InvestMacro

The Dow Jones (US30) fell by 0.17% on Tuesday. The S&P 500 Index (US500) was up 0.05%. The Nasdaq Technology Index (US100) was up 0.31%. Data released on Tuesday showed a modest increase in US job openings for October, while layoffs declined, indicating workers’ confidence in the labor market. US October JOLTS job openings rose 372,000 to 7.744 million, showing a stronger labor market than expectations of 7.519 million. Traders are now focused on Wednesday’s ADP private sector jobs report and Friday’s Non-Farm Payrolls data to gain further insight into labor market trends. Federal Reserve Chairman Jerome Powell is also scheduled to speak in New York on Wednesday afternoon. Markets are currently pricing in a roughly 75% chance that the Fed will cut rates by 25 basis points in December.

Equity markets in Europe rallied on Tuesday. Germany’s DAX (DE40) rose by 0.42%, France’s CAC 40 (FR40) closed higher by 0.26%, Spain’s IBEX 35 (ES35) added 1.18%, and the UK’s FTSE 100 (UK100) closed up 0.56%. France’s political crisis is intensifying. Marine Le Pen’s National Rally party is expected to join forces with a left-wing coalition in a no-confidence vote on Wednesday to topple Prime Minister Barnier’s administration. Swaps discount the odds of a 25bp ECB rate cut at the Dec. 12 meeting to 100% and a 50bp rate cut at the same meeting to 14%.

WTI crude oil prices held near $70 per barrel on Wednesday after rising 2.7% in the previous session, helped by signals that OPEC+ will further delay production recovery, as well as new US sanctions on Iranian oil. The producer group is reportedly close to an agreement to delay the plan to increase production for another three months, with a final decision expected at Thursday’s meeting, easing market fears of oversupply. Meanwhile, the US has imposed sanctions on 35 companies and ships it believes are involved in the transportation of Iranian crude.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 1.91%, China’s FTSE China A50 (CHA50) gained 1.29%, Hong Kong’s Hang Seng (HK50) added 1.00%, and Australia’s ASX 200 (AU200) gained 0.56%. On Wednesday, Chinese stocks failed to build on recent gains as caution prevailed in the region following political turmoil in South Korea. Adding further uncertainty was the fact that China’s Politburo opted not to release a report on its regular November meeting, which sparked speculation that additional stimulus measures may be forthcoming.

The Bank of Korea announced today that it will temporarily take measures to boost short-term liquidity in response to market volatility caused by the country’s brief declaration of martial law. The Central Bank said in a statement that it has begun purchasing additional repurchase agreements from more financial institutions to boost market liquidity. The move is in line with Finance Minister Choi Sang-mok’s earlier pledge to provide unlimited liquidity support if needed following President Yoon Suk Yeol’s surprise declaration of martial law on Tuesday night.

The Australian dollar fell below $0.645 on Wednesday, hitting its lowest level in four months, as weak GDP data reinforced expectations of an imminent interest rate cut by the Reserve Bank of Australia. The data showed Australia’s economy grew just 0.3% in the three months through September in quarterly terms, missing market expectations of 0.4%. On an annualized basis, the economy grew by 0.8%, well below the projected 1.1%, a growth rate typically seen during recessions. Despite the disappointing data, the RBA is expected to leave rates unchanged at its December meeting, citing persistent inflation.

On Monday, the Dow Jones (US30) fell by 0.29%. The S&P 500 Index (US500) gained 0.24%. The Nasdaq Technology Index (US100) added 1.12%. Better-than-expected US economic news on the ISM Manufacturing Index for November and construction spending for October bolstered the outlook for a soft landing and boosted stocks. The US Manufacturing PMI for November rose 1.9 to a 5-month high of 48.4, beating expectations of 47.5. US construction spending for October rose 0.4% mom, stronger than expectations of 0.2% mom.

Tesla (TSLA) shares are up more than 4% after Roth Capital Partners upgraded the stock to “buy” from “neutral.” Shares of Cloudflare (NET) are up more than 5% after Morgan Stanley upgraded the stock to overweight from equal weight with a $130 price target.

Equity markets in Europe rallied on Monday. Germany’s DAX (DE40) rose by 1.57%, France’s CAC 40 (FR40) closed higher by 0.02%, Spain’s IBEX 35 (ES35) gained 0.81%, and the UK’s FTSE 100 (UK100) closed up 0.31%. The S&P German Manufacturing PMI for November from S&P was revised down 0.2 to 43.0 from the previously reported 43.2. ECB Governing Council spokesman Kazaks said that the ECB is likely to cut interest rates at next week’s meeting and that a larger move is currently under discussion. Swaps are discounting the chances at 100% for a 25 bp rate cut by the ECB at its December 12 policy meeting and at 18% for a 50 bp rate cut at the same meeting.

Political unrest in France has heightened concerns about Eurozone stability. France’s far-right party threatened to topple the fragile government of Prime Minister Michel Barnier in a no-confidence vote, escalating the standoff over the national budget.

WTI crude prices stabilized near $68 a barrel on Tuesday as traders await Thursday’s OPEC+ meeting for further guidance on global supply. The group is expected to postpone a small production increase for the third time amid concerns that the market will be oversupplied next year. At the same time, Saudi Arabia, the world’s biggest exporter, is expected to cut crude prices for Asian buyers to the lowest level in four years.

Asian markets were mostly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 0.80%, China’s FTSE China A50 (CHA50) gained 1.36%, Hong Kong’s Hang Seng (HK50) rose 0.65%, and Australia’s ASX 200 (AU200) gained 0.14%. Hong Kong stocks fell by 0.6% to 19,437 in Tuesday morning session, reversing gains in the previous two sessions after the US imposed restrictions on the sale of 24 types of manufacturing equipment and three software tools, and blacklisted another 140 Chinese entities. In response, Beijing said on Monday that Washington was abusing export controls and exerting unilateral pressure, adding that it would take necessary actions to protect its interests.

The offshore yuan fell to 7.31 per dollar, hitting a one-year low, as the dollar strengthened on expectations of strong US economic performance and weak Chinese growth. The dollar gained further support after Trump warned of potential 100% tariffs on BRICS countries that support an alternative to the US dollar. Meanwhile, persistent tariff risks and weakness in the Chinese economy put additional pressure on the yuan. On Monday, the PBOC chief signaled rate cuts later in the year and plans to strengthen countercyclical measures next year.

On Tuesday, the New Zealand dollar continued its recent decline to US$0.587. It was pressured by continued weakness in the yuan, which has been weakened by threats of US tariffs and ongoing economic uncertainty in China. The NZD is often seen as a liquid proxy for the yuan due to China’s significant role as New Zealand’s largest trading partner.

The Dow Jones Index (US30) was up 0.42% on Friday (+2.37% for the week). The S&P 500 Index (US500) added 0.56% (for the week +1.48%). The Nasdaq Technology Index (US100) increased by 0.90% (for the week +0.93%). Stocks rose moderately on Friday, with the S&P 500 and Dow Jones Industrials hitting new all-time highs. The gains were driven by lower inflation expectations in the US.

Airbnb (ABNB) shares closed down more than 1% on signs of insider selling after CEO Chesky sold more than $15 million worth of stock on Monday. Boeing (BA) closed up nearly 2% after BOA Aviation agreed to buy 14 Boeing 737-8 airplanes.

On Saturday, US President-elect Donald Trump threatened a bloc of nine countries with 100% tariffs if they acted to the detriment of the US dollar. His threat was aimed at countries in the so-called BRICS alliance, which includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. Turkey, Azerbaijan, and Malaysia have applied to join, and several other countries have expressed interest in joining. According to the IMF, the dollar accounts for about 58% of the world’s foreign exchange reserves, and basic commodities such as oil are still bought and sold mostly in dollars. But the dollar’s dominance is threatened by the BRICS countries’ growing share of GDP and the alliance’s intention to trade in non-dollar currencies, a process known as de-dollarization.

Canada’s third-quarter GDP grew at a 1% annualized rate after an upwardly revised 2.2% in the second quarter, which was in line with market expectations but short of the Central Bank’s estimate of 1.5%. Nevertheless, the Bank of Canada is expected to cut rates further next month, although the likelihood of a 50bp cut was reduced after core inflation rose to 2.6% in October from 2.4% in September. The Canadian dollar fell above 1.4 per US dollar after the report.

Equity markets in Europe rallied on Friday. Germany’s DAX (DE40) rose by 1.03% (for the week +0.84%), France’s CAC 40 (FR40) closed higher by 0.78% (for the week -1.29%), Spain’s IBEX 35 (ES35) gained 0.26% (for the week -0.73%), and the UK’s FTSE 100 (UK100) closed up 0.07% (for the week +0.31%). Eurozone CPI came in at 2.3% y/y in November, matching expectations. Core CPI (excluding food and energy prices) for November came in at 2.7% yoy, weaker than expectations of 2.8% yoy. ECB expectations for 1-year inflation unexpectedly rose to 2.5% in October from 2.4% in September, stronger than expectations for a decline to 2.3% y/y. Expectations for 3-year inflation for October were unchanged from September at 2.1%, in line with expectations. German retail sales for October fell by 1.5% m/m, weaker than expectations of 0.5% m/m and the largest decline in 2 years. German unemployment rose by 7,000 in November, indicating a stronger labor market than expectations of 20,000. The unemployment rate in November was unchanged at 6.1%, matching expectations.

ECB Governing Council spokesman Stournaras said the ECB is likely to pursue a more aggressive interest rate cut policy if evidence emerges that US tariffs will lead Europe into recession.

In Switzerland, markets currently give a 72% probability of a 25 basis point rate cut and a 28% probability of a 50 basis point rate cut at the SNB’s next monetary policy meeting on December 12. The rate cut comes amid slowing inflation, which has been within the SNB’s 0–2% target range for almost 18 months. Switzerland’s annual inflation rate fell to 0.6% in October, the lowest level in more than three years.

Oil prices fell about 3% last week amid easing concerns over supply risks from the Israel-Hezbollah conflict and the prospect of more supply in 2025, even as OPEC+ is expected to extend production cuts.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) fell by 1.22%, China’s FTSE China A50 (CHA50) rose by 1.02%, Hong Kong’s Hang Seng (HK50) gained 0.60%, and Australia’s ASX 200 (AU200) posted a positive 0.51%.

Indonesia’s annual inflation rate fell to 1.55% in November 2024 from 1.71% in the previous month, the lowest since July 2021, but slightly above market projections of 1.5%. The latest result remains within the Central Bank’s target range of 1.5% to 3.5%. The core inflation rate hit a 16-month high of 2.26%, above estimates of 2.20%.