InvestMacro

At the end of Tuesday, the Dow Jones Index (US30) added 0.28%. The S&P 500 Index (US500) was up 0.57%. The Nasdaq Technology Index (US100) increased by 0.57%.

Federal Reserve officials expressed optimism that inflation is falling and the labor market remains robust, supporting the possibility of further interest rate cuts, albeit at a moderate pace, minutes from the November 6–7 meeting showed. Officials noted that monetary policy decisions depend on economic trends and cautioned against premature rate cuts. The volatility of recent data and uncertainty about the impact of a neutral interest rate on economic activity make the policymaking process particularly challenging. Markets rate the odds of a 25 bps rate cut at the December 17–18 FOMC meeting at 67%.

Intel (INTC) shares are down more than 3% after Bloomberg reported that Qualcomm’s interest in acquiring Intel has waned. General Motors (GM) stock is down more than 8%, and Ford Motor (F) is down more than 2% after President-elect Trump promised to impose additional 10% tariffs on goods from China and 25% tariffs on all products from Mexico and Canada. Both automakers import cars from China into the US and have plants in Canada and Mexico.

The Mexican peso fell more than 2% to above 20.7 per US dollar on Tuesday, the weakest since March 2022, after Donald Trump doubled down on his threats to raise tariffs. In his Truth social media posts, Trump said he would impose 25% tariffs on imports from Mexico and Canada. Mexico is the US’s largest trading partner, and the auto sector would be one of the hardest hit. In response, Mexican President Claudia Sheinbaum suggested that Mexico could respond by imposing its own tariffs. The peso has weakened about 20% this year.

Equity markets in Europe were declining yesterday. Germany’s DAX (DE40) fell by 0.56%, France’s CAC 40 (FR40) closed down 0.87%, Spain’s IBEX 35 (ES35) lost 0.80%, and the UK’s FTSE 100 (UK100) closed down 0.40%.

WTI crude oil prices held below $69 per barrel on Wednesday as traders weighed signs of another OPEC+ production delay and easing geopolitical risks following a ceasefire between Israel and Hezbollah. Markets are anticipating the December 1 OPEC+ meeting. It is reported that the group will postpone its planned January production increase by several months due to signs of oversupply. Meanwhile, tensions in the Middle East eased after Israel and Hezbollah reached a 60-day ceasefire agreement in US-brokered talks. However, shortly after President Biden’s announcement, both sides resumed attacks, underscoring the difficulty in reaching a long-term agreement.

The US natural gas (XNG) prices rose to $3.48/MMBtu, the highest level in more than a year, as estimates of colder weather and lower production prompted utilities to accelerate the start of the season for drawing gas from storage. EIA data showed that gas inventories in storage fell by 3 billion cubic feet in the week ending November 15 instead of the expected 5 billion cubic feet. It was the first accelerated decline this season, as relatively low prices in the previous week prompted producers to cut production.

Asian markets traded flat on Tuesday. Japan’s Nikkei 225 (JP225) fell 0.87%, China’s FTSE China A50 (CHA50) gained 0.28%, Hong Kong’s Hang Seng (HK50) rose 0.04%, and Australia’s ASX 200 (AU200) was negative 0.69%.

The Reserve Bank of New Zealand cut the discount rate by 50bps to 4.25%, which is in line with market expectations. The RBNZ said the rate cut strikes a balance between supporting growth and employment while keeping inflation under control and ensuring market stability. This is the third rate cut by the Central Bank this year, bringing the total easing to 125bps this cycle. In addition, Governor Adrian Orr has suggested that another significant interest rate cut will occur early next year if economic conditions develop as expected. In the external market, the kiwi remains under pressure from recent tariff threats by US President-elect Donald Trump, particularly those targeting China, New Zealand’s largest trading partner.

In Australia, the annual CPI reading came in at 2.1%, which is in line with the growth seen in September but below analysts’ estimate of 2.3%. This is the lowest inflation rate since July 2021. The Reserve Bank of Australia (RBA) believes that monetary policy should remain restrictive until there is confidence that inflation is moving steadily towards target.

At Monday’s close, the Dow Jones Index (US30) increased by 0.99%. The S&P 500 Index (US500) was up 0.30%. The Nasdaq Technology Index (US100) was up 0.14%. The Dow Jones Industrials set a new all-time high, and the Nasdaq 100 set a weekly high. Stocks rose on Monday amid optimism that President-elect Trump has picked Scott Bessent, a former hedge fund manager, to be US Treasury Secretary to bring a Wall Street mentality to the role and ease concerns about Trump’s inflationary agenda of tax cuts and tariff hikes. Bessent said he would support Trump’s policies, but his experience as a fiscal hawk indicates he will prioritize economic and market stability and deficit reduction.

Nvidia (NVDA) fell more than 4% and topped the list of losers in the Dow Jones Industrials and Nasdaq 100 markets after Amazon.com said it was developing its own artificial intelligence chips. Moderna (MRNA) closed up more than 6% after Jefferies said Robert F. Kennedy’s appointment to the Department of Health and Human Services is unlikely to mean an end to vaccines.

The Dollar Index climbed back above 107 on Tuesday as President-elect Donald Trump stepped up his threats to raise tariffs on China, Mexico and Canada, among others, sparking renewed demand for the dollar. Trump said he would impose additional 10% tariffs on all Chinese goods entering the US, as well as 25% tariffs on imports from Mexico and Canada.

Equity markets in Europe rallied yesterday. Germany’s DAX (DE40) rose by 0.43%, France’s CAC 40 (FR40) closed 0.03% higher, Spain’s IBEX 35 (ES35) added 0.47%, and the UK’s FTSE 100 (UK100) closed up 0.36%. The German IFO Business Climate Index for November fell by 0.8 to 85.7, weaker than expectations of 86.0. ECB Governing Council spokesman Kazaks said yesterday that given the European economy at the moment, another interest rate cut in December should follow. Swaps discount the odds of a 25 bp ECB rate cut at the December 12 meeting by 100% and a 50 bp rate cut at the same meeting by 35%.

Platinum (XPTUSD) prices fell to $950 per ounce, not far from the two-month low of $930 reached on November 13, and followed a general decline in precious metals-related assets as markets reduced their demand for safe-haven assets.

WTI crude oil prices fell by 3% on Monday to settle at $68.90 a barrel following reports that Israel and Hezbollah are close to reaching a ceasefire agreement. Iran announced plans to expand nuclear fuel production after criticism from the UN atomic watchdog, preparing for potential sanctions under a possible second Trump administration. Meanwhile, Azerbaijan’s Energy Minister said OPEC+ may maintain its current oil production cuts from January 1 as the group continues to delay planned production increases due to demand concerns. The next OPEC+ meeting is scheduled for December 1 and will be held online.

Asian markets traded flat on Monday. Japan’s Nikkei 225 (JP225) was up 1.30%, China’s FTSE China A50 (CHA50) was down 0.50%, Hong Kong’s Hang Seng (HK50) was down 0.41%, and Australia’s ASX 200 (AU200) was positive 0.28%.

Trump confirmed his plans to impose an additional 10% tariffs on all Chinese goods, adding to fears of global trade tensions. Against this backdrop, the offshore yuan fell to around 7.26 per dollar, nearing its lowest level since late July. Earlier this week, the PBoC kept the MLF rate at 2.0%, injecting 900 billion yuan and withdrawing 550 billion yuan. Last week, the Central Bank also kept the one-year lending rate at 3.1% and the five-year lending rate at 3.6%, indicating a cautious stance on supporting economic growth.

At Friday’s close, the Dow Jones Index (US30) was up 0.97% (week-to-date +1.99%). The S&P 500 Index (US500) gained 0.35% (week-to-date +1.62%). The Nasdaq Technology Index (US100) was up 0.17% (week-to-date +1.59%). Investor rotation from technology sectors to economically sensitive sectors such as financials, industrials, and consumer discretionary contributed to the broader market’s gains. On the economic front, S&P’s US PMI for November rose to 55.3, showing the fastest private sector growth since April 2022.

Mexico’s Q3 2024 GDP grew by 1.1% quarter-on-quarter, the fastest pace since Q1 2022, beating estimates of 1%. Mexico’s annual inflation rate fell to 4.56% in mid-November, an eight-month low, down from 4.69% in October and below projections. Despite strong growth supporting gradual rate cuts by the Bank of Mexico, the peso (MXN) is under pressure from the US dollar rally driven by a strong labor market, sustained Fed policy expectations, and speculation about President-elect Trump’s inflationary policies. Reports of the appointment of trade hawk Robert Lighthizer as US Trade Representative and the potential appointment of Marco Rubio as Secretary of State with his hardline stance on Latin America further add to concerns.

Investors who bet on “buying a digital asset and the dollar” after Trump’s victory are still in profit. Bitcoin is approaching the $100,000 mark and is up about 50% since early October, when markets were leaning toward Trump’s election victory. The Dollar Index is up 3.6%. The Mexican peso has lost over 4%, and European stocks are down about 3%. However, resistance to Trump-related trades could increase if equity valuation concerns intensify or geopolitical risks challenge the rally in risk assets.

Equity markets in Europe were rising on Friday. Germany’s DAX (DE40) rose by 0.92% (week-to-date +0.38%), France’s CAC 40 (FR40) closed up 0.58% (week-to-date -0.27%), Spain’s IBEX 35 (ES35) gained 0.39% (week-to-date +0.16%), and the UK’s FTSE 100 (UK100) closed down 1.38% (week-to-date +2.46%). According to the ECB representatives, the European Central Bank’s policy will evolve regardless of what happens in the Federal Reserve. Bloomberg estimates that the Fed will cut rates in December, but policymakers will keep borrowing costs unchanged in January. Meanwhile, the ECB has cut rates three times since June and is expected to continue at its next four meetings.

Swiss National Bank (SNB) Chairman Martin Schlegel said on Friday he would reintroduce negative interest rates if necessary, which has weakened the Swiss franc against the dollar and euro. Schlegel said the Central Bank doesn’t like negative rates but could use them if necessary to reduce investor appetite for the safe-haven franc. The SNB has cut the benchmark rate to 1% three times during 2024 and expects further cuts. There is currently a 72% chance of a 25 basis point rate cut and a 28% chance of a 50 basis point cut at the Central Bank’s next meeting in December.

WTI crude oil prices rose by 1.6% to $71.2 a barrel on Friday, ending the week up more than 5%, helped by the escalating conflict in Ukraine, which added a geopolitical risk premium to oil prices. China unveiled new policies aimed at boosting trade, including support for energy imports, amid concerns over Trump’s potential tariffs.

The US natural gas prices fell to $3.1 per mmbbl after hitting a one-year high of $3.35 in November 21 amid expectations of higher production next year. The EIA noted that US drillers are expected to increase production next year for the first time since the pandemic amid increased export capacity and global demand for US LNG. Nevertheless, prices rose nearly 20% in November as estimates of the colder weather accelerated expectations for the start of the storage withdrawal season.

Asian markets were flat last week. Japan’s Nikkei 225 (JP225) rose by 0.06%, China’s FTSE China A50 (CHA50) fell by 1.83%, Hong Kong’s Hang Seng (HK50) lost 1.87%, and Australia’s ASX 200 (AU200) was positive 1.31%.

Japan’s Coincident Economic Index, which includes data such as output, employment, and retail sales, came in at 115.3 for September 2024, slightly below the prognoses of 115.7. Nevertheless, this result has improved compared to the six-month low of 114.0 recorded in August, reflecting a moderate economic recovery.

At Thursday’s close, the Dow Jones Industrial Average (US30) was up 1.06%. The S&P 500 Index (US500) closed positive 0.53%. The Nasdaq Technology Index (US100) was up 0.36%.

The Dollar Index remained above 107, holding near two-year highs, as investors assessed the Federal Reserve’s monetary policy outlook. Data released on Thursday showed that weekly US jobless claims unexpectedly fell to a seven-month low, further evidence of a strong labor market. Investors await business activity data today and inflation data next week for more economic information.

Alphabet (GOOG) fell more than 6% after antitrust regulators said in court Wednesday that Google must get rid of Chrome, citing that the browser “reinforced” the company’s dominant position. Salesforce (CRM) is up more than 4% and tops the leaderboard in the Dow Jones Industrials after Stifel raised its price target on the company’s shares to $390 from $350. PDD Holdings (PDD) is down more than 9% and tops the Nasdaq 100 losers list after reporting third-quarter revenue of ¥99.35 billion, weaker than the consensus estimate of ¥102.83 billion.

The price of Bitcoin (BTC/USD) rose more than 2%, hitting a new record high above $99,000 on optimism that President-elect Trump’s support for digital assets will boost the industry as the US moves toward friendly regulation of digital assets. Trump’s team has begun discussing creating a position in the White House dedicated to digital asset policy.

Inflationary pressures intensified in Canada, with producer prices rising 1.2% month-on-month in October, the strongest increase since April. Earlier data showed consumer inflation exceeded estimates on key indicators, with the average core inflation rate rising to 2.6% in October from a three-year low of 2.4% in September.

Equity markets in Europe ended trading yesterday on a strong note. Germany’s DAX (DE40) rose by 0.74%, France’s CAC 40 (FR40) closed 0.21% higher, Spain’s IBEX 35 (ES35) added 0.19%, and the UK’s FTSE 100 (UK100) closed up 0.79%. The Eurozone Consumer Confidence Index for November unexpectedly fell by 1.2 to a 5-month low of 13.7, weaker than expectations for a rise to 12.4.

The US natural gas prices rose by 7% to 4.3 million barrels per ton, extending yesterday’s 6% gain to the highest level in a year, as estimates of colder weather boosted heating demand and accelerated expectations for the start of the storage withdrawal season. EIA data showed that gas inventories in storage fell by 3 billion cubic feet in the week ending November 15 instead of the 5 billion cubic feet expected. This was the first accelerated decline this season, as relatively low prices in the previous week forced producers to cut production.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell by 0.85%, China’s FTSE China A50 (CHA50) rose 0.11%, Hong Kong’s Hang Seng (HK50) lost 0.53% and Australia’s ASX 200 (AU200) was negative 0.04%.

Malaysia’s annualized inflation rate for October 2024 was 1.9%, slightly above market estimates, and September’s 1.8%, the lowest in five months. Core consumer prices, excluding volatile fresh food and administrative costs, rose to 1.8% y/y, holding steady for the second month and remaining at the lowest level in six months.

Australian manufacturing activity continued to contract for the 10th consecutive month in November, although the rate of decline slowed to its lowest level in six months. At the same time, service sector activity moved into contraction for the first time in ten months.

Japan’s core Consumer Price Index, which excludes fresh food but includes fuel costs, rose to an annualized rate of 2.3% in October 2024. However, the increase was slightly above the market projections of 2.2%. Despite this, Japan’s core inflation has remained at or above the Bank of Japan’s 2% target for more than two years, which has contributed to the Central Bank’s more hawkish stance.

At Wednesday’s end, the Dow Jones Index (US30) rose by 0.32%. The S&P 500 Index (US500) closed at the opening price. The Nasdaq Technology Index (US100) declined 0.08%.

Nvidia (NVDA) reported fiscal third-quarter results that beat Wall Street estimates, but its plans for the current quarter fell short of investors’ inflated expectations amid hot demand for artificial intelligence. NVIDIA Corporation shares fell more than 2% in after-hours trading following the report. Qualcomm (QCOM) closed down more than 6%, leading to a decline in chip stocks after Susquehanna Financial cut its price target on the company’s shares to $210 from $230. Additionally, shares of Advanced Micro Devices (AMD) and Texas Instruments (TXN) were down more than 1%.

Of the 90% of S&P 500 companies that posted Q3 earnings, 75% beat estimates, slightly below the 3-year average. According to Bloomberg Intelligence, S&P 500 companies reported an average 8.5% year-over-year increase in Q3 quarterly earnings, more than double estimates.

Equity markets in Europe ended trading yesterday on a weak note. The German DAX (DE40) fell by 0.29%, the French CAC 40 (FR40) closed down 0.43%, the Spanish IBEX 35 (ES35) rose by 0.01%, the British FTSE 100 (UK100) closed down 0.17%. Investors sold risk assets following reports that Ukraine fired UK-made Storm Shadow missiles at Russian territory for the first time since the war began in 2022. This followed the firing of US-made ATACMS missiles the same morning Russia expanded the scenario, justifying the use of nuclear weapons and raising fears of a wider conflict with possible NATO involvement. However, by the end of the day, geopolitical tensions in Europe had eased after Reuters reported that Russian President Putin was willing to discuss a ceasefire agreement in Ukraine with US President-elect Trump, which could roughly freeze the war on current front lines.

The US crude inventories rose by 545,000 barrels last week, exceeding market projections. Oil markets have come under pressure in recent months amid concerns about a possible oil glut next year due to slowing demand growth in China and record-high production levels, even as OPEC+ maintains current production levels.

The US natural gas (XNG/USD) prices rose more than 6% to nearly $3.2/MMBtu, the highest since June 11, as colder weather in late November is expected to boost heating demand.

Asian markets were flat yesterday. Japan’s Nikkei 225 (JP225) fell by 0.16%, China’s FTSE China A50 (CHA50) rose by 0.13%, Hong Kong’s Hang Seng (HK50) gained 0.21%, and Australia’s ASX 200 (AU200) was negative 0.57%.

On Thursday, the New Zealand Treasury said it is likely to revise its economic and fiscal estimates downward due to a prolonged slowdown in labor productivity growth. This has prompted investors to increasingly consider the possibility that the Reserve Bank of New Zealand (RBNZ) will cut its 4.75% cash rate by 75bps more aggressively at its meeting next week, with a 50bps cut already fully priced in.

China’s Central Bank left key lending rates unchanged this week as expected, but investors remain hopeful that Beijing will introduce additional stimulus measures to support economic growth. Meanwhile, the prospect of higher tariffs on Chinese goods under the upcoming Trump administration adds to concerns about the country’s economic outlook.

The Dow Jones Index (US30) fell by 0.28% on Tuesday. The S&P500 Index (US500) was up 0.40%, and the Nasdaq Technology Index (US100) rose by 0.71%. The escalating Ukraine-Russia war caused a de-risking of stock markets and liquidation of equities. Investors sought safer assets after Ukraine used Western-made missiles to strike Russia, and President Vladimir Putin expanded Russia’s nuclear doctrine to authorize a nuclear response to major conventional attacks.

The Canadian dollar strengthened above 1.4 per dollar as inflation data tempered expectations about the extent of the Bank of Canada’s (BoC) rate cuts. The reduced average core inflation rate, the Bank of Canada’s preferred measure of core inflation, rose to 2.6% in October from a three-year low of 2.4% in September, beating expectations. This came amid favorable economic data, including a lower-than-expected unemployment rate and strong PMI readings, further dampening prospects for a significant rate cut.

Equity markets in Europe ended trading yesterday on a weak note. Germany’s DAX (DE40) fell by 0.67%, France’s CAC 40 (FR40) closed down 0.67%, Spain’s IBEX 35 (ES35) lost 0.74%, and the UK’s FTSE 100 (UK100) closed down 0.13% on Tuesday. Concerns over the impact of US trade tariffs on Eurozone growth and geopolitical tensions weighed on sentiment.

WTI crude oil prices traded around $69 per barrel, caught between geopolitical tensions and easing worries in the Middle East. Russia’s conflict with Ukraine intensified as Ukrainian forces used Western-supplied missiles for the first time, and President Putin expanded Russia’s nuclear doctrine. Meanwhile, the IAEA announced that Iran has agreed to halt uranium production, potentially reducing tensions in the region.

Asian markets mostly rose yesterday. Japan’s Nikkei 225 (JP225) rose by 0.51%, China’s FTSE China A50 (CHA50) gained 0.35%, Hong Kong’s Hang Seng (HK50) added 0.44%, and Australia’s ASX 200 (AU200) increased by 0.89%.

The People’s Bank of China (PBOC) kept key lending rates unchanged at the November fixing, in line with market assessments. The one-year prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3/1%. The five-year rate, the benchmark for mortgage loans, remained at 3/6 %. Both rates remain at record lows following rate cuts in October and July. The latest decision reflects the Chinese Central Bank’s current assessment of existing stimulus measures.

At the end of Monday, the Dow Jones Index (US30) fell by 0.13%. The S&P 500 (US500) was up 0.39%. The Nasdaq Technology Index (US100) was up 0.71%. The US stock indices changed a little as investors await key earnings reports this week, including Nvidia (NVDA) and major retailers. In after-hours trading, Walmart (WMT) is up 1.5% ahead of its earnings release scheduled for Tuesday morning. Conversely, Alphabet (GOOG) shares are down nearly 1% following reports that the US Justice Department plans to ask a judge to force Google to abandon its Chrome browser, citing antitrust concerns. Tesla is up 5.6% following reports that President-elect Donald Trump’s team is exploring easing regulations for self-driving cars. In addition, shares of Advance Micro Devices (AMD) are up more than 3% after IBM said it had signed a deal with the company to supply MI300x gas pedal chips for its cloud network.

Equity markets in Europe ended trading yesterday on a weak note. Germany’s DAX (DE40) fell by 0.11%, France’s CAC 40 (FR40) closed up 0.12%, Spain’s IBEX 35 (ES35) rose by 0.33%, and the UK’s FTSE 100 (UK100) closed up 0.57%. Nagel, a representative of the ECB’s governing council and president of the Bundesbank, said that if international tensions escalate, this could lead to increased inflationary pressures or increased volatility in consumer price growth, and central banks may have to respond by raising interest rates. His colleague, also a representative of the ECB’s governing council, Stournaras, warned that economic activity could weaken and the Eurozone could fall into recession if the US imposes additional tariffs. Swaps discount the odds of a 25bp ECB rate cut at the December 12 meeting at 100% and a 50bp rate cut at the same meeting at 17%.

WTI crude oil prices traded above $69 per barrel on Tuesday after rising 3.2% in the previous session amid concerns over supply disruptions and ongoing geopolitical tensions. Tensions between Russia and Ukraine escalated after the US and other countries approved Ukraine’s use of US-made long-range missiles on Russian territory, which could draw the US into the conflict. Oil prices were further supported by a weaker US dollar, making oil more attractive to foreign buyers.

Asian markets traded yesterday without any unified dynamics. Japanese Nikkei 225 (JP225) declined by 1.09%, Chinese FTSE China A50 (CHA50) fell by 1.02%, Hong Kong Hang Seng (HK50) rose by 0.77%, and Australian ASX 200 (AU200) yesterday showed a positive result of 0.07%.

Top Chinese officials are gathering for an investment summit in Hong Kong, where the heads of key economic and financial bodies are expected to discuss the latest developments in China’s financial sector. Investors are also focused on the PBOC’s upcoming LPR decision scheduled for Wednesday.

The Australian dollar climbed above $0.65 on Tuesday, rising for the third consecutive session, as investors reacted to minutes from the Reserve Bank of Australia’s November meeting. The minutes showed that the Central Bank plans to maintain a restrictive monetary policy until it is confident that inflation is moving steadily toward the target while remaining cautious about upside risks to inflation. Currently, markets do not expect the RBA to cut the RBA rate until May next year, and the probability of this happening in February is estimated at 38%.