InvestMacro

The Dow Jones Industrial Average (US30) was down 0.55% at Thursday’s close, the S&P500 Index (US500) decreased by 0.19%, and the Nasdaq Technology Index (US100) fell by 0.31%. Liquidation of long positions and profit-taking before Friday’s release of the monthly payroll report negatively impacted stocks. In addition, hawkish comments from San Francisco Fed President Daly on Wednesday evening weighed on stocks when she stated that the Fed has “no sense of urgency” to cut interest rates.

Economic news out of the US on Thursday was mixed for stocks. Weekly initial jobless claims rose by 9,000 to a 6-week high of 224,000, indicating a weaker labor market than expected at 215,000. The US trade deficit for October narrowed to $73.8 billion from $83.8 billion in September, better than expectations of $75.0 billion and a positive for Q4 GDP.

Equity markets in Europe rallied on Wednesday. Germany’s DAX (DE40) rose by 0.63%, France’s CAC 40 (FR40) closed higher by 0.37%, Spain’s IBEX 35 (ES35) added 1.57%, and the UK’s FTSE 100 (UK100) closed 0.16% yesterday. Eurozone retail sales for October fell by 0.5% m/m, weaker than expectations of 0.3% m/m and the biggest decline in 4 months. S&P’s German Construction PMI for November fell 2.2 to 38.0, the steepest decline in 7 months. German factory orders for October fell by 1.5% m/m, which was a smaller decline than expectations of 2.0% m/m. In France, markets remained stable despite political turmoil.

The World Gold Council reported that China, a major gold consumer, saw a decline in physical demand in 2024 while investment remained strong. The council also forecast that both sectors could stabilize, with demand for gold jewelry likely to increase and gold investment likely to slow in 2025.

WTI crude oil prices extended their recent decline to around $68 a barrel on Friday as OPEC+’s decision to postpone restoring halted production failed to lift market sentiment amid expectations of oversupply next year. On Thursday, the producer group postponed a supply increase for another three months, gradually increasing in April and gradually cutting output over 18 months at a slower pace than originally planned. Experts believe that oil will show moderate growth over the next week after a sharp drop in the previous week.

Asian markets traded without any dynamics. Japanese Nikkei 225 (JP225) rose by 0.30%, Chinese FTSE China A50 (CHA50) fell by 0.61%, Hong Kong Hang Seng (HK50) fell by 0.92%, and Australian ASX 200 (AU200) was positive 0.15% yesterday.

The offshore yuan held steady at 7.26 per dollar, supported by rising expectations of potential additional stimulus measures from the Chinese authorities during key policy meetings in mid-December, notably the Politburo meeting and the annual Central Economic Work Conference. Goldman Sachs and Morgan Stanley forecast a 40 bps cut in the Chinese central bank’s main discount rate in 2025, which would be the largest interest rate cut in a decade.

The Australian dollar fell as low as $0.643 on Friday, nearing four-month lows, as disappointing economic growth data fueled speculation that the Reserve Bank of Australia (RBA) may take a softer stance at next week’s monetary policy meeting.

The Reserve Bank of India (RBI) unexpectedly cut the cash reserve ratio (CRR) by 50 basis points to 4.0%, the first cut since April 2020. The RBI governor said the decision was in line with the central bank’s neutral policy, reflecting a balanced approach to liquidity management while ensuring economic stability. India’s GDP growth slowed to 5.4% year-on-year in September 2024 from 6.7% in the previous quarter, the weakest since December 2022. At the same time, annual inflation rose to 6.21% in October 2024, the highest in 14 months, and exceeded the central bank’s upper tolerance limit of 6% for the first time in a year.

Vietnam’s annual inflation rate fell to 2.77% in November 2024, down from 2.89% in the previous month. The decline was mainly due to softening inflation on food and catering services. Meanwhile, the annual core inflation rate, which excludes volatile goods, rose to a seven-month high of 2.77%, up from 2.68% in October.

At the end of Wednesday, the Dow Jones Index (US30) rose by 0.69%. The S&P 500 Index (US500) was up 0.61%. The Nasdaq Technology Index (US100) was up 1.24%. All three major US stock indices closed at record highs. Market sentiment was buoyed by strong momentum in the technology sector and encouraging earnings reports from major companies. In addition, traders closely followed the statements of Fed Chairman Powell. At the DealBook summit, Powell reiterated that the Central Bank is in no hurry to cut interest rates, emphasizing that the US economy remains resilient but continues to face inflationary pressures.

Bitcoin prices soared above the key $100,000 mark on Thursday, hitting new all-time highs, as Donald Trump’s imminent return to the White House sparked optimism for a more favorable regulatory environment for the digital assets industry. Trump’s selection of Paul Atkins to replace outgoing SEC Chairman Gary Gensler, who has introduced tougher rules to regulate digital assets, has further fueled that optimism. Atkins, a strong advocate of digital assets, has broad support from market participants.

Equity markets in Europe rallied on Wednesday. Germany’s DAX (DE40) rose by 1.08%, France’s CAC 40 (FR40) closed up 0.66%, Spain’s IBEX 35 (ES35) rose by 0.49%, and the UK’s FTSE 100 (UK100) closed down 0.28%. The French government will resign for the first time since 1962. The French Parliament backed a vote of no confidence in Michel Barnier’s government. He will leave office after serving the shortest term as prime minister in modern French history. Amid the political chaos, more lawmakers are demanding the resignation of Macron, whose term lasts until 2027.

OPEC+ representatives will meet today. The alliance is expected to extend the current production cuts until the first quarter of 2025, but analysts emphasize that the tone and details of Thursday’s meeting could significantly affect prices. Despite the drop, the market received some support from a larger-than-expected decline in US crude oil inventories, as reported by the Energy Information Administration. Geopolitical tensions also impacted market dynamics, including a fragile ceasefire between Israel and Hezbollah, political unrest in South Korea after a brief declaration of martial law, and an escalating conflict in Syria that could involve oil-producing countries.

Asian markets were flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.07%, China’s FTSE China A50 (CHA50) gained 0.52%, Hong Kong’s Hang Seng (HK50) fell 0.02% and Australia’s ASX 200 (AU200) was negative 0.38%.

PMI reports for November showed a second consecutive month of growth in China’s manufacturing sector, although growth in the services sector slowed. Meanwhile, Beijing recently banned exports of critical military minerals to the US, a retaliation to Washington’s recent actions against China’s microchip industry.

The Australian dollar stabilized near $0.643 on Thursday after data showed that Australia posted its largest trade surplus in eight months in October, driven by higher exports. However, the Australian dollar remained near four-month lows after falling nearly 1 percent on Wednesday. Weak GDP data fueled expectations of an interest rate cut by the Reserve Bank of Australia soon.

The kiwi remains under pressure in New Zealand due to the Reserve Bank of New Zealand’s dovish stance. The RBNZ cut its benchmark interest rate by 125bps this year to 4.25% and said it would further ease monetary policy early next year, possibly by another 50bps if economic conditions evolve as estimated.

Thailand’s annual inflation rate accelerated to 0.95% in November 2024 from 0.83% in October, the highest since May. However, the result fell short of market expectations of 1.12% and remained outside the Central Bank’s target range of 1% to 3% for the sixth month. The annualized core inflation rate, which excludes volatile items such as food and energy prices, rose to 0.80%, the highest since July 2023 and above estimates of 0.77%.

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.