Egypt’s pound hit a record low against the dollar on Wednesday after its central bank hiked interest rates by 600 points and devalued the currency.

The steps were meant to facilitate an agreement with the International Monetary Fund, which is expected to confirm the extension of its current $3 billion financial support package for Egypt.

The Egyptian pound was trading at roughly 50 to the dollar following the announcement, from 30.85 previously, according to LSEG data. The country’s key interest rate now stands at 27.25%, the central bank said Wednesday.

The development “shows that policymakers are committed to the turn back toward economic orthodoxy. This is likely to pave the way for an IMF deal within hours,” James Swanston, a Middle East and North Africa economist at London-based Capital Economics, wrote in a research note.

“This appears to be a positive step for Egypt on the path out of its current crisis,” he wrote.

This is a breaking news story, and it is being updated.

Israel’s gross domestic product shrank by nearly 20% in the fourth quarter of 2023, according to official figures.

The contraction was significantly larger than expected — analysts predicted a contraction of around 10% — and reflects the toll of the country’s war against Hamas in Gaza, now entering its fifth month.

The economic data out Monday “pointed primarily to a contraction in private sector consumption and a deep contraction in investment, especially in real estate,” analysts at Goldman Sachs wrote in a research note.

“The deep GDP contraction occurred despite a strong surge in public sector consumption as well as a positive net trade contribution, with the decline in imports outpacing the decline in exports.”

Official figures showed a 26.9% quarter-on-quarter annualized drop in private consumption, and fixed investment plummeting by nearly 68% as residential construction ground to a halt amid a shortage of both Israel workers due to military mobilization and Palestinian workers as the latter group have been mostly barred from entering Israel since Oct. 7.

Before then, more than 150,000 Palestinian workers from the occupied West Bank entered Israel daily for work in a range of sectors, predominantly in construction and agriculture.

Israel’s GDP contraction “was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in an analysis note.

“While a recovery looks set to take hold in Q1, GDP growth over 2024 as a whole now looks likely to post one of its weakest rates on record.”

Israel’s high-tech economy is particularly impacted by the fact that it’s mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.

The mobilization was triggered by the terror attack of Oct. 7 led by Palestinian militant group Hamas that killed roughly 1,200 people in Israel. Israel’s subsequent offensive against the Gaza strip and relentless bombing campaign has killed more than 28,000 people in the blockaded territory, according to Gaza’s Hamas-run health ministry.

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%, according to the Turkish central bank’s figures released Monday.

The consumer price index for the country of 85 million people increased by 64.86% annually, up slightly from 64.77% in December. Sectors with the largest monthly price rises were health at 17.7%, hotels, cafes and restaurants at 12%, and miscellaneous goods and services at just more than 10%. Clothing and footwear was the only sector showing a monthly price decrease, with -1.61%.

Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.

The monthly rises, economists say, stem from a significant increase to the minimum wage that Turkey’s government mandated for 2024. The minimum wage for the year has risen to 17,002 Turkish lira ($556.50) per month, a 100% hike from January 2023.

Turkey’s central bank has been on a prolonged mission to bring down inflation, implementing eight consecutive interest rate hikes since May 2023, for a cumulative 3,650 basis points. The bank’s latest increase, on Jan. 25, raised the key interest rate by 250 basis points to 45%.

The more conventional approach follows several years of unorthodox policy during which Ankara refused to tighten rates despite ballooning inflation. The lira is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 

The latest inflation print comes just days after Turkey’s central bank governor, Hafize Gaye Erkan, announced her resignation, saying Friday that the decision was due to a “reputation assassination” campaign and the need to protect her family.

Erkan became the bank’s central governor by presidential decree in June 2023, and led — along with Turkish Finance Minister Mehmet Simek — the turnaround in Turkey’s monetary policy and subsequent series of interest rate rises.

She was replaced on Saturday by the central bank’s deputy governor, Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve Bank of New York.

January’s inflation figures “highlight the continued strength of services inflation and may put pressure on new central bank governor Karaham to restart the central bank’s tightening cycle,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note.

“The fact that inflation didn’t rise significantly more than expected in January is positive given the uncertainty about the impact of the minimum wage hike,” Peach wrote. “But the figures present a small setback to the disinflation process and highlight the continued strength of services inflation. For now, the central bank’s end-year inflation forecast of 36% remains intact.”  

The global economy does not need a “collapse” in order to bring inflation back to target and return to sustainable growth, according to Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth.

Major economies have proven surprisingly resilient to sharp interest rate increases from central banks over the last two years. This has been particularly evident in the U.S., with recession thus far avoided and the labor market remaining robust.

Talk has now turned to rate cuts as inflation remains on a downward trajectory toward central banks’ targets, while growth has slowed.

Wieting told CNBC’s “Squawk Box Europe” on Monday that he is optimistic the global economy does not need an “economic collapse” to rein in inflation.

“We had one massive shock — one pandemic, one collapse. We didn’t need two recessions to ultimately cure our inflation problem,” he said.

“It’s holding down parts of our economy now — manufacturing and trade declines are happening around the world — but these are likely to bottom within the year.”

U.S. headline inflation came in at an annual 3.4% year-on-year in December, remaining above the Federal Reserve’s 2% target but down considerably from a peak of 9.1% in June 2022.

Investors will be closely watching Friday’s personal consumption expenditure (PCE) inflation figure, the Fed’s preferred metric, for further clues as to when the central bank will begin cutting rates.

Meanwhile, a preliminary estimate of fourth-quarter GDP is scheduled for Thursday, with the economy expected to have grown by 1.7%, its lowest rate since the 0.6% decline in the second quarter of 2022.

“This period of slower global growth and slowing employment growth in the United States we think can pass and lead to a healthier growth period if we take a look particularly at the next year and beyond, and that’s this year’s business for investors,” Wieting said.

He highlighted that while there is excess that needs to be worked out of the economy, this was not the result of a “true overheating” or prolonged “boom,” but instead of excess government fiscal stimulus related to the pandemic recovery that wasn’t going to be repeated.

“If you take a look at money supply in the United States, it declined 4% over the past year. Take a look at the 1970s, it was almost 10% growth for the entire decade, important prices surging 14% every single year — that’s … sustained inflation,” Wieting said.

“This story with just all of this government spending coming and going — upheaval in supply and demand, consumer spending going up or down 30% between goods and services, during the pandemic period — that’s not the environment we’re in any longer.”

LONDON — European stocks started the final session of 2023 higher, marking a positive end to a solid year.

The regional Stoxx 600 index was up 0.26% in mid-morning trade, with all sectors in the green. Thin trade is expected, while London markets close early.

Spanish pharmaceutical group Grifols was the biggest stock mover, climbing 8.9% after announcing it will sell a 20% stake in Shanghai RAAS, a blood products firm, to China’s Haier for approximately $1.8 billion.

The blue-chip benchmark Stoxx is set to have gained more than 12% in 2023, according to LSEG data, just about reversing its 2022 loss.

Germany’s DAX has risen nearly 20% despite the country’s gloomy economic picture, while France’s CAC 40 and the U.K.’s FTSE 100 have gained 16.3% and 3.64%, respectively.

In the U.S., the S&P 500 index is chasing a new record high to cap off the rally of the last two months.

Latest data releases, including Thursday’s on jobless claims, continue to suggest U.S. economic growth is slowing without grinding to a halt. Market bets currently place a 72.8% probability on the Federal Reserve beginning rate cuts as soon as March 2024, CME’s FedWatch shows.

In the final readings of the year, U.S. annual headline inflation had slowed to 3.1% in November from 6.4% in January.

That compared with a drop to 2.4% from 8.5% in the euro zone, and to 3.9% from 10.1% in the U.K. — both of which have also fueled expectations of rate cuts next year amid sharp economic slowdowns in both economies.

“The apparent loss of U.S. economic momentum in late 2023 suits the view that the full impact of aggressive US Federal Reserve rate hikes may still be in the pipeline,” economists at Berenberg said in a note Friday.

“Nevertheless, the Fed remains on track to pull off the usually elusive feat of a soft landing in 2024. The easing of underlying inflation has encouraged bond and equity markets to play the Fed pivot theme,” they added, though they do not expect the first cut until May 2024.

Data on Spanish inflation will be released on Friday.

U.K. house prices recorded a 1.8% fall in the year to December, according to lender Nationwide, a bigger drop than recent polls suggested but significantly lower than calls made for a fall of up to 10% earlier in 2023.

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China reported Friday its industrial output expanded at the fastest pace since February 2022 in November, though retail sales growth missed expectations, pointing to a patchy recovery in the world’s second-largest economy.

Economists are approaching the China data with some caution, given a low base effect. The country was in the final months of its stringent zero-Covid curbs in the last quarter of 2022, which had adversely impacted the economy.

“The data is a mixed bag,” Miao Ouyang, Bank of America’s Greater China economist, told CNBC. “If you look at the whole set of data, it still shows that domestic demand is still on the weak side…and [the government] still definitely needs to do more to stabilize the economy.”

China’s industrial output grew 6.6% in November from a year earlier, according to the country’s National Bureau of Statistics Friday. This outpaced expectations for 5.6% in a Reuters poll and follows a 4.6% rise in October.

Retail sales climbed 10.1% in November from a year ago, the fastest pace of growth since May — though analysts had expected a 12.5% spike following a low base in 2022. Retail sales rose 7.6% in October.

“Year-on-year growth in retail sales also rose in November, thanks mainly to faster automobile and Covid-sensitive restaurant sales growth on the back of favorable base effects, although this is well below market (high) expectations and implies a negative sequential growth,” Goldman Sachs economists led by Lisheng Wang wrote in a note.

Fixed asset investment in urban areas cumulatively grew 2.9% in the first 11 months of the year, compared with expectations for 3% growth. China’s urban unemployment rate stayed at 5% in November.

Hong Kong shares, among this year’s underperformers in Asia Pacific, saw gains briefly accelerate after the release of Friday’s data. The Hang Seng pared those gains to eventually close up 2.4% on the day.

The CSI 300 benchmark of the largest blue chips listed in Shanghai and Shenzhen gave up modest gains to close down 0.3% on the day.

The post-Covid recovery of the world’s second-largest economy has so far fallen short of expectations, plagued by a festering real estate crisis, debt risks and chronic youth unemployment.

A slew of policy support measures have not sufficiently lifted economic sentiment, igniting calls for Beijing to amp up its stimulus amid fears of a deepening slowdown.

Still, there are several green shoots that point to Beijing’s focus on growth, while also underscoring the depths of the real estate malaise.

On a cumulative basis in the first 11 months, investments in infrastructure and manufacturing increased 5.8% and 6.3%, year-on-year, respectively; retail sales rose 7.2%, while real estate development investment dropped 9.4%, China’s NBS said.

Official data released earlier Friday showed that China’s new home prices fell for the fifth straight month in November, underscoring weak confidence in demand and investment as some of the largest real estate developers are facing serious debt problems as Beijing strives to deleverage its once-bloated real estate sector.

Ratings agency Moody’s downgraded its outlook on China’s government credit ratings to negative from stable, expecting Beijing’s support and possible bailouts for distressed local governments and state-owned enterprises to diminish China’s fiscal, economic and institutional strength.

Moody’s though retained China’s “A1” long-term rating on the country’s sovereign bonds, while expecting China annual GDP growth to slow to 4% in 2024 and 2025 and average 3.8% from 2026 to 2030.

Structural factors including weak demographics will drive a decline to 3.5% by 2030, it said.

The move underscores concerns over rising debt levels and the impact on broader growth in the world’s second-largest economy as Beijing resorts to fiscal stimulus to support local governments and contain the spiraling debt crisis among the country’s property developers.

“The outlook change also reflects the increased risks related to structurally and persistently lowermedium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said in a statement issued Dec. 5.

“These trends underscore the increasing risks related to policy effectiveness, including the challenge to design and implement policies that support economic rebalancing while preventing moral hazard and containing the impact on the sovereign’s balance sheet,” Moody’s added.

China credit default swaps (the cost of insuring against a government default) rose 4 basis points from Monday’s closing level, according to Reuters data.

China’s Finance Ministry expressed its disappointment with Moody’s downgrade decision.

“Moody’s concerns about China’s economic growth prospects and fiscal sustainability are unnecessary,” the ministry said in a statement Tuesday.

“Since the beginning of this year, in the face of the complex and severe international situation, and against the background of unstable global economic recovery and weakening momentum, China’s macro economy has continued to recover and high-quality development has steadily advanced,” the ministry added.

The central government said Oct. 24 that it had formalized a process allowing local governments to borrow funds for the year ahead — starting in the preceding fourth quarter, according to an announcement published by state media.

Beijing also announced a rare mid-year fiscal revision, which included the issuance of 1 trillion yuan in ($137 billion) in government debt — one of the biggest changes to the national budget in years. The amount was for the reconstruction of areas hit hard by natural disasters — such as this summer’s historic floods — and for catastrophe prevention.

Moody’s also cited the 1.6 trillion yuan increase in central government transfers to regional and local governments in 2022 from 2021, which partly but only temporarily offset the 2 trillion yuan in lost land sales revenue, as a key development that factored in its thinking.

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

A fierce winning streakU.S. stocks rose Tuesday to hit fresh winning streaks, their longest in three years. But Asia-Pacific markets were mixed Wednesday. Japan’s Nikkei 225 ticked down 0.1% despite rising confidence among large Japanese manufacturers, according to a Reuters Tankan survey. Meanwhile, Australia’s S&P/ASX 200 climbed 0.2% a day after the country’s central bank raised rates by 25 basis points.

Microsoft closes at a highMicrosoft shares climbed 1.12% to hit $360.53, a record high. It’s the eighth consecutive day in which the technology giant’s shares rose, a streak unseen since January 2021. Investors cheered Microsoft CEO Satya Nadella’s surprise appearance at OpenAI’s event, where he encouraged developers to build with Microsoft’s Azure cloud infrastructure.

‘Absolutely booming’ Chinese sectorChina’s economy hasn’t recovered from its pandemic blues. But in the sectors of “electric vehicles and everything around sustainability and renewable power technology,” China is “absolutely booming,” Standard Chartered CEO Bill Winters told CNBC. Relatedly, China’s truck industry is increasingly using vehicles with assisted-driving technology, a critical step toward monetizing the nascent business.

Peak, not pause?The U.S. Federal Reserve, European Central Bank and the Bank of England all paused interest rate hikes in recent weeks. This breather comes after dramatic hikes over the last 18 months as central banks grappled with unruly inflation. Some market watchers, in fact, think this lull in hikes isn’t so much a pause but the peak in rates — and are turning their attention to when central banks will start cutting.

[PRO] Buy BYDOver the past 18 months, Warren Buffett’s Berkshire Hathaway has sold more than half its stake in Chinese electric vehicle maker BYD, according to stock filings. Despite that, analysts still think BYD’s a stock worth buying — and some even raised their price targets for the firm.

Last month’s sudden surge in Treasury yields and oil prices — both of which tend to suppress investors’ appetite for stocks — looks to be ending. No, scratch that — the increases aren’t just ending, they’re ebbing.  

Look at oil: Contracts for both West Texas Intermediate and Brent futures fell around $3. WTI’s now at $77.01 a barrel while Brent’s $81.44, their lowest since July. That’s almost $10 per barrel less compared with a month ago, when prices jumped on fears triggered by the Israel-Hamas conflict.

Meanwhile, the 10-year Treasury yield fell around 10 basis points to 4.569% and the 2-year yield slipped 3 basis points to 4.915%. As Treasury yields serve as the benchmark for interest rates on loans and cash investments, sinking yields generally benefit rate-sensitive companies more. In other words: the Magnificent Seven Big Tech. Amazon led the pack, shooting up 2.13% yesterday.

That explains why the Nasdaq Composite jumped 0.9%, more than the S&P 500’s 0.28% gain and the Dow Jones Industrial Average’s 0.17% increase. Still, that’s not downplaying the movements. The S&P and Dow are enjoying their seventh consecutive session of gains, while the Nasdaq’s basking in its eighth.

If the U.S. Federal Reserve does indeed steer the economy to a soft landing, in which inflation is contained below 2% without the economy contracting, then there could be a further rally in stocks, said HSBC. Within periods of soft landings, the S&P has jumped, on average, 22% in the space between a pause and six months after rate cuts begin, noted HSBC’s global equity strategist Alastair Pinder.

And that immaculate disinflation isn’t just a dream. Chicago Federal Reserve President Austan Goolsbee told CNBC, “Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down without a recession.”

Both the economy and markets have truly acted in strange, unprecedented ways ever since the pandemic. From one of the worst years for stocks and bonds in 2022, to a widely heralded bull rally in the S&P — and then a correction — in 2023. And I haven’t even started on the U.S. labor market and inflation numbers. Strange may be new and unsettling, but it isn’t necessarily bad.

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Spooky OctoberMajor U.S. indexes inched up Tuesday, but ended October in the red — giving them a three-month losing streak. Asia-Pacific markets mostly rose Wednesday, with Japan’s Nikkei jumping around 2.2% a day after the Bank of Japan relaxed its yield curve control policy. South Korea’s Kospi climbed about 1% as the country’s October exports rose 5.1% year on year, its first rise in 13 months.

Watch Janet alongside JeromeThere’s virtually zero chance the Federal Reserve will raise interest rates at the conclusion of its meeting later today. But Chair Jerome Powell’s comments may still have the force to move markets. And market watchers might want to pay more attention to the U.S. Treasury Department’s announcement of the size, and the duration mix, of its upcoming Treasury auction.

China’s high-level meetingsChina concluded a high-level financial meeting Tuesday, where the country signaled support for property developers and resolving local government debt problems. The twice-a-decade financial conference tends to sketch out long-term policy. Separately, U.S. President Joe Biden will meet his Chinese counterpart Xi Jinping in the U.S., announced the White House.

Next year will be betterAMD reported third-quarter earnings and revenue that beat expectations. But the chipmaker’s fourth-quarter sales forecast came in at $6.1 billion, below the $6.37 billion analysts were looking for. Nonetheless, AMD thinks 2024 will prove a better year for its artificial intelligence chip business — the firm’s one of the few chipmakers capable of manufacturing the high-end chips that generative AI relies on.

[PRO] A 117-year-old AI companyThere’s an old technology company that was founded in 1906, and which has become a household name. But traders should “rethink” their preconceptions of it, according to one investor. The 117-year-old company is “becoming an AI company. They’re becoming a cloud company,” he said.

The last day of October was sweet for markets, but it was more trick than treat for the rest of the month.

Major indexes managed to finish the day in the green. The S&P 500 rose 0.65% — pulling it out of correction territory, the Dow Jones Industrial Average climbed 0.38% and the Nasdaq Composite was 0.48% higher.

But this final sprint couldn’t help stocks outrun a dismal October, which was haunted by the 10-year Treasury yield breaching the 5% level for the first time in 16 years. On a monthly basis, the S&P fell 2.2%, the Dow 1.4% and the Nasdaq 2.8%. All three indexes declined for three consecutive months — the first time for the S&P and Dow since March 2020.

In fact, this is just the ninth time since 1928 the S&P has fallen consecutively from August to October, according to Bespoke Investment Group. But history presents a silver lining: The last two times the S&P fell during those months, it rallied 3.42% and 5.99% in the following November, the group said.

The Federal Reserve’s decision on interest rates, expected Wednesday, might give stocks another boost. “If the Fed comes out and says they’re probably done for the year, gives hints that they’re feeling more dovish, that could be one thing that really helps,” said Ross Mayfield, investment strategy analyst at Baird.

And stocks certainly do need help. Even the Magnificent Seven stocks that led most — if not all — the gains in the S&P this year have been struggling in October. Tesla, most significantly, is down 20.5% for the month, while Nvidia has dropped more than 7% and Alphabet’s 5.8% lower. Only Microsoft and Amazon have advanced for the month.

But nothing lasts forever: Even cold November rain may wash away the bitter taste of the past three months.

The World Trade Organization’s director-general warned that the ongoing Israel-Hamas conflict will impact global growth if it spills over to the wider Middle East region.

In an interview with CNBC aired on Monday, Ngozi Okonjo-Iweala said: “If it spreads beyond where it is now, to the rest of the Middle East, there will be an impact.”

“Remember that this region is also the source of a lot of the world’s energy with respect to natural gas as well as oil, which is still very much in use and all over the world. So you will see an impact on global growth, on global trade,” she added.

“We do hope it does not amount to that. We’re praying for de-escalation and peace,” she told CNBC’s Martin Soong on the sidelines of the Group of 7 meeting in Osaka, Japan.

Israel’s military campaign in the Gaza Strip was triggered by the brutal terrorist attack by Hamas militants in southern Israel on Oct. 7 that killed 1,400 people, including Americans. Nearly 240 people have been captured and taken as hostages to Gaza.

Economists have cautioned that any possible escalation of the Israel-Hamas war poses a major disruption to the global economy, and could drive up energy prices and disrupt key trade routes.

Trade growth is already “quite grim” due to the “fall in aggregate demand across the board,” said Okonjo-Iweala.

The WTO cut its trade growth forecast for 2023 amid a global manufacturing slowdown. In October, the organization scaled back on growth estimates in global merchandize trade for this year due to a continued slump that started in the fourth quarter of 2022.

Global merchandize trade volume is now projected to grow by 0.8% this year, less than half of the 1.7% increase forecasted in April. The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.

“The rebound from China has not been as robust after the pandemic as we hoped. We have the real estate crisis in China. European Union growth is slower than we had also hoped,” said the WTO director-general.

“The U.S. seems to be doing okay but still, there’s the issue of aggregate demand falling across the board in most regions and both sectors and persistent inflation with interest rates going up higher for long,” she added.