InvestMacro

The Dow Jones Industrial Average (US30) was down 0.53% on Thursday. The S&P 500 Index (US500) decreased by 0.54%. The Nasdaq Technology Index (US100) fell by 0.68%. The losses came amid signs of stagflation after US weekly jobless claims unexpectedly rose to an 8-week high, and November Producer Prices rose faster than expected, the fastest pace in nearly 2 years.

US weekly jobless claims unexpectedly rose by 17,000 to an 8-week high of 242,000, indicating a weaker labor market than expected down to 220,000. The US final Consumption Goods and Services Price Index for November rose by 3.0% y/y, exceeding expectations of 2.6% y/y and the largest increase in over a year. In addition, the November Price Index, excluding food and energy, was unchanged from October at 3.4% y/y, exceeding expectations of 3.2% y/y. Markets estimate the odds of a 25 bps rate cut at the December 17–18 FOMC meeting at 95%.

Adobe (ADBE) fell more than 13%, topping the list of losers in the S&P 500 and Nasdaq 100, after estimating 2025 revenue of $23.30-$23.55 bln, weaker than the consensus projections of $23.78 bln.

Equity markets in Europe were mostly flat yesterday. Germany’s DAX (DE40) rose by 0.13%, France’s CAC 40 (FR40) closed down 0.03%, Spain’s IBEX 35 (ES35) fell by 0.21%, and the UK’s FTSE 100 (UK100) closed up 0.12%. The ECB, as expected, cut the deposit rate by 25 bps to 3.00% from 3.25% and abandoned previous language that monetary policy will remain “sufficiently restrictive for as long as necessary.” The ECB lowered its 2024 eurozone GDP estimate to 0.7% from a previous projection of 0.8% and its 2024 Eurozone inflation prognosis to 2.4% from a previous one of 2.5%. ECB President Lagarde said the latest information indicates that the eurozone economy is losing momentum and will strengthen more slowly than expected.

The Swiss National Bank (SNB) cut its key rate by 50bps to 0.5% in December 2024, beating market expectations for a smaller 25bps cut. This is the fourth consecutive rate cut and the sharpest since January 2015, bringing borrowing costs to the lowest since November 2022. The decision came amid a decline in inflation from 1.1% in August to 0.7% in November. Inflation is projected to average 1.1% in 2024, 0.3% in 2025, and 0.8% in 2026, staying within the SNB’s target range. Swiss GDP growth is expected to be around 1% this year, rising slightly to 1–1.5% in 2025, supported by recent rate cuts.

Oil prices are targeting their first weekly rise in three weeks, helped by the prospect of tighter sanctions and hopes for improved Chinese demand following Beijing’s pledge to ease monetary policy next year. OPEC also cut its 2024 demand growth prognosis again, the fifth consecutive month of lower demand growth.

The US natural gas prices (XNG/USD) climbed above $3.4/MMBtu to the highest level in more than two weeks, driven by larger-than-expected withdrawals from storage reported by the EIA. For the week ending December 6, US utilities withdrew 190 billion cubic feet of gas from storage, well above the 170 billion cubic feet prognosis. This withdrawal was well above last year’s 72 Bcf and the five-year average of 71 Bcf for the same period.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell by 1.09%, China’s FTSE China A50 (CHA50) rose by 1.38%, Hong Kong’s Hang Seng (HK50) gained 1.28%, and Australia’s ASX 200 (AU200) was negative 1.37%.

The New Zealand dollar fell as low as 0.575 USD on Friday, ending at its weakest level in two years under pressure from a strong US dollar. The US dollar strengthened after US Producer Inflation rose more than expected, pushing Treasury yields higher. Domestically, expectations of a significant rate cut by the Reserve Bank of New Zealand have further weighed on the local currency. Markets currently see a 66% chance of a 50bp rate cut at the central bank’s February meeting, with the rate prognosis to fall to 3.10% by the end of 2025.

At the end of Wednesday, the Dow Jones Index (US30) fell by 0.22%. The S&P 500 Index (US500) is up 0.82%. The Nasdaq Technology Index (US100) jumped 1.85% to an all-time high. The US stocks extended early gains, reversing earlier session declines this week as inflation data offered no surprises and bolstered bets that the US Federal Reserve will cut rates next week. Markets rate the odds of a 25bp rate cut at the December 17–18 FOMC meeting at 95%. The US Consumer Price Index for November rose by 0.3% m/m and 2.7% y/y, which aligns with expectations. In addition, the Consumer Price Index, excluding food and energy, rose by 0.3% m/m and 3.3% y/y, which aligns with expectations.

Technology stocks led the gains, helped by low bond yields and bets that the incoming Trump administration may reduce sector regulation. Tesla (TSLA) jumped 3.6%, up nearly 70% since the November election, while Meta (META) added 5.3%, Nvidia (NVDA) jumped 2.6%, and Broadcom (AVGO) gained 5%.

At its December meeting, the Bank of Canada (BoC) cut its key interest rate by 50 bps for the second consecutive time, as expected by the markets. This brought the cumulative rate cut to 175 bps from this cycle’s peak of 5%. Nevertheless, the rhetoric of Central Bank policymakers suggests that there will be no more aggressive rate cuts next year, and officials have backtracked on the statement that borrowing costs will be reduced if the base case scenario continues. The sharp interest rate cut followed data that Canada’s GDP grew at a 1% annualized rate in the third quarter, below the Central Bank’s projections, and fourth-quarter growth risks also falling short of estimates.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.34%, France’s CAC 40 (FR40) closed higher by 0.39%, Spain’s IBEX 35 (ES35) fell by 1.47%, and the UK’s FTSE 100 (UK100) closed up 0.26%.

The Swiss National Bank (SNB) is expected to meet today. Most economists expect a 25bps rate cut, but some economists expect a 0.5% rate cut. This is even though the current rate is at 1%. The Swiss franc has declined slightly over the past few months, but mainly because markets expect a significant rate cut towards the lower boundary of zero. A 0.25% rate cut is already factored into the price, so it will only add volatility to currency pairs with the CHF. But if the SNB surprises and goes for a 0.5% rate cut, the franc could come under selling pressure.

WTI crude oil prices jumped 2.5% to $70.29 a barrel on Wednesday, driven by the European Union’s approval of a new package of sanctions targeting Russian oil flows, adding to supply concerns. However, gains were tempered as the US EIA reported a larger-than-expected increase in gasoline and distillate inventories, signaling weak domestic fuel demand. Adding to market uncertainty, OPEC cut its estimates for global oil demand growth in 2024 and 2025 for the fifth consecutive month, citing weak demand in China and rising non-OPEC+ supply. OPEC+ had earlier postponed plans to increase production, reflecting cautious market dynamics.

The US natural gas prices (XNGUSD) climbed above $3.25/MMBtu, the highest in more than a week, mainly due to projections of colder weather and increased heating demand. In addition, export liquefied natural gas (LNG) plants are receiving more natural gas, averaging 14.0 Bcf/d in December compared to 13.6 in November.

Asian markets were relatively flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.01%, China’s FTSE China A50 (CHA50) gained 0.44%, Hong Kong’s Hang Seng (HK50) fell by 0.77%, and Australia’s ASX 200 (AU200) was negative 0.47%.

Australia’s seasonally adjusted unemployment rate fell to 3.9% in November 2024 from 4.1% in the previous three months, defying market estimates of 4.2%. It was the lowest unemployment rate since March as the number of jobless fell by 27,000 to an 8-month low. Market sentiment shifted sharply after the data release, as the implied probability of a February rate cut fell to around 50% from 68% before publication.

The Dow Jones (US30) was down 0.35% on Tuesday. The S&P 500 Index (US500) closed negative 0.30%. The Nasdaq Technology Index (US100) fell by 0.34%. Investors were cautious ahead of Wednesday’s expected consumer inflation report, which could significantly impact Federal Reserve policy. Despite the market decline, the indices remain near record highs, driven by optimism that the inflation data could reinforce expectations of a soft landing and pave the way for a Fed rate cut in December. The Consumer Price Index is expected to rise slightly to 2.7% y/y in November from 2.6% y/y in October. Meanwhile, the Core CPI (excluding food and energy) is expected to be unchanged from October at 3.3% y/y in November.

Oracle (ORCL) is down more than 6% after reporting adjusted second-quarter revenue of $14.06 billion, below the consensus estimate of $14.12 billion. EBay (EBAY) shares are down more than 2% after Jefferies downgraded the stock to “unweighted” from “hold” with a $52 price target. Alphabet (GOOG) is up more than 5% and led the Nasdaq 100 stocks higher after it disclosed a breakthrough in quantum computing with its new Willow quantum chip.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 0.08%, France’s CAC 40 (FR40) closed down 1.14%, Spain’s IBEX 35 (ES35) dropped 0.38%, and the UK’s FTSE 100 (UK100) closed down 0.86%. Investor sentiment was dampened by disappointing trade data from China, which partially offset optimism from China’s announcement of fiscal and monetary policy easing for next year. Traders also refrained from making big bets ahead of tomorrow’s release of the US Consumer Price Index and Thursday’s ECB monetary policy decision.

German annual inflation rose to 2.2% in November 2024 from 2% in October, which is in line with preliminary estimates and the highest in four months. Core inflation, which excludes volatile food and energy prices, hit a six-month high of 3% in November. Norway’s annualized consumer inflation rate fell to 2.4% in November 2024 from 2.6% in the previous month. Meanwhile, the tax-adjusted Consumer Price Index excluding energy (CPI-ATE) rose to 3% year-over-year in November after rising 2.7% in October.

Silver prices (XAG/USD) traded near $32 an ounce on Tuesday, remaining near one-month highs as Chinese policymakers unveiled plans for additional economic stimulus, boosting demand prospects in the world’s top metals consumer. Like other precious metals, Silver also benefited from rising expectations that the US Federal Reserve will cut interest rates again this month.

WTI crude oil prices rose to around $69 a barrel on Wednesday, rising for the third consecutive session amid an improved demand outlook. This came after China announced plans to implement a sufficiently loose monetary policy next year to revitalize its economy, which could boost energy demand from the world’s largest oil importer. In support of that projection, China’s crude oil imports rose in November for the first time in seven months, rising more than 14% year-on-year.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.53%, China’s FTSE China A50 (CHA50) gained 1.04%, Hong Kong’s Hang Seng (HK50) fell by 0.50%, and Australia’s ASX 200 (AU200) was negative 0.36%. In Asia, market attention turned to China’s annual Central Economic Work Conference, which began today. This closed-door meeting, which usually lasts two to three days, is an opportunity for China’s top leaders to assess the state of the economy and set priorities for the coming year.

The Reserve Bank of New Zealand (RBNZ) has already cut the official money rate by 125 bps this year to 4.25%. Markets are now pricing in a 59% chance of another 50bp rate cut at the Central Bank’s next meeting in February, further weighing on the local currency.

At the end of Friday, the Dow Jones (US30) was down 0.28% (for the week -0.63%). The S&P 500 Index (US500) was up 0.25% (for the week +0.83%). The Nasdaq Technology Index (US100) added 0.92% (up +3.10% for the week). The S&P 500 and Nasdaq indices set new record highs on Friday, helped by a stronger-than-expected November employment report reinforcing optimism for a Federal Reserve rate cut this month. Nonfarm Payroll Employment rose by 227,000, exceeding the estimate of 214,000, recovering from the bad weather and strikes seen in October. Following the report, traders raised the probability of a December rate cut to 90% from 70%. The rally was led by major technology stocks, with Amazon (+2.9%), Tesla (+5.3%), and Meta (+2.5%) all rising, reflecting confidence in the labor market and potential Fed policy changes.

The Canadian dollar weakened to 1.41 per dollar in December, the lowest level since April 2020, as investors embraced softer-than-expected labor market data. Canada’s unemployment rate rose to 6.8% in November from 6.5%, beating projections of 6.6% and marking the highest level since September 2021. This is in line with the Bank of Canada’s concerns about a weakening labor market and increased expectations of a 50 bps rate cut this week. In addition, tariff threats by US President-elect Donald Trump, including tariff hikes of 25% for Canada and Mexico and 10% for China, dampened sentiment given Canada’s reliance on US energy and auto demand.

Equity markets in Europe traded flat on Friday. Germany’s DAX (DE40) rose by 0.13% (for the week +4.08%), France’s CAC 40 (FR40) closed 1.31% higher (for the week +3.91%), Spain’s IBEX 35 (ES35) fell by 0.39% (for the week +4.27%), and the UK’s FTSE 100 (UK100) closed down 0.49% (for the week +0.26%). Economists seem to have missed the political situation in France, where President Macron has promised to appoint a new Prime Minister in the coming days and form a new “government of common interests.” In Germany, despite economic woes and political problems at home, the benchmark DAX Index (DE40) has shown surprising resilience, achieving roughly a 20% gain over the past year. This strength is due to globally oriented companies benefiting from international revenue streams and a weakening euro, which improves export competitiveness.

The Eurozone economy grew by 0.4% in Q3, the strongest pace in two years, following 0.2% growth in Q2 and in line with previous estimates. Among the largest economies, Germany’s GDP grew by 0.1%, down from 0.2% in the preliminary estimate but avoided recession. In addition, France’s GDP grew by 0.4%, and the Spanish economy remained resilient (+0.8%). On the other hand, the Italian economy stalled, and the Dutch economy slowed down (+0.8%).

According to banks and industry consultants, OPEC+’s decision to postpone the resumption of supply until April will reduce global oil production next year, which will tighten the balance somewhat, but a glut is still expected. Nevertheless, rising supply, especially from non-OPEC+ countries in the Americas, and weak demand from China remain major concerns. Morgan Stanley raised its estimates for Brent crude oil prices for the third and fourth quarters of 2025 to $70 a barrel from $68 and $66, respectively. ING Groep NV raised its prognosis for Brent to $71 a barrel from $69.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 2.29%, China’s FTSE China A50 (CHA50) gained 1.13%, Hong Kong’s Hang Seng (HK50) added 2.18%, and Australia’s ASX 200 (AU200) was negative 0.18%.

China’s annual inflation rate unexpectedly fell to 0.2% in November 2024 from 0.3% in the previous month, missing market estimates of 0.5% and the lowest since June. The slowdown showed the country’s growing deflation risks despite recent government stimulus measures and the Central Bank’s supportive stance on monetary policy. Inflation remains subdued, which will require continued stimulus.