While the Nikkei 225 Stock Average climbed to a three-decade high in 2023 on the back of the Bank of Japan’s ultra-loose policy and a weak yen, Japanese shares face a hurdle in early 2024. The central bank is maintaining the world’s last negative rate, but two-thirds of economists forecast it will deliver its first rate hike since 2007 by April.
Meanwhile, after another disappointing year for China bulls, investors will watch meetings of the National People’s Congress and the third plenum for Beijing’s growth target in 2024 and clues on fiscal stimulus.
India is a big bullish bright spot, as the nation bags high-profile manufacturing contracts, ramps up infrastructure spending and emerges as an alternative to China.
ECB, BOE Policy
With the Stoxx Europe 600 Index near its highest level in two years, cyclical shares that are heavily exposed to Asia may hold the key to further gains given China’s potential fiscal boost. While a soft economy will likely weigh on European earnings, analysts’ consensus estimates are for roughly 4% profit growth in 2024, mostly relying on rising margins, BI data show.
Bond markets expect the European Central Bank to cut rates by April, which could provide an additional boost to the region’s shares. The Bank of England is expected to trail both the Fed and ECB in easing since the UK has one of the highest inflation rates among Group of Seven nations.