China eases Covid restrictions. The dollar index fell to a 5-month low amid expectations of a rate hike slowdown

December 5, 2022

Fed Chairman Jerome Powell said last week that it might be time to slow rate hikes, raising hopes that the Central Bank is near the end of its tightening cycle. But Friday’s jobs report that hiring remained high last month while average hourly earnings rose. The US non-farm payrolls report (NFP) beat market expectations with 263,000 new jobs created compared to the expected 200,000. The unemployment rate remained unchanged at 3.7%, while average hourly earnings rose to 5.1% year-over-year against expectations of 4.6% and a revised higher October rate of 4.9%. This suggests that the labor market remains strong, giving the Fed room for another major hike, although there is less than a 20% chance of such a scenario.

At the close of the stock market on Friday, the Dow Jones Index (US30) increased by 0.10% (+0.45% for the week), while the S&P 500 Index (US500) decreased by 0.12% (+1.66% for the week). Tech Index NASDAQ (US100) was down by 0.18% (+2.82% for the week). Despite the slight decline on Friday, all three indices closed the week on a profit.

Equity markets in Europe mostly rallied last week. German DAX (DE30) gained 0.27% (+0.40% for the week), French CAC 40 (FR40) lost 0.17% (+0.96% for the week), Spanish IBEX 35 (ES35) was down 0.30% (+0.06% for the week), British FTSE 100 (UK100) closed 0.03% (+0.93% for the week).

European Central Bank President Christine Lagarde is scheduled to appear twice this week ahead of this year’s key ECB policy meeting on December 15. Markets are leaning toward a 50 basis point rate hike at the ECB’s upcoming meeting after data last week showed that Eurozone inflation fell much more than expected in November. European Central Bank officials in Germany and France said over the weekend that the ECB would return inflation to 2% by the end of 2024 or 2025. National governments have used hundreds of billions of euros to protect companies and households from rising energy prices, which bankers said could undermine their efforts to rein in inflation. Nagel and Villeroy called for a return to a more balanced budget in the near future.

Representatives of OPEC+, which includes the Organization of the Petroleum Exporting Countries, and its allies, including Russia, met Sunday to discuss production targets after the G7 countries agreed to cap Russian oil prices. On Friday, the G7 nations and Australia agreed to cap the price of Russian offshore crude at $60 a barrel to deprive President Vladimir Putin of revenue to fund the invasion of Ukraine. Many OPEC analysts and ministers say the cap is ineffective because Moscow sells most of its oil to countries such as China and India. So far, OPEC+ countries have agreed to stick to their oil production targets at a meeting on Sunday. Russian Deputy Prime Minister Alexander Novak said Sunday that Russia would rather cut production than deliver oil under a price cap.

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Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) declined 1.57% over the week, Hong Kong’s Hang Seng (HK50) jumped by 9.85% last week, and Australia’s S&P/ASX 200 (AU200) was up 0.58%. Most Asian markets are trading sideways on Monday amid some uncertainty over US monetary policy after strong wage data, while Chinese stocks are rising as the government loosened restrictions imposed on COVID. Hong Kong stocks have also significantly outperformed their Chinese counterparts in the last month as the city rolled back its COVID policies early.

In the commodities market, futures on silver (+8.98%), copper (+6.27), WTI oil (+5.32%), palladium (+4.56%), platinum (+3.8%), cotton (+3.68%), and gold (+3.27%) showed the biggest gains over the week. Futures on natural gas (-15.12%), lumber (-6.23%), wheat (-4.64%), corn (-3.69%), and orange juice (-3.18%) showed the biggest drops.

S&P 500 (F) (US500) 4,071.70 −4.87 (−0.12%)

Dow Jones (US30) 34,429.88 +34.87 (+0.10%)

DAX (DE40) 14,529.39 +39.09 (+0.27%)

FTSE 100 (UK100) 7,556.23 −2.266 (−0.030%)

USD Index 104.51 −0.22 (−0.21%)

Important events for today:

– Japan Services PMI (m/m) at 03:30 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 03:45 (GMT+3);
– China Caixin Services PMI (m/m) at 04:45 (GMT+3);
– Spanish Services PMI (m/m) at 10:15 (GMT+3);
– Italian Services PMI (m/m) at 10:45 (GMT+3);
– French Services PMI (m/m) at 10:50 (GMT+3);
– German Services PMI (m/m) at 10:55 (GMT+3);
– Eurozone Services PMI (m/m) at 11:00 (GMT+3);
– UK Services PMI (m/m) at 11:30 (GMT+3);
– Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
– US ISM Services PMI (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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China eases Covid restrictions. The dollar index fell to a 5-month low amid expectations of a rate hike slowdown