Core CPI in Tokyo area rose 4.0% year-on-year in December, fastest rate in 40 years

Market Summary

With global macro data came out last week, investors focused on slowing CPI growth in the U.S., U.K. GDP growth, and high inflation in China.

In the United States, Stock market continues to rise. Headline prices fell 0.1% in December, the first decline since May 2020. On an annual basis, headline CPI rose 6.5% while core increased 5.7%, the slowest pace in over a year. U.S. Treasury yields trend lower. In Europe, The German economy likely stagnated in the fourth quarter of 2022. Eurozone unemployment remained at 6.5% in November at record low. Gross domestic product in the UK grew 0.1% sequentially in November, Bank of England official hints that interest rates might probably rise again.

In Asia, Japan’s equity markets gained. Core consumer price inflation in the Tokyo area rose 4.0% year on year in December, the fastest rate in 40 years. The yen strengthened to about JPY 128 against the U.S. dollar, from around JPY 132 the prior week. Chinese stocks rose. China issued a large quota for crude oil imports. On the trade front, China’s exports fell 9.9% in December from a year ago. Imports fell a better-than-expected 7.5% and trade surplus reached an all-time high of USD 878 billion for the full year. China’s inflation gained momentum, rising 1.8% in December, and the producer price index declined 0.7% in December after falling 1.3% in November.

Major News

JP Morgan said its company-wide average cost of deposits could rise from about 1 per cent in 2022 to up to 2 per cent in 2023. The bank estimates that every basis point move higher is an extra $250mn of interest cost.

Germany’s defence minister Christine Lambrecht plans to step down as a series of errors that badly hurt her credibility as commander-in-chief of the country’s armed forces.

UK mortgage payments have risen to their highest level since the financial crisis, making it harder for Britons to buy a first property.

China will take ‘golden shares’ in Alibaba and Tencent units to exert influence over private news and content companies.

What Caught Our Attention

South Korea’s, Ahn Duk-geun warned last month that if EU continues to mimic America’s protectionist industrial policies, the international system of trade and investment will be upended.

Unctad calculated that 63% of global investment flows were subject to a screening regime last year, up from 52% in 2020 (see chart 1). The Committee on Foreign Investment in U.S. has investigated 661 transactions between 2017 and 2021, more than twice as many as during the previous five years. Many deals are called off under the glare of its scrutiny (see chart 2), such as ByteDance. The EU also called on members to set up screening mechanisms in 2020 and now nearly all of them have one. In December, Canada announced legislation to strengthen its investment-review process weeks after ordering three Chinese investors to divest from its lithium miners.

Viewed in isolation these plans increase investment in national economies, but increase enormously in global costs. After all, if no country’s firms can get equal treatment and open market access, all countries will nurture and protect industries at home.

Source: Kredens Capital, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia