Day Ahead… Jay Powell’s early Christmas gift has certainly been welcomed by markets with the US rallying to close >1% firmer overnight. The positivity has filtered through into Asia with HK, Auz & the Kospi all trading >1% firmer. The ECB, BOE and SNB are all expected to stand firm today, like the Fed, with markets focused on expectations of easier policy next year. The ECB may discuss a quicker exit from QE by phasing out reinvestments under the pandemic-era PEPP program. 

US Wrap…  SPX: +1.37% NDX: +1.27% INDU +1.40% ESA: +0.41%

US Markets rallied overnight pushing the Dow to a record closing high as the Fed held interest rates steady for a 3rd straight meeting and indicated that it’s likely to start easing monetary policy in 2024. Fed Chair Jay Powell said in a prepared statement that interest rate policy is “at or near peak,” a pivot that fueled the rally. Treasuries rallied with the 10yr yields falling below 4% for the first time since August. Two bond titans have opposing views on where we go from here – Jeff Gundlach predicts benchmark yields will fall to the low of 3% range, while Bill Gross thinks the yield is already where it should be at c.4%. On the data front we have retail sales, jobless claims and consumer confidence survey which will give investors additional insights into the US consumer.

Asia Morning…  HSI +1.19%, NKY -0.70%, SHCOMP +0.20%, ASX +1.65% KOSPI +1.15%

Asian markets rallying after the US rallied overnight following the Fed pivot. The MSCI Asia Pacific index rose 1.6%. HK, South Korea & Auz all trading >1% firmer. Japanese equities fell as the yen strengthened, with investors eying an eventual end to the nations negative rates. HS Tech index is trading +1% with Tencent lagging trading 7bps softer. HS Property index is trading +2.75%.

Commodity action… Commodity complex catching a solid bid following Jays pivot overnight. Copper leading the way higher in the base metal space trading >1% firmer. In the precious space, Gold rallied back above the $2000/oz level with Plat and pall also enjoying solid gains.

Thoughts and Themes from the Trading Desk:

The Federal Reserve held interest rates steady for a third meeting and gave its clearest signal yet that its aggressive hiking campaign is done. Policymakers penciled in no further interest-rate hikes in their projections for the first time since March 2021, based on the median estimate. Focus now turns to rate sensitive stocks, with many REITs and investment trusts still trading substantially below book value. A snapshot of “dears” and “cheaps” relative to 12 month average discounts below: