InvestMacro

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was up by 0.17%, while the S&P 500 Index (US500) added 0.80%. The NASDAQ Technology Index (US100) closed positive by 1.37% on Thursday.

A positive for stocks yesterday was Alphabet (GOOG) shares rising more than 5% after Google released Gemini, “the largest and most capable artificial intelligence model” the company has ever developed. Additionally, Advanced Micro Devices (AMD) shares are up more than 5% after the company unveiled its new accelerator chip MI300, saying the processor will be able to run artificial intelligence programs faster than competing products.

US weekly initial jobless claims rose by 1k to 220k, matching expectations. Today, the US will release its monthly nonfarm labor market report. The unemployment rate is expected to be 3.9%, and Nonfarm Payrolls are expected to increase by 180k in November compared to 150k in October. A strong (better than expected) report could undermine bets that the Fed will start easing its restrictive monetary policy sooner than expected, which would serve as a headwind for a rally in equities and bring back confidence in the dollar, at least temporarily. On the other hand, a weak Nonfarm report (worse than expected) will increase investor fears that the labor market and economy are cooling. If the data comes out in line with expectations, it is unlikely to do much to shake market expectations for several Fed rate cuts next year, which will only add to market volatility.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) decreased by 0.16%, France’s CAC 40 (FR40) fell by 0.10%, Spain’s IBEX 35 (ES35) lost 1.09%, and the UK’s FTSE 100 (UK100) closed negative 0.02%. Recent economic data from Germany has heightened fears that the industrial sector will continue to have a negative impact on the Eurozone’s largest economy. Germany’s industrial sector is struggling: industrial production in Germany unexpectedly fell in October, a day after industrial orders in the country’s largest Eurozone economy also unexpectedly fell in the same month.

On Thursday, the euro fell to its lowest level against the Swiss franc in nearly nine years as markets bet on an imminent interest rate cut by the European Central Bank (ECB). Currently, the difference between short rates in the Eurozone and Switzerland is around 225 basis points, but markets expect this to narrow to 150 in the next 12 months. This makes the euro less attractive than the Swiss franc. Analysts at Goldman Sachs believe the ECB will cut interest rates by 25 basis points (bps) at each meeting starting next April. Economists at the brokerage forecast that the ECB’s deposit rate will reach 2.25% by early 2025. BNP Paribas also expects the ECB to make its first interest rate cut in April 2024 and to “gradually reduce rates” over the year, citing weak economic activity and weakening inflation. BNP chief economist Luigi Speranza believes the ECB’s prime rate will be 3.25% by the end of 2024, down from 4% currently.

Crude oil and gasoline prices on Thursday continued Wednesday’s sharp decline. Crude oil fell to a five-month low. Concerns about a global crude oil supply glut continue to weigh on oil prices. In addition, doubts about whether the OPEC+ agreement to cut crude oil production will be honored are weighing on prices.

High inventories caused by carryover balances from the mild winter of 2022/23 and weak heating demand have depressed natural gas prices. As of December 3, natural gas storage in Europe was 94% full, above the 5-year seasonal average of 84% for this time of year.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) fell by 1.76%, China’s FTSE China A50 (CHA50) was down by 0.16%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.71%, and Australia’s ASX 200 (AU200) ended Thursday negative 0.07%.

The Nikkei 225 (JP225) fell sharply on Thursday, while the yen rose sharply to hit a 4-month high against the dollar. The yen saw a massive short-covering in the yen on Thursday as comments by Bank of Japan (BoJ) Governor Ueda in the Japanese parliament reinforced speculation that the BoJ would soon exit ultra-easy monetary policy. On Wednesday, Deputy Governor Ryozo Himino discussed the potential impact of an exit from ultra-loose monetary policy on the economy. Their joint comments “fueled the fire.” Japanese five-year bond yields witnessed the most aggressive sell-off in a decade. However, Ueda remained of the view that policy would remain loose in the near term, citing the need to stimulate economic growth. This view was bolstered by Japan’s revised third-quarter gross domestic product data, which showed a bigger decline in economic growth than initially expected.

India’s central bank (RBI) left its key lending rate unchanged at 6.5% on Friday as growth in the world’s fastest-growing economy remains robust and the inflation outlook uncertain. The central bank also raised its economic growth forecast to 7% from 6.5% after stronger-than-expected growth in July-September. RBI forecasts consumer inflation at 5.4% in 2023-24.

S&P 500 (US500) 4,585.59 +36.25 (+0.80%)

Dow Jones (US30) 36,117.38 +62.95 (+0.17%)

DAX (DE40)  16,628.99 −27.45 (−0.16%)

FTSE 100 (UK100) 7,513.72 −1.66 (−0.022%)

USD Index  103.64 −0.51 (−0.49%)

• – Japan GDP (q/q) at 01:50 (GMT+2);
• – German Final Consumer Price Index (m/m) at 09:00 (GMT+2);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• – US Unemployment Rate (m/m) at 15:30 (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.

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was down by 0.22%, while the S&P 500 Index (US500) decreased by 0.06%. The NASDAQ Technology Index (US100) closed positive 0.31% on Tuesday. A decline in bond yields on Tuesday supported technology stocks and the Nasdaq 100. Bond yields fell after the October JOLTS job openings report fell more than expected to a 2-year low, a sign that the labor market is cooling and dovish for Fed policy.

Economic news from the US on Tuesday was mixed. On the bullish side, the ISM Services Business Activity Index for November rose by 0.9 to 52.7, beating expectations of 52.3. In contrast, the October JOLTS Job Openings Index fell by 617,000 to a 2-year low of 8.733 million, indicating a weaker labor market than expectations of 9.300 million.

Procter & Gamble (PG) fell more than 3% and topped the Dow Jones Industrials’ list of losers after it said it expects $2.0 billion to $2.5 billion in restructuring costs for its operations in some corporate markets due to “challenging macroeconomic and financial conditions.” Nvidia (NVDA) stock price rose more than 2% and led the Nasdaq 100 higher after the company said it plans to partner with Japanese research organizations, companies, and startups to build artificial intelligence factories in Japan.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.78%, France’s CAC 40 (FR40) gained 0.74% on Tuesday, Spain’s IBEX 35 (ES35) jumped by 0.59%, and the UK’s FTSE 100 (UK100) closed negative 0.31%. Economic news for European indices contributed to the gains. The S&P Eurozone Composite PMI for November was revised upward by 0.5 to 47.6 from the previously reported 47.1. The Eurozone Producer Price Index for October rose by 0.2% m/m to 9.4% y/y, matching expectations of 0.2% m/m and 9.5% y/y.

The ECB’s monthly inflation expectations survey showed that expectations for 1-year inflation in October were unchanged from September at 4.0%, above expectations of 3.8%. 3-year inflation expectations were 2.5%, unchanged from September and in line with expectations. ECB Executive Board spokesperson Schnabel said yesterday that another ECB interest rate hike is rather unlikely.

The build-up in US crude oil exports is putting pressure on oil prices. In addition, the rise in the dollar index to a one-week high on Tuesday was a negative factor for oil. In addition, Saudi Arabia’s actions to cut official oil selling prices for Asian buyers for January delivery is a negative factor for oil. Russian Deputy Prime Minister Novak said OPEC+ may take additional measures if last week’s production cuts fail to balance the oil market.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.37%, China’s FTSE China A50 (CHA50) lost 2.55% yesterday, Hong Kong’s Hang Seng (HK50) fell by 1.91% on the day, and Australia’s ASX 200 (AU200) was negative 0.89% on Tuesday.

China’s Shanghai Composite index fell to a 5-week low as Moody’s Investors Service cut its outlook on China’s sovereign debt from stable to negative, weighing on global growth prospects. According to the median forecast of 28 economists surveyed, China’s exports are expected to decline 1.1% in November from a year earlier, following a 6.4% drop in October and continuing a downward trend for the fourth consecutive month.

Australia’s real gross domestic product (GDP) rose by 0.2% in the July-September quarter from the previous quarter, marking the eighth consecutive quarter of growth, albeit the slowest in a year. Australia’s economy barely grew in the third quarter as exports contracted and households suffering from soaring mortgage payments were reluctant to spend, suggesting higher rates are curbing demand.

Ryozo Himino, deputy governor of the Bank of Japan (BoJ), said the central bank should determine the timing and appropriate structure of the exit from ultra-loose monetary policy while closely monitoring developments in wages and prices. He also noted that Japan is making progress in exiting the protracted period when wage and price growth remained stagnant.

S&P 500 (US500) 4,567.18 −2.60 (−0.06%)

Dow Jones (US30) 36,124.56 −79.88 (−0.22%)

DAX (DE40)  16,533.11 +128.35 (+0.78%)

FTSE 100 (UK100) 7,489.84 −23.12 (−0.31%)

USD Index  103.96 +0.25 (+0.24%)

• – Australia GDP (q/q) at 02:30 (GMT+2);
• – UK Construction PMI (m/m) at 11:30 (GMT+2);
• – UK FPC Meeting Minutes at 12:30 (GMT+2);
• – UK BoE Financial Stability Report at 12:30 (GMT+2);
• – UK BoE Gov Bailey Speaks at 13:00 (GMT+2);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
• – US Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada Trade Balance (m/m) at 15:30 (GMT+2);
• – Canada BoC Interest Rate Decision at 17:00 (GMT+2);
• – Canada BoC Rate Statement at 17:00 (GMT+2);
• – Canada Ivey PMI (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (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.

By George Prior 

The European Central Bank is likely to cut interest rates next year, which could have far-reaching consequences for investors worldwide, predicts the CEO of one of the world’s largest independent financial advisory asset management and fintech organizations.

Nigel Green of deVere Group’s comments come as ECB Board member, Isabel Schnabel, who has previously been one of the most hawkish of the Board, told Reuters on Tuesday that given a “remarkable” fall in inflation, the central bank can now take rate hikes off the table.

Euro zone inflation fell to 2.4% last month, down from above 10% a year earlier.

He comments: “When the hawks turn dovish, and as inflation falls to within touching distance, it is reasonable to assume that the ECB will start to cut rates.

“We now expect this to begin in the first quarter of 2024.”

If the ECB decides to cut interest rates, European investors are likely to experience both challenges and opportunities.

“On the one hand, lower interest rates can boost economic growth, leading to increased corporate profits and potentially higher stock prices.

“However, on the downside, savers and bond investors could face diminished returns. The repercussions of ECB interest rate cuts extend beyond Europe, influencing global bond markets.

“As the ECB lowers rates, it can be expected to trigger a broader trend of falling yields in bond markets worldwide.

“Fixed-income investors across the globe, seeking higher returns, may shift their attention to riskier assets.”

Another channel through which the ECB’s policy decisions affect global investors is currency markets. A rate cut by the ECB is likely to lead to a depreciation of the euro against other major currencies.

This can impact international investors holding euro-denominated assets, either positively or negatively, depending on their exposure and hedging strategies. For instance, European exporters may benefit from a weaker euro as it makes their goods more competitive in global markets.

Equity markets around the world are, of course, closely interconnected, and changes in one major economy can have ripple effects globally.

“A rate cut by the ECB could be expected to inject liquidity into financial markets, leading to a surge in equity prices. International investors could find opportunities for capital appreciation, especially in sectors that are sensitive to interest rates, such as real estate and utilities.”

Nigel Green concludes: “We now expect that the ECB could be among the first of the major central banks to start cutting interest rates in the first quarter of 2024.

“Investors across the globe will be closely monitoring developments and potentially adjusting their strategies to adapt to the evolving economic landscape.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

As of Friday’s stock market close, the Dow Jones Index (US30) decreased by 0.11%, and the S&P 500 Index (US500) was down by 0.54%. The NASDAQ Technology Index (US100) closed negative 0.84% on Monday, hitting a 3-week low. Yesterday’s rise in bond yields pressured technology stocks and lowered the broad market. Bond yields are rising on concerns that markets may be overly optimistic about the Fed’s chances of cutting interest rates by the second quarter of 2024. Markets forecast a 68% probability of a 25 bps rate cut at the March 19-20, 2024, FOMC meeting and a fully discounted (137% probability) probability of a 25 bps rate cut at the April 30-May 1, 2024, FOMC meeting.

This week, markets await JOLTS openings, ADP national employment, and US monthly payrolls reports to gauge the strength of the US labor market and whether additional monetary tightening is appropriate. US factory orders in October fell by 3.6% m/m, weaker than expectations of 3.0% m/m and the biggest decline in 3 years. This indicates weak demand for industrial metals, which put additional pressure on silver.

Nvidia (NVDA) shares fell more than 3% yesterday on signs of insider selling after Washington Service data showed that Nvidia executives sold $180 million worth of stock last month.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) rose by 0.04%, France’s CAC 40 (FR40) fell by 0.18% on Monday, Spain’s IBEX 35 (ES35) jumped by 0.37%, and the UK’s FTSE 100 (UK100) closed negative 0.22%.

ECB Governing Council representative Centeno warned yesterday that the labor market implications of excessive monetary tightening could be swift when the economy turns around. His counterpart, ECB Vice President Guindos, indicated that the ECB cannot yet say that inflation is under control as the ECB sees large wage growth in some parts of the Eurozone, which could lead to additional price pressures. Eurozone Investor Confidence Index for December from Sentix rose by 1.8 to minus 16.8, which was weaker than expectations of minus 15.6. German trade balance data was weaker than expected, with October exports unexpectedly falling by 0.2% m/m, which was weaker than expectations of 1.1% m/m. Imports also fell by 1.2% m/m, weaker than expectations of 0.8% m/m.

Swaps tied to ECB meeting dates estimate a 73% probability that the ECB will cut the benchmark rate by 25 bps at the March 7 meeting and more than estimated (+150%) that rate cut by 25 bps at the April 11 ECB meeting.

The dollar index rally to 1-week highs on Monday was bearish for energy prices. Crude oil was also pressured by the negative impact of last Thursday’s events, when OPEC+ said it would cut oil production levels by 1.0 mln bpd, but did not provide details on how the cut would be implemented. Oil prices were supported by concerns that attacks on oil tankers in the Middle East could disrupt crude supplies. The US Central Command said there were four missile and drone attacks on three separate commercial vessels operating in international waters in the Red Sea on Sunday. Iranian-backed Houthis rebels claimed responsibility for the attacks.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.60%, China’s FTSE China A50 (CHA50) was down by 0.70% yesterday, Hong Kong’s Hang Seng (HK50) lost 1.09% on the day, and Australia’s ASX 200 (AU200) was positive 0.73% on Monday.

Australia’s Central Bank left interest rates unchanged at 4.35% on Tuesday as expected, giving itself more time to assess the economy and decide whether to tighten further next year. RBA chief Bullock maintained the same policy tightening bias, saying the need for further rate hikes will depend on data and a changing risk assessment. Markets expect an early rate cut by the US Federal Reserve and the European Central Bank in 2024, with a drop of more than 100 basis points, while the RBA may just cut the rate by 15 basis points late next year. That would stabilize the Australian currency against the dollar and euro next year.

Core inflation in Japan’s capital slowed in November, confirming the central bank’s view that cost pressures in the world’s third-largest economy will gradually ease. The core consumer price index (CPI), which excludes food prices but includes fuel costs, came in at 2.3% y/y in Tokyo, down from 2.7% y/y in October. Bank of Japan Governor Kazuo Ueda emphasized the need to maintain ultra-loose policy until inflation driven by recent cost increases is replaced by demand-driven price increases backed by strong wage increases. Revised real gross domestic product (GDP) data on Friday is expected to show that Asia’s second-largest economy contracted by 2.0% in the third quarter, which would be negative for the Japanese currency.

S&P 500 (US500) 4,569.78 −24.85 (−0.54%)

Dow Jones (US30) 36,204.44 −41.06 (−0.11%)

DAX (DE40)  16,404.76 +7.24 (+0.044%)

FTSE 100 (UK100) 7,512.96 −16.39 (−0.22%)

USD Index  103.63 +0.36 (+0.35%)

• – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
• – China Caixin Services PMI (m/m) at 04:45 (GMT+2);
• – Australia RBA Interest Rate Decision at 05:30 (GMT+2);
• – Australia RBA Rate Statement at 05:30 (GMT+2);
• – German Services PMI (m/m) at 10:55 (GMT+2);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – Eurozone Producer Price Index (m/m) at 11:00 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – US ISM Services PMI (m/m) at 17:00 (GMT+2);
• – US JOLTS Job Openings (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.

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) was up by 0.82% (+2.46% for the week), while the S&P 500 Index (US500) was up by 0.59% (+0.87% for the week). The NASDAQ Technology Index (US100) closed positively by 0.55% (+0.46% for the week) on Friday. Stocks were boosted by the latest economic data, as well as dovish comments from US Fed chief Jerome Powell.

The ISM Manufacturing Index for November was unchanged at 46.7, which was weaker than expectations of a rise to 47.8 and was the 13th consecutive month of contraction in manufacturing activity. Dovish comments from the Fed on Friday put pressure on the dollar. Fed Chair Powell signaled that the Fed will leave interest rates unchanged at the December 12-13 FOMC meeting.

Canada added 24,900 jobs in November, 15,000 more than analysts had forecast, with the unemployment rate rising to 5.8% from 5.7%. Bank of Canada Governor Tiff Macklem said in a recent speech that “interest rates can now be quite restrictive” as excess demand has disappeared and weak growth is expected to persist, leading most to conclude that the central bank has peaked on rates this cycle and the BoC is expected to leave rates unchanged this Wednesday. That said, polls suggest the Bank of Canada will start cutting interest rates in the second quarter of next year as inflation slows and the economy grows. Economists believe the underlying cost of borrowing will fall by at least one percentage point by the end of 2024.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 1.12% (+2.44% for the week), France’s CAC 40 (FR40) gained 0.48% (+0.73% for the week), Spain’s IBEX 35 (ES35) jumped by 0.82% (+2.15% for the week), and the UK’s FTSE 100 (UK100) closed positively by 1.01% (+0.55% for the week).

The European Central Bank (ECB) should not cause “unnecessary damage” to the economy and financial stability by keeping interest rates high, new Bank of Italy Governor Fabio Panetta said on Thursday. Panetta, a spokesman for the ECB’s governing council, added that the round of monetary tightening, which saw a streak of 10 consecutive rate hikes through September, has yet to have its full impact and will continue to dampen demand going forward. In his first major speech since taking the helm of Italy’s central bank, Panetta warned that the eurozone economy would remain weak in the final three months of this year and that risks to the economy were tilted to the downside. Market swaps tied to ECB meeting dates estimate an 81% probability that the ECB will cut the benchmark rate by 25 bps at its March 7 meeting and more than estimated (+183%) the probability of a 25 bps rate cut at the ECB’s April 11 meeting.

On Friday, crude oil prices were pressured by Thursday’s negative impact when OPEC+ said it would cut oil production levels by 1.0 million bpd, but did not provide details on how the cut would be implemented. The market is disappointed that additional OPEC oil production cuts will be announced by each country individually, suggesting that the cuts can only be voluntary. The rift between Angola and other OPEC+ members persists and is bearish, signaling increasing infighting between members of the organization.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) was down by 0.83% for the week, China’s FTSE China A50 (CHA50) decreased by 2.53% for the 5 trading days, Hong Kong’s Hang Seng (HK50) lost 4.79% for the week, and Australia’s ASX 200 (AU200) was positive 0.46% for the week.

An interest rate survey conducted from November 29 to December 1 showed that 28 out of 30 economists, including representatives from Australia’s four largest banks, expect the Central Bank of Australia (RBA) to leave the official money rate unchanged on December 5.

Bank Indonesia (BI) will keep the benchmark rate at the current level until 2024 unless there are any major changes in global dynamics, Bank Governor Perry Warjiyo said on Wednesday, signaling the central bank has completed its rate hike cycle. Warjiyo said the benchmark 7-day rate at 6% should be enough to keep domestic inflation within the target range of 1.5% to 3.5% in 2024 and 2025. The bank’s inflation target range for this year is between 2% and 4%. BI has raised interest rates by a total of 250 basis points between August 2022 and October, with the latest rate hike in response to a sharp fall in the rupee amid capital outflows associated with US monetary tightening.

S&P 500 (US500) 4,594.63 +26.83 (+0.59%)

Dow Jones (US30) 36,245.50 +294.61 (+0.82%)

DAX (DE40) 16,397.52 +182.09 (+1.12%)

FTSE 100(UK100) 7,529.35 +75.60 (+1.01%)

USD Index 103.19 −0.30 (−0.29%)

• – German Trade Balance (m/m) at 09:00 (GMT+2);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 16:00 (GMT+2);
• – US Factory Orders (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.