Japanese stocks jump after the Bank of Japan kept its monetary policy unchanged at the last meeting of 2023

The Bank of Japan left its ultra-loose monetary policy unchanged at its final policy meeting this year in light of “extremely high uncertainty,” setting the stage for any long-awaited unwinding in the new year.

The Bank of Japan voted unanimously to keep interest rates at -0.1%, sticking to a yield curve policy that indicates a 1% upper limit for Japanese government bonds with a maximum of 10 years.

The Japanese yen reversed its gains after the Bank of Japan’s decision and was trading at around 143.5 against the US dollar in midday trading. The yield on 10-year Japanese government bonds was largely unchanged.

Central Bank Governor Kazuo Ueda is scheduled to meet the press in Tokyo later Tuesday, where he may provide future guidance on the Bank of Japan’s future course of action.

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– Clement Tan

Shares of Japan’s Nippon Steel fell 5.8% to 3,052 yen in the first hour of trading after it agreed to buy US Steel for $14.9 billion in cash late Monday.

Nippon Steel is buying US Steel for $55 per share, representing a roughly 40% premium to US Steel’s last closing price of $39.33 on Friday.

The acquisition of US Steel will allow Nippon Steel to move toward 100 million metric tons of global crude steel production capacity.

The Nikkei 225 was flat, while the broader Topix index fell 0.3% as investors awaited the Bank of Japan’s decision on interest rates later in the day.

– Shreyashi Sanyal

The Japanese yen strengthened against the dollar, trading within the 142 range. It is up for the third day in a row.

Investors are bracing for the Bank of Japan’s final interest rate decision for this year, as the central bank is expected to stick to a negative interest rate policy, according to a Reuters poll of economists.

The Bank of Japan’s stance on yield curve control policy will also be closely watched.

“There is no urgency for the Bank of Japan (BOJ) to change its accommodative stance, but our base scenario is that it will end the current negative interest rate policy in April 2024 to coincide with the annual wage negotiations,” Aadish Kumar, international economist at T. Rowe Price, wrote. In a note to the client.

“Another major decision facing the Bank of Japan is when and how to rescind yield curve control (YCC). While this could happen as early as December this year, YCC has already begun to ease.” Gradually, Kumar added, the criteria for the 10-year yield ceiling are being relaxed towards the point where they become irrelevant.

Japan’s Nikkei 225 index is heading towards a flat opening, with futures in Chicago reaching 32,810 points and its counterpart in Osaka at 32,740 points, compared to the index’s last close at 32,758.98 points.

– Shreyashi Sanyal

Non-AI technology stocks that struggled in 2023 have significant upside potential in 2024, according to Morgan Stanley.

Technology analysts at the investment bank say that although artificial intelligence and cloud computing stocks are likely to continue to grow, their valuations are too high.

The Wall Street bank named its 14 “most favored” stocks that have “rerating potential around pricing/growth, early cycle and premium earnings to the upside.”

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– Ganesh Rao

Bank of America has named four small- and mid-cap pharma stocks as its “Top Picks” for 2024, highlighting their strong potential for regulatory approvals and product launches over the coming year.

The Wall Street bank noted that it remains “cautiously selective” in its biotech picks as the sector as a whole underperforms the broader stock market in 2023.

Meanwhile, the biotech stock with Bank of America’s biggest upside potential has already received approval for a drug that treats a rare kidney disease that affects up to 150,000 people in the United States.

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– Ganesh Rao

Oil prices rose more than 1% on Monday, as attacks on ships in the Red Sea disrupted shipping traffic.

The January West Texas Intermediate crude contract rose $1.04, or 1.46%, to settle at $72.47 per barrel. The February Brent contract rose $1.40, or 1.83%, with the settlement price set at $77.95 per barrel.

BP announced on Monday that it had halted shipping through the Suez Canal in response to attacks by militants in Yemen on ships in the Red Sea.

-Spencer Kimball

Chicago Fed President Austan Goolsbee said on CNBC’s “Squawk Box” that the market may have misinterpreted the central bank’s update from last week, when the Dow jumped to a record high.

“It’s not about what you say, or what the president says,” Goolsby said. “It’s about what they heard, what they want to hear.” “I was confused – was the market just calculating, and this is what we want them to say?”

The Fed Chairman also disputed the idea that the Fed is actively planning a series of interest rate cuts.

“We are not discussing specific policies about the future. We are voting at this meeting,” he said.

-Jesse Pound

Real estate and utilities performed less than expected on Monday. The two sectors were the only ones trading in negative territory. Real estate prices fell by 0.8%, while utilities fell by 0.6%.

Shares of Kimco Realty and Boston Properties fell more than 1% each. Prologis was off 1.2%.

Exelon shares fell 3%, while PG&E shares fell more than 2%. Pinnacle West Capital fell 1.5%.

– Sarah Maine

Technology stocks could face an even bigger wave of pressure in 2024, according to Bernstein senior research analyst Toni Sacconaghi.

“We struggle to recommend an Overweight in technology for 2024,” the analyst wrote in a note on Monday. “Technology has outperformed by more than 2,500 basis points twice in the past 20 years (2009 and 2020) and both times subsequent performance next year has been in line with the broader market.”

While the company is finding it difficult to maintain its overweight in technology stocks, Sacconaghi said, Bernstein has stopped short of moving to a less than overweight rating due to strong momentum, low interest rates, as well as the sector’s overall outperformance making it “statistically difficult.” “. and economically punitive) for effectively betting on technology.”

– Brian Evans