Hong Kong shares drop 2% as investors look ahead to Fed meeting, U.S. inflation this week

Southeast Asian markets will move in a trajectory resembling that of a “bungee jump” next year — taking a plummet before surging in the second half of 2023, JPMorgan wrote in a report.

That is likely to bee characterized by a “sharp fall followed by a rapid increase in altitude (bear market rally) followed by another decline until eventually markets come to rest at rock-bottom,” analysts led by Rajiv Batra wrote.

They attributed that to weakened purchasing power in light of monetary policy tightening, lower savings and the higher cost of borrowing.

Additionally, JPMorgan forecasts the MSCI ASEAN Index will “re-test this year’s lows and potentially move even lower” in the first half of 2023, on the back of tightening financial conditions and weaker external demand, among other factors.

The MSCI ASEAN index plunged 22% from February’s high to the year’s lowest in October, but rebounded 10%.

— Lee Ying Shan

U.S. Treasury Secretary Janet Yellen foresees a “substantial reduction in inflation” by the end of next year, provided there’s no “unanticipated shock.”

Yellen, speaking in an interview on CBS’ “60 Minutes,” premised her optimism on shipping costs and gas prices coming down.

She cautioned, however, that recession risks remain and that the economy is still prone to shocks. But she said this could be buffered by a “very healthy” banking system, as well as business and household sectors.

“There’s a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

The latest reading for the U.S. consumer price index is expected Tuesday. Analysts polled by Reuters expect the index rose 0.3% in November. Before this, October’s consumer price index inched up less than expected. Even with the slowdown in the inflation rate, it still remains well above the Fed’s 2% target.

—Lee Ying Shan

Oil prices rose more than a dollar on the back of further China reopening optimism and Moscow threatening to slash oil production in retaliation for price caps on Russian crude exports.

In early Asia hours, Brent crude futures rose 1.53%, or $1.11 to $72.13 a barrel, while U.S. marker West Texas Intermediate futures traded up 1.29%, or close to a dollar at $77.08 a barrel.

Russian President Vladimir Putin on Friday told reporters in the Kyrgyz capital of Bishkek that Russia “simply will not sell” to countries imposing the West’s price cap on Russian oil, Reuters reported.

– Lee Ying Shan

Shares in a little-known London-listed miner are set to rise by 50%, according to Ben Davis, a mining analyst at Liberum Capital.

The company, which extracts metals such as platinum, palladium, and chrome, also offers an 8% dividend yield.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Dan Niles’ Satori Fund is beating the market this year. He shares what’s behind the outperformance and how he’s trading the market as recession looms.

Pro subscribers can read more here.

— Zavier Ong

Stock futures have slowly declined throughout the first hour of trading. Dow futures are down about 50 points, or around 0.2%, while Nasdaq 100 futures have dipped about 0.3%.

— Jesse Pound

The major averages fell on Friday to clinch a losing week, snapping a two-week winning streak for Wall Street.

Here are the key stats from last week:

• The Dow fell 2.77%, suffering its worst stretch since September.
• The S&P 500 fell 3.37%, suffering its worst stretch since September.
• The Nasdaq composite fell 3.99%, suffering its worst weekly stretch in a month.
• The Russell 2000 fell 5.08%, marking the worst week since September for small caps.
• All 11 sectors were negative for the week, led to the downside by energy.

—Jesse Pound, Christopher Hayes