Recovery conditions are forming for oil. Powell’s hawkish comments pressured the broad market

November 10, 2023

As of Tuesday’s stock market close, the Dow Jones Industrial Average (US30) decreased by 0.65%, while the S&P 500 Index (US500) lost 0.81%. The NASDAQ Technology Index (US100) closed negative by 0.94% on Thursday.

US Fed Chairman Powell spoke at the IMF’s annual academic conference yesterday. In a prepared speech, Powell said that he and his colleagues are pleased that inflation is slowing but that they are not sure if they have done enough to support it and would not hesitate to tighten it if necessary. As a result, stocks came under pressure, and bond yields rose. Comments from some Fed officials indicate that they favor keeping interest rates at current levels. Atlanta FRB President Bostic said yesterday that the Fed will maintain restrictive measures until it is confident that inflation will fall to 2%.

US weekly jobless claims unexpectedly fell by 3,000 to 217,000, matching expectations of 218,000.

Tesla (TSLA) shares fell more than 3% yesterday, topping the list of losers on the Nasdaq 100 (US100) after HSBC initiated coverage of the company’s stock with a “downgrade” recommendation and a price target of $146. Walt Disney (DIS) is up more than 6%, leading the Dow Jones Industrials (US30) higher after the company reported 150.2 million Disney+ subscribers in Q4, above the consensus forecast of 147.07 million subscribers.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.81%, France’s CAC 40 (FR40) gained 1.13%, Spain’s IBEX 35 (ES35) jumped by 1.31%, and the UK’s FTSE 100 (UK100) closed positive by 0.73%.

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ECB Governing Council representative Villeroy de Gallo said that the inflation rate in the Eurozone has fallen three times over the year and, despite some volatility, the trend is clearly downward, so the ECB stops raising interest rates unless it has to face additional shocks. For his part, ECB Vice President Gindos said that talk of ECB interest rate cuts in the coming months is clearly premature, citing risks to the inflation outlook.

The likelihood that Saudi Arabia will extend its unilateral 1 million bpd production cut until the first quarter of 2024 is increasing by the day. Given renewed market concerns about Chinese demand and the broader macro outlook, oil prices are likely to recover in the coming trading sessions.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 1.49% on Thursday, China’s FTSE China A50 (CHA50) added 0.05%, Hong Kong’s Hang Seng (HK50) was down by 0.33% on the day and Australia’s ASX 200 (AU200) was positive 0.28%.

In its quarterly Monetary Policy Statement, the Reserve Bank of Australia (RBA) said that at its November meeting this week, the Board discussed keeping rates unchanged but decided that an increase was necessary to ensure inflation slowed. Earlier this week, the RBA ended a four-month pause by raising the money rate by a quarter point to a 12-year high of 4.35%. Whether further monetary tightening will be needed to ensure that the inflation target is achieved within a reasonable timeframe will depend on the data and the evolving risk assessment. Economists believe the RBA has peaked and will not raise rates again.

S&P 500 (F)(US500) 4,347.35 −35.43 (−0.81%)

Dow Jones (US30) 33,891.94 −220.33 (−0.65%)

DAX (DE40) 15,352.54 +122.94 (+0.81%)

FTSE 100 (UK100) 7,455.67 +53.95 (+0.73%)

USD Index 105.91 +0.32 (+0.30%)

News feed for 2023.11.10:

– Australia RBA Monetary Policy Statement at 02:30 (GMT+2);
– UK GDP (q/q) at 09:00 (GMT+2);
– UK Industrial Production (m/m) at 09:00 (GMT+2);
– UK Manufacturing Production (m/m) at 09:00 (GMT+2);
– UK Trade Balance (m/m) at 09:00 (GMT+2);
– US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2).

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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Recovery conditions are forming for oil. Powell’s hawkish comments pressured the broad market