Nikkei 225 falls greater than 2% after Financial institution of Japan widened yield goal vary, yen strengthens

Japanese financial stocks rise after Bank of Japan announcement

S&P expects oil prices to rise to $121 on full reopening of China

Oil prices could also reach as high as $121 if China fully reopens, S&P forecast, adding that prices are likely to settle at $90 a barrel in 2023.

Oil prices are likely to get a “big boost” from a full reopening of China to $121 a barrel and near peaks in March after Russia invaded Ukraine, S&P Vice Chairman Dan Yergin said.

He added that the price rise is being fueled by drags caused by currently observed underinvestment in oil and gas, Yergin added.

“Our base case for 2023 is $90 Brent, but you have to look at other cases,” he said, adding that three main uncertainties clouding the oil outlook — further Fed hikes, China’s demand and Russia’s response on the price cap for its oil agreed by the European Union.

– Lee Ying Shan

Bank of Japan holds rates steady and widens yield curve control band

The Bank of Japan kept its benchmark interest rates steady and announced that it would change its yield curve control band, the central bank said in a statement.

The BOJ will widen the range of fluctuations in the 10-year Japanese government bond yield to plus and minus 0.5 percentage point from the current plus and minus 0.25 percentage point, it said.

The adjustment is intended to “improve the functioning of the market and encourage smoother formation of the entire yield curve while maintaining accommodative financial conditions,” the BOJ said.

The Japanese yen rose more than 2% to 133.37 against the US dollar following the announcement.

– Jihye Lee

Minutes from the Reserve Bank of Australia show a range of options being considered in December

Minutes from the Reserve Bank of Australia’s December meeting showed that the central bank had considered a number of options for its interest rate decision, including a complete halt to rate hikes.

“The board considered several options for the cash rate decision at the December meeting: a 50 basis point increase, a 25 basis point increase, or no change in the cash rate,” the minutes read.

RBA board members also noted the importance of “acting consistently”, adding that the central bank will continue to consider a number of options for the year ahead.

– Jihye Lee

China leaves interest rates unchanged

The People’s Bank of China left interest rates on one- and five-year loans unchanged in December, according to an announcement.

The central bank left its 1-year lending rate at 3.65% and its 5-year lending rate at 4.30%, in line with expectations from a Reuters poll.

The Chinese offshore and onshore yuan were relatively unchanged at 6.9808 and 6.9783 respectively against the US dollar.

– Jihye Lee

CNBC Pro: Is China set for a rebound in 2023? Wall Street pros step in — and reveal how to trade it

What next for China after rolling back a raft of Covid-19 measures?

Market professionals weigh the prospect of a recovery in the world’s second largest economy and highlight opportunities for investors.

CNBC Pro subscribers can read more here.

– Zavier Ong

The Bank of Japan expects interest rates to remain stable

According to a survey of economists by Reuters, the Bank of Japan is expected to keep interest rates steady at -0.10%.

The interest rate decision is expected after the conclusion of the central bank’s two-day monetary policy on Tuesday.

Separately, the Japanese government and BOJ are reportedly aiming to revise a statement committing to a 2% inflation target at the earliest possible date, Kyodo News said, citing government sources.

– Jihye Lee

The Fed is overdoing rate hikes, says Evercore ISI

The Federal Reserve is likely to overdo it with rate hikes to tame inflation and could eventually plunge the US economy into recession, Evercore ISI’s Ed Hyman wrote in a Sunday note.

The federal funds rate is now at 6.5% versus a core PCE of 4.7% for the year and bond yields at 3.5%, Hyman wrote.

“And it’s not just Fed tightening: the ECB, BoE, Mexico, Switzerland and Norway also tightened last week,” he said. “Perhaps deeper, the money supply is shrinking.”

Additionally, Evercore’s Economic Diffusion Index is approaching recessionary territory, along with other indicators such as business surveys, inflation data and layoff announcements. Also, wage growth is slowing and high rents are showing signs of easing, suggesting that inflation is likely to have run its course.

“In any case, 87 percent of American voters are concerned about a recession,” Hyman said.

– Carmen Reinicke

The S&P 500 headed for its worst December in four years

The S&P 500 is down more than 6% this month as Wall Street heads towards year-end. That puts the worst monthly performance since September on track. It would also be the biggest drop in December since 2018, when it fell 9.18%.

Shares close lower for fourth straight day

Recession fears and dashed hopes of a year-end rally weighed on stocks on Monday, sending them down for the fourth straight month.

The Dow Jones Industrial Average lost 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47 and the Nasdaq Composite lost 1.49% to 10,546.03, weighed down by shares of Amazon, which fell 3%.

– Carmen Reinicke