relatively flat against the US dollar at 6.9808 and 6.9783 respectively.

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– Jihya Lee

CNBC Pro: Is China Poised for a Rebound in 2023? Wall Street pros weigh in — and tell you how to trade them

What’s next for China after rolling back many of the Covid-19 measures?

Market sentiment underscores the potential for recovery in the world’s second-largest economy and reveals opportunities for investors.

CNBC Pro subscribers can read more here.

– Xavier Ong

The Bank of Japan is expected to keep rates steady

The Bank of Japan is expected to keep interest rates steady at -0.10%, according to a survey of economists by Reuters.

A rate decision is expected after the central bank’s two-day monetary policy session ends on Tuesday.

Separately, the Japanese government and BOJ aim to revise the statement to commit to the 2% inflation target as soon as possible, according to Kyodo News, citing government sources.

Jihya Lee

Evercore ISI says the Fed is raising rates

The Federal Reserve is likely raising its rates to curb inflation and could tip the U.S. economy into recession, Evercore ISI’s Ed Hyman wrote in a Sunday note.

The federal funds rate is now 6.5% versus core PCE of 4.7% a year and bond yields are 3.5%, Hyman wrote.

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“And it’s not just the Fed tightening: the ECB, BoE, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps more profoundly, the money supply is shrinking.”

Additionally, Evercore’s economic expansion index is approaching recession territory, along with other indicators such as company surveys, inflation data and layoff announcements. And, wage gains have begun to slow and higher rents are showing early signs of easing, signaling that inflation is on its way.

“In any event, 87 percent of American voters are worried about a recession,” Hyman said.

– Carmen Reinicke

The S&P 500 is headed for its worst December in four years

The S&P 500 is down more than 6% this month, as Wall Street struggles to end the year. That puts it on track for its worst monthly performance since September. It would also be the biggest December decline since 2018, when it fell 9.18%.

Shares closed lower for the fourth day in a row

Fears of a recession and hopes for a year-end rebound weighed on Monday, sending them to a fourth straight negative close.

The Dow Jones Industrial Average closed down 163.85 points, or 0.50%, at 32,756.61. The S&P 500 fell 0.91% to 3,817.47 and the Nasdaq Composite fell 1.49% to 10,546.03, weighed down by Amazon shares, which fell 3%.

– Carmen Reinicke


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