Oil heads for first annual loss since 2020

US equities closed mixed on Thursday, with the S&P 500 nearing its record high. Real estate and utilities outperformed, while energy lagged. The Dow Jones achieved a second consecutive record close. The S&P 500, up 24.6% for the year, is set for its ninth consecutive weekly gain. Small caps dipped, but the Russell 2000 remains on track for a seventh weekly advance, up 17% for the year. Treasury yields rose, and oil prices closed lower. In the Euro Area, the Stoxx 50 edged 0.1% lower on Thursday, stepping back from recent multi-year highs as markets evaluated the macroeconomic landscape and potential impacts of anticipated rate cuts. For the year, the STOXX 50 is poised for a nearly 19% gain, highlighting its robust performance in 2023.

Summary for 29.12.2023

• Asian equity markets remained steady on the last trading day of the year and were poised to break a two-year losing streak. The MSCI’s Asia-Pacific index is up 5% for the year, with an 11% recent gain. Japan’s Nikkei led with a 28% gain, while Thailand’s SET index was the worst performer, down 15%.

• Futures indicate European bourses are likely to have a subdued end to the year as traders consolidate their positions. Meantime, US equity futures were steady as Wall Street eyes strong annual gains, driven by a rebound in tech and expectations of interest rate cuts by the Federal Reserve.

• Oil prices are set to end 2023 with a 10% annual decline, the first in two years, influenced by geopolitical concerns, production cuts, and global inflation control measures. Both Brent and WTI benchmarks are on track for their lowest year-end levels since 2020. Despite Middle East tensions, a third consecutive monthly decline is expected due to lingering demand concerns. Anticipated 2024 interest rate cuts and a weaker dollar may contribute to a potential boost in future oil demand.

• US weekly jobless claims rose to 218,000 for the week ending 23rd December, exceeding expectations, while continuing jobless claims increased to 1.88 million. Despite these upticks, 2023 saw historically low averages for both initial and continuing claims, supporting robust consumer spending amid inflation and higher borrowing costs. Looking to 2024, a potential economic growth slowdown may gradually ease current labour-market conditions.

• Boeing urged airlines on Thursday to inspect recent 737 MAX planes for potential loose bolts in the rudder control system, following routine maintenance findings. The FAA is closely monitoring the situation and may take additional action. Boeing confirms the identified issue has been addressed and recommends inspections for precaution, assuring ongoing communication with the FAA and customers.

• Xiaomi unveiled its first electric vehicle (EV), the SU7, aiming to rival Tesla and Porsche with its "super electric motor" technology. CEO Lei Jun envisions Xiaomi among the world's top five automakers in 15-20 years. The SU7 offers driving ranges of up to 668 km and 800 km. Xiaomi plans a $10 billion investment in the automotive sector over a decade. Production will occur at a Beijing factory owned by a subsidiary of BAIC Group.

• Wedbush raised Microsoft's price target to $450, citing an "iPhone moment" as AI monetization is expected to reshape the company's cloud growth trajectory. The analysts believe over 60% of Microsoft's installed base will embrace AI functionality in the next three years, marking a significant shift. They anticipate strong AI growth in FY25, estimating an additional ~$25 billion in revenue by then. Microsoft shares have risen over 52% in 2023.

Disclaimer: The article is issued by Calamatta Cuschieri Investment Services Ltd, which is licensed to conduct investment services business under the Investments Services Act by the MFSA.

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