US Equities Break Yesterday’s Record

US equities climb to new all-time highs while Chinese stocks get a boost. The SPX and Nasdaq 100 repeated yesterday’s feat by closing at all-time highs, the former up +0.29% and the latter +0.43%. Meanwhile, US-listed Chinese stocks rose as reports emerged that China is planning a ~2 trillion-yuan fund to prop-up equities. Elsewhere, UST yield movements were relatively muted today, aside from the 30-year which was up ~4bps.

Shipping costs keep rising as the Middle East conflict continues to boil. The US and UK launched more airstrikes against the Houthis yesterday, the 8th round of attacks since January 12th. A joint statement issued by both governments after the strikes indicated that western retaliation against the Houthis will continue, despite President Biden’s acknowledgment last week that airstrikes have not had the intended effect of preventing Houthi attacks on Red Sea shipping. Shipping costs between Asia and the Mediterranean have roughly tripled since early December, with the cost to ship a 40-foot container now at $6,773, up from $5,440 just 1-week prior. Commenting on the economic impact of the shipping disruptions, former PIMCO CEO Mohamed El-Erian said last week, “Relative to what would have happened otherwise, we will see higher inflation, higher mortgage rates and lower growth.”

BOJ holds rates negative; Ueda cites “desirable” developments. As expected, the BOJ held rates negative in their first 2024 policy meeting. BOJ Governor Ueda hinted at the end of negative rates this year, saying, “the economy is moving in line with our projections on inflation… this is the biggest factor that made us more convinced than before that the likelihood [of sustainably achieving our price target] is gradually heightening.” He also pointed to incremental wage increases as the next step toward sustainable inflation and a rate hike. Separately, Ueda suggested that monetary conditions will “likely remain very accommodative” to help sustain 2% inflation even if the negative rate environment ends.