<ul><li>Prior 48.3</li></ul><p style=““ class=“text-align-justify“>This just reaffirms another contraction in France’s manufacturing sector, though the drop in output is the slowest in the past seven months. However, employment conditions declined for the first time since January 2021 and there was a slight acceleration in output charge inflation. S&P Global notes that:</p><p style=““ class=“text-align-justify“>“France’s manufacturing downturn continued into December as the effects of inflation, slowing economic activity and high energy costs weighed on the performance of the sector. </p><p style=““ class=“text-align-justify“>“However, the strength of the downturn continued to ease, with output and new orders falling at their slowest rates since May and June respectively. An improvement in business confidence also provides tentative signs that the industrial sector recession may not be as severe as first feared. </p><p style=““ class=“text-align-justify“>“Inflation remains a key risk to the performance of the manufacturing sector, with high prices deterring clients from making new orders. The fact that energy costs thus far haven’t surged to the levels some were initially expecting has been a boost to the sector, although whether things take a turn for the worst this remains to be seen.“</p>

This article was written by Justin Low at www.forexlive.com.

<p>Apple is ending the year as the largest capitalized stock in the US. It closed the year with a market capitalization of $2.066T, and that makes it the only company above the $2T level. </p><p>That is the good news. The not so good news is its peak end of day market capitalization reached $2.973T back on January 3rd, 2022. On that day the market capitalization reached an intraday high of over $3T, making it the first US company to reach that milestone, but backed off into the close, and after another try on January 4th, the capitalization never returned to the lofty milestone again. From the high capitalization to the end of 2022 level, the company lost $907B.</p><p>The chart below shows the high capitalization levels of the top 20 companies vs the EOY 2022 levels, and the dollar change in capitalization.</p><p>The magnitude of that $907B dollar decline was not the worst decline from the peak. That distinction goes to Amazon whose peak market capitalization reached 1888B on July 8, 2021 and closed 2022 at $856B for a cool -$1.031T decline. </p><p>Ironically (or maybe not0, that peak in Amazon’s market capitalization coincided roughly with the day that Jeff Bezos turned the helm over to the company’s cloud-computing boss Andy Jassy. </p><p>Bezos said at the time, “We chose that date because it’s sentimental for me, the day Amazon was incorporated in 1994, exactly 27 years ago.”</p><p>The date will now have a less sentimental distinction as being within 3 days of the highest capitalization for the retail behemoth.</p><p>From a percentage basis, the biggest loser of the top 20 in market capitalization goes to Meta Platform which has seen Mark Zuckerberg’s companies stock lose -70.33% of its market capitalization as it shifted to its metaverse initiative. Meta shares reached a high stock price on September 21, 2021 and a high market capitalization of 1.078T on that day. However, that capitalization has now declined to $319.88B (or -$758.12B).</p><p>The next biggest loser from a % capitalization perspective is Tesla which fell -68.61% from its January 3, 2022 high watermark. 2022 saw the leader in EV market struggle with supply issues, a China slowdown, increased competition and the knock on effect from CEO’s Musk’s purchase of Twitter. Musk lost over $120B in net worth in 2022 as a result of decline in Tesla stock. He exasperated the decline in the stock by selling close to $23B of his shares to finance the purchase of Twitter. </p><p>So how did the stocks of the top 20 capitalized companies fare in 2022?</p><p>Tesla and Meta had the biggest 2022 stock declines of -65.03% an -64.22% respectively. That was followed by Nvidia which fell -50.31% and Amazon which fell -49.61%. Alphabet (Google) rounded out the top 5 with a decline of -38.67%</p><p>Despite the sharp declines in the major indices in 2022 which saw the S&P fall -19.44%, there were 5 of the top 20 largest cap stocks whose stock rose in 2022. </p><p>The top 5 % stock winners were led by:</p><ul><li>Exxon Mobile whose stock rose 80.26%. </li><li>Chevron, another gas and oil company rose by 52.95%. </li><li>Pharma company Eli Lilly increased 32.45%, </li><li>UnitedHealth rose 5.58%, and </li><li>Johnson and Johnson – also in the pharma space rose 3.26%. </li></ul>

This article was written by Greg Michalowski at www.forexlive.com.

<p>December PMIs from China’s National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP).</p><p> Manufacturing 47.0 </p><ul><li>prior 48.0</li></ul><p>Services 41.6 </p><ul><li>prior 46.7</li></ul><p>Composite 42.6</p><ul><li>prior 47.1</li></ul><p>Languishing with the renewed COVID-19 outbreak as China moved rapidly towards reopening. While widespread lockdowns are a thing of the past self-imposed isolation and illness have seen impacts on the Chinese economy as workers stay home and others (at the margin) avoid going out and about. Check out the Services PMI, 41.6 is deeply contractionary. Eating out, shopping, personal services, and more – all suffering.</p><p>While this set of results will not be a positive for China trades, China-proxy trades (AUD for example), oil and other commodities, for traders and markets it will not be a surprise. We’ve all been seeing how the virus is spreading in China, despite the official Chinese media downplaying it, and how that is hitting economic activity. China’s people deserve better, hopefully it’ll come good for them soon. </p><p>-</p><p>As a note, major forex centres in Asia will all be closed on Monday. </p><ul><li>Japan, Singapore, Hong Kong, Australia and New Zealand markets are all closed.</li></ul><p>China is also out on Monday.</p><p>-</p><p>Happy New Year to all – catch you on Tuesday morning Asia time!</p>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p>The 2022 year is in the books and the final rankings of the strongest to the weakest of the major currencies is showing the USD as the strongest and the JPY as the weakest. </p><p>The central bank fundamentals drove both the USD and the JPY to their respective positions. </p><p>The Federal Reserve hiked rates the fastest and the most of all the major countries. Overall, the Federal Reserve hiked rates by 4.25% from 0.25% at the end of 2021 to 4.5% (high target) at the end of 2022. </p><p>The Bank of Japan did not hike once in 2022, choosing instead to maintain their steady rate policy in the face of a tick up in inflation. As a result, their currency was hit hard for most of the year with the USDJPY reaching the highest level going back to July 1990 at it’s peak on October 21, 2022. </p><p>At the high the USDJPY had move up 32.02% for the year. The last 2+ months did see the USDJPY pair correct more than 50% of the years trading range, with the USDJPY ending the year still up 13.91% but well off the highs. </p><p>Catalysts for the decline in the USDJPY (rise in the JPY) other than overbought technical conditions and some technical tilts including a break below the 100 and 200 day MAs, include: </p><ul><li>Softening of US inflation, </li><li>More restrictive Fed policy which shifted the bias for the economy lower going into 2023 (at least from the market traders), </li><li>Lower US stocks</li></ul><p>The Bank of Japan did their part, by hiking the ceiling yield for the 10 year bond to 0.5% from 0.25% in December (a small but meaningful gesture and shift). </p><p>Overall, the respective central banks did the following in 2022:</p><ul><li>Federal Reserve +4.25%</li><li>Bank of Canada, +4.00%</li><li>Reserve Bank of New Zealand 3.25%</li><li>Bank of England 3.25%</li><li>Reserve Bank of Australia 3.00%</li><li>ECB 2.5%</li><li>SNB +1.75%</li><li>Bank of Japan 0.0%</li></ul><p>The next strongest currency behind the US was the CHF. Although the SNB raised rates by 1.75% – less than all but the Bank of Japan, they tended to benefit from safe haven flows in 2022 (and not being part of the EU or GBP). They had a bit of the best of the rest.</p><p>On the weak side, the next weakest of the majors was the GBP. The GBP suffered from the impact of the Ukraine War and its proximity to the EU nations (and trade reliance). They also suffered from political uncertainty with 3 separate PMs in 2022. Fiscal blunders from Liz Truss’s 40 or so day’s as Prime Minister also led to sharp selling in September. </p><p>The combination had investors shunning the pound. </p><p>The GBPUSD move to a low of 1.0352 on September 26th before retracing 61.8% into December helped by a settling of the government issues, and a calming from the anxiety from gas/oil. A weaker USD into year end also helped the GBPUSD recover.</p><p>The GBPUSD settled the year right around the 50% midpoint of the 2022 trading range at 1.20499. Nevertheless, the USD gained 10.7% vs the GBP in 2022. </p><p>The EUR was the next strongest behind the CHF despite the trouble from bordering Ukraine. A relatively mild winter and stockpiling of natural gas helped the EURUSD into year end. The ECB increased their hawkish tilt at the December meeting which has helped to keep the gains from the November run higher. </p><p>The AUD, CAD and the NZD had gains and losses vs the major currencies in 2022. Some ups and some downs vs the majors earns the distinction of being „mixed“ in 2022.</p><p>Below are the gainers and the losers of the major pairs. NOTE if the USDJPY was up 13.91%, I simply inversed the JPYUSD for simplicity purposes. </p>

This article was written by Greg Michalowski at www.forexlive.com.

<p>Coming up on Saturday, 31 December 2022 are the December PMIs from China’s National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP). </p><p>The December results are likely to show the ill-effects of surging COVID-19 cases in China as the country embraced reopening. </p><ul><li>Composite prior was 47.1</li></ul><p>On those ‚expected‘ results, it’s a small sample survey only. I expect both results will remain in contraction. </p><p>Also, while you are here, Asian trading this coming Monday, January 2, will be neglibile. It’s the New Year observance holiday in all major forex centres and China. </p><ul><li>Japan, Singapore, Hong Kong, Australia and New Zealand markets are all closed. </li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.

<p>Both 10 and 2 year yields moved higher in 2022, pushed by much tighter central bank policy. </p><p>The chart above shows the 2021 end of year 10 year yields, the end of year 2022 10 year yields, along with the changes for the year in those yields for major global countries. </p><p>The largest gains in 10 year yields for the year were in EU as the markets started to discount higher yields in 2023 to fight inflation due to a more hawkish ECB going into 2023. The German 10 year is up 2.753%, the France 10 year is up 2.82%, Spain 10 year is up 3.066% and Italy rose the most by 3.535% from end of 2021 levels. </p><p>Japan is the expectation to the run higher as the Bank of Japan maintained a ceiling on 10 year yields at 0.25% for most of the year before raising that cap to 0.50% in December. The end of year yield closed at 0.41%.</p><p>In the US, the 10 year yield moved up 2.365% from end of 2021 levels (or 236 basis points). From the high in yield that was reached on October 21 at 4.335%, the 10 year yield has moved lower and is closing 2022 at 3.879%. The low for the year was on the 1st trading day of the year at 1.529%. </p><p>Technically, the 10 year remains above its 100 day MA at 3.637% (blue line in the chart below) after dipping below in early December. Those dips in early December found support near the 50% of the move up from the August low. Remember as well the Fed was more hawkish at their December 14 meeting raising the terminal rate to 5.1% from 4.6% in September. </p><p>Although the 10 year yield is off highs for the year, it will take a move below the 100 day MA (blue line) to give the downside more of a shot in 2023. That level is also where the 38.2% of the move up August low. Below that the 50% level at 3.426% will be eyed and below that is the rising 200 day MA at 3.257%</p><p>Those targets should be some tough downside hurdles, however, without the Fed shifting policy in 2023. Putting it another way, they are yield support levels into 2023. </p><p>Overall, since August when the last low yield level was reached at 2.516%, the Fed has tightened an additional 200 basis points with increases of 75 basis points in September and November and an additional 50 basis points in December. That pushed the Fed Funds target to 4.5% currently (with expectations for more in early 2023). </p><p>The current yield at 3.88% is 62 basis points below that Fed Funds target level and with the potential for another 75 basis points from the Fed in 2023, hopes to the downside are limited, barring a shift in Fed expectations. However, judging from the Fed comments in December, that shift is not likely soon which should make the 100 day MA a tough nut to crack going into 2023. </p><p>Taking a look at the 2 year yield changes, the European yield changes (in bps) is near the US change of 3.69% (or 369 basis points) in 2022. The German 2 year yield is up 3.40%, and Spain is up 3.62% with France and Italy between those changes. Of note is the Euro 2 year yields were negative at the end of 2021. As a result, with Italy 2 year at 3.34% and German current 2 year yield at 2.76%, they are well below the comparable US 2 year at 4.427%. </p><p>A contributor to that spread is that the ECB hiked rates by 2.5% or 250 basis points in 2022 vs 4.25% in the US.</p><p>Looking at the chart below, it shows the change in the 2 year yields in respective countries vs the change in the target rates by the respective central banks.</p><p>IN the US, the fed hiked rates 4.25% (from 0.25% to 4.5%) in 2022. The 2 year yield is up 3.69% or 369 basis points in 2022 (the rate is 4.427%). The negative spread between the change in central bank rate to the current 2 year yield is saying the Fed is ahead of the curve. Their policy is restrictive.</p><p>In comparison, the European yields are above the the change in ECB policy. For Spain, the 2 year yield is up 3.62% or 262 basis points vs only 250 basis points of tightening in 2022. </p><p>Clearly, the market is saying the ECB is behind in their tightening and indeed that was supported by the more hawkish ECB statement and presser by Lagarde in December. </p><p>Looking at the other countries, Canada with 4.0% or 400 basis points of tightening in 2022, has seen their 2 year move up by 3.10% (or 310 basis points), indicative of the markets belief that the tightening cycle may also be more near an end in that country going into 2023. New Zealand, Australia and UK have seen near equal changes in 2 year yields to changes in policy rates in 2022 (all with 27 basis points).</p><p>Looking at the 2 year yield on the daily chart, the current 2 year yields is at 4.427% vs a Fed funds target at 4.5%. Once again the expectations are for the Fed to continue to tighten into 2023 (up to 75 basis points from them), but the market is not so sure with the 2 year below the current Fed funds target of 4.5%. </p><p>If the market sentiment gets even more bearish on the economy with expectations for inflation to tumble, a break below the rising 100 day MA at 4.127% will be eyed as a technical clue. Get and stay below that level would tilt the bias more to the downside. with the 200 day MA at 3.465% (and rising) another target. Ahead of that, watch 3.80% which is the 50% of the move up from the July corrective low. </p><p>Those levels would need to be broken and if so, would be indicative of an economy that is rolling over with inflation coming back toward the 2% target area. </p><p>Absent that, and the market is continuing to spar with the Fed and the economic data, and waiting for either a more hawking winner (more inflation/continued strong employment) or bearish winner (lower inflation/higher unemployment)</p>

This article was written by Greg Michalowski at www.forexlive.com.

<p>There weren’t many safe havens in 2022 but energy was one of them. </p><p>Oil finished today with a flurry, gaining $2.03 to $80.43 for the first annual close above $80 since 2013. It was far from a smooth ride though as oil surged to $130.50 on fears that Russian supplies would be cut off before falling all the way back to $70.08 earlier this month.</p><p>Further out the curve, prices have moved up and that’s made energy the best sector in the S&P 500. </p><p>The volatility on the yearly chart since 2020 is staggering. </p><p>Going into next year, many are betting that slowing growth saps demand but others see China reopening eventually spurring bids for barrels.</p><p>On the supply side, Russia is starting to lose some barrels and the SPR sales are now set to reverse. Oil companies have shown discipline so far and are suffering from cost inflation but there’s still money to be made by drilling.</p>

This article was written by Adam Button at www.forexlive.com.

<p style=““ class=“text-align-justify“>That figure is lower than the $87.80 consensus seen last month, despite the news that China is staying firmly on course to re-opening its economy. Meanwhile, Brent crude is seen averaging $89.37 next year and that forecast is down from the $93.65 consensus from the November survey.</p><p style=““ class=“text-align-justify“>According to the poll, the impact of sanctions on Russian oil is expected to be minimal with Goldman Sachs noting that „we do not expect an impact from the price cap, which was designed to give bargaining power to third-country buyers“.</p><p style=““ class=“text-align-justify“>It seems like for now, the softening global outlook is weighing on sentiment as the market seems to be fearing a hit to demand amid a recession in most major economies. But China will be a key factor to be mindful of in the first half of the year I would say, before we start to see how market players will take to the recession fears and potential reversal of the central bank tightening cycle.</p><p style=““ class=“text-align-justify“>As for the oil market itself, conditions remain tight and the lack of investment are still two key drivers to be wary of in the longer-term outlook.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>The announcement comes via the PBOC and will go into effect from 3 January. This will see the domestic interbank FX market, the ChinaForeign Exchange Trade System (CFETS), observe trading hours until 3.00am local time (from 11.30pm currently).</p><p style=““ class=“text-align-justify“>The time for the fixing for the yuan currency and spot closing both remains unchanged though at 9.15am and 4.30pm local time respectively. The change to the trading hours above is said to „promote the development of the foreign exchange market and expand high-level opening“. The full announcement can be found <a target=“_blank“ href=“https://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4751668/index.html“ target=“_blank“ rel=“nofollow“>here</a>.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>And that is despite a surging recovery in the currency over the past two months, with USD/CNY having 7.30 at the peak in late October to early November. The over 8% decline will be the worst performance by the Chinese onshore yuan against the dollar since 1994 when China unified market and official rates.</p><p style=““ class=“text-align-justify“>I’ve argued plenty of times during the course of the year that if China is allowing its currency to weaken, that is a major tailwind signal for the dollar to extend higher – as we saw during the August period <a target=“_blank“ href=“https://www.forexlive.com/news/a-key-trigger-for-the-next-leg-higher-in-the-dollar-20220819/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>As such, this will continue to be a key consideration for the greenback going into next year as the Fed tightening cycle will be called into question and as China has moved away from its zero-Covid policy.</p>

This article was written by Justin Low at www.forexlive.com.