The XJO is expected to edge lower on open this morning following a flat night of trading in the US. Their futures are also flat.

Our expected pullback this morning is likely chalked up to a handful of factors. Firstly, like the US, we are holding the key resistance that represents our all-time highs (which comes in at roughly 6,720). Secondly, we have finally caught up to the US, which over the past few sessions has shown a reluctance to push through and make fresh all-time highs. We are likely reluctant to make any further gains without seeing the US do so first. Finally, markets are simply due for some healthy profit taking. Even though we have seen flashes in the pan on the recent run up, the current uptrend is in no way sustainable. We should expect a pullback soon, and a bounce from all-time highs seems an appropriate. However, we will need to wait and see.

If we do see a pullback, then roughly 7,500 is the next key level of support. If selling is aggressive, we could blow past it with 7,450 and 7,400 being the following key levels.

US Markets

Equity markets closed lower on Friday, with the Dow Jones down -0.1%, S&P 500 down -0.3% and NASDAQ down -0.6%, as data by the Fed Bank of Philadelphia revealed economic activity is declining in a growing number of US states with indexes for 21 states, constructed by analysing four labor-market indicators, payroll employment, average hours worked by production workers, the unemployment rate and inflation-adjusted wages, showing a contraction in the three months through November.

European Markets

European equity markets closed higher on Friday, with the Stoxx Europe 600 up +0.2% and German DAX up +0.3%.

The U.K. FTSE 100 gained +0.1%, as pound weakened after data revealed U.K.’s house prices dropped -1.8% y/y in December with Nationwide Building Society, one of U.K.’s biggest mortgage lender, forecasting prices to stagnate or fall as much as 2% in 2024.

Asian Markets

Asian equity markets closed mixed on Friday, with the Shanghai Composite up +0.7%, as China named navy veteran Dong Jun as its new defense minister, a move that will help resume top-level military talks with the US that are seen as crucial to steadying ties between the nuclear-armed powers.

The Hang Seng was flat, KOSPI was closed for a holiday and Nikkei 225 declined -0.2%.

South Korea’s inflation eased slightly in December with CPI rising +3.2% y/y and core CPI rising +2.8% y/y, despite which BOK continued to deliver a cautious note saying it will keep its policy tight until it is confident inflation will reach its target 2% range. BOK announced South Korea’s financial system will generally remain stable while warning risks related to real estate project financing are likely to increase in 2024, as it pledged to step up a $66bn program to stabilise markets if needed to limit the spillover from a builder’s debt troubles. 

WTI oil is trading at US$71.25 a barrel.

Iron ore price is at US$130.33 per ton. 

Spot gold is trading at US$2063 per oz. 

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