A look at the day ahead in U.S. and global markets by Samuel Indyk
A rollercoaster 2023 that ended with an equity rally on hopes for rate cuts amid slowing inflation has extended into the first trading day of 2024, pushing European stocks to an almost two-year high and bringing U.S. stock market peaks into view.
Today's economic calendar looks light, so the theme that has driven markets since the beginning of November looks set to dominate until important U.S. data is released on Wednesday - JOLTs and manufacturing ISM - and the minutes from the Federal Reserve's December meeting.
At that meeting, the central bank appeared to make the long-awaited pivot, signaling that tightening of interest rates is likely over and the discussion of rate cuts coming into view.
Traders moved quickly to price in easing of policy and, as things stand, are looking for 150 basis points of easing this year, with the first 25 basis-point rate cut almost fully priced for March.
Wednesday's minutes will be parsed for clues on whether that pricing is justified, especially as commentary over the holiday period from Fed policymakers has been sparse.
It looks set to remain that way this week, apart from speeches from Richmond Fed President Tom Barkin on Wednesday and Friday.
Barkin will get to vote on policy this year as the annual reshuffle of voters on the Federal Open Market Committee sees Barkin, Raphael Bostic, Mary Daly and Loretta Mester get a vote, while Austan Goolsbee, Patrick Harker, Neel Kashkari and Lorie Logan rotate out in 2024.
How the new composition of voters on the FOMC affects policy this year remains to be seen.
For now, European equities are pushing higher with the STOXX 600 trading at a 23-month high and Germany's DAX rising over 1%.
The euro zone's banking stocks are leading the rally, jumping as much as 2% and on track for their biggest daily rise since October.
Wall Street futures are also pointing to a higher open. With the S&P 500 just 1% from its all-time high, it seems only a matter of time before new peaks are reached for the U.S. benchmark.
The picture in Asia was less rosy with MSCI's broadest index of Asia-Pac shares outside Japan falling 0.6%, led lower by weakness in China and Hong Kong as latest activity data signaled uneven economic recovery.
A private sector survey showed China's factory activity expanded at a quicker pace last month, but that contrasted with official data, released on Sunday, that showed manufacturing activity shrank for a third straight month in December.
Elsewhere, the dollar is hovering above a five-month low reached at the end of last year, while bond yields in the U.S. and Europe are on the up but remain within striking distance of multi-month lows reached at the end of 2023.
Bitcoin has also begun the new year in a similar fashion to how it ended the last, storming above $45,000 for the first time since April 2022.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* U.S. final S&P global manufacturing PMI
* U.S. 3-, 6-month bill auctions