It has been a relatively fruitful market for stock indices worldwide over the last month and many seem content to consolidate at current ranges for the time being. Nonfarm Payrolls drop in a matter of hours however, so expect such peaceful conditions to shatter in the event of unexpected numbers. Consensus currently stands at 180k new jobs and an unemployment rate of 3.9%. We will soon find out.
Speaking of the unexpected, comments from Bank of Japan’s governor Kazuo Ueda prompted a surge in the Yen on Thursday, forcing USDJPY as low as 141 before closing at 144 Yen. Looking more closely at the actual meat of the speech however it is hard to see why. Ueda claimed the central bank will “patiently continue with monetary easing under Quantitative and Qualitative Monetary Easing with Yield Curve Control” adding that it will continue to conduct monetary policy with the aim of a 2% inflation target. Board member Nakamura echoed the same sentiment a week prior, stating that “more time is needed before making revisions to the monetary easing policy”. Someone obviously knows something we don’t.
The strength of the Japanese Yen contributed to weakness in the Dollar on Thursday, seeing the DXY lose half a percent, but the more interesting development lies in Europe. For all the talk of interest rate cuts in the US, it is in fact possible that the Eurozone will be the first to shift policy towards monetary easing. Poor economic performance all round may force the ECB’s hand, or so many traders are assuming. The Swiss Franc in particular has bid heavily against the Euro in the last two weeks, EURCHF falling as low as 0.9404 in intra-day trading yesterday. A record low.
December 08, 2023
Gold continues to be the talk of the town after reaching new highs on Monday. The mania that helped carry the price all the way up past $2140 was short lived, bulls ran out of steam and gold closed the day around $2029 an ounce. The timing of the move probably had something to do with it, being in the early hours of the Asian trading session would not have contributed the greatest amount of liquidity to the market. Tuesday offered no answers as gold lost another half a percent to close around $2020 by the day’s close.
It has been a strong week so far for the Dollar, the DXY gaining almost a whole point over the last two sessions to flirt with 104. This despite job openings in the US unexpectedly decreasing to 8.73M versus the 9.3M consensus. Of course, this is not the last we’ll hear from the Bureau of Labor Statistics this week; Nonfarm Payrolls come in on Friday, hopefully providing a clearer picture than the mixed messages markets are trying to interpret currently. We also have jobless claims on Thursday from the Department of Labor to complete the picture.
Oil can’t seem to find any kind of floor recently. It is down over $5 in the last four sessions alone, Brent crude closing at $77 a barrel on Tuesday, WTI down to $72. US production continues to hit fresh highs, OPEC targets may as well not exist and global demand remains defiantly absent. With all this in mind the recent price action isn’t surprising many.
December 06, 2023
The optimism that took hold of markets last week continued until the closing bell on Friday evening as traders seem more and more convinced interest rates have plateaued. The Federal Reserve will hold its final meeting of the year on December 13th; the expectation is that rates will remain unchanged. The reaction currently unfolding in stocks and gold appears to be pricing in no further rate hikes next year either.
The Dow Jones Industrial Average seemed intent to keep its momentum alive on Friday as it smashed through the 36,000 level, gaining 0.82% on the day. The S&P 500 climbed to briefly flirt with the 4,600 mark before settling for a 0.59% gain and the Nasdaq also managed to closed 0.55% in the black. The breath of optimism even spread to the other side of the pond, as the German DAX ended a very strong week by closing 1.12% higher on Friday. The UK’s FTSE index gained 1% on the day and France’s CAC 40 climbed half a percent.
If there was a clear winner last week however the title would have to go to gold. Not content with a mid-week surge to the $2040 area, gold would see a further 1.76% gain on Friday pushing it to a close above $2070. The fun clearly isn’t over yet though, early trading in the Asian session pushed gold firmly to new all-time highs of $2140 an ounce. Gold clearly latching onto the narrative of the Dollar’s reign of terror coming to an end.
The driving force behind gold is clearly also affecting its digital counterpart; Bitcoin blasted past $38k on Friday, continued to climb all weekend before smashing through $40k this morning.
As stated in the last update, oil markets clearly have very little confidence in crude producing countries’ willingness to adhere to the latest OPEC targets, as Brent Crude fell below $80 a barrel on Friday and WTI closed under $75.
A reminder that Nonfarm Payrolls come out this Friday. Recent releases have cultivated the opinion that the US economy is indeed cooling off, a major barometer in the Federal Reserve’s decision-making process. Should new data contradict this, expect a sudden shift in sentiment.
December 04, 2023
Traders received yet another sign that the US economy is cooling off yesterday in the Personal Consumption Expenditures (PCE) price index. PCE came in at 0.2% for the month and 3.5% on a year-on-year basis. Both figures matched expectations, but were enough to help indices maintain their optimism that the US inflation is on the right track.
The Dow Jones in particular had a wonderful day yesterday, gaining over 500 points to reach 35,950 by the day’s close. It now sits at the same level as in January 2022 and is only one thousand points away from a new all time high. The euphoria didn’t spread to other indices, the S&P 500 only climbing 0.38% and the Nasdaq Composite closing 0.23% in the red on Thursday.
The delayed OPEC meeting finally took place on Thursday, with members agreeing to reduce output by about 2.2 million barrels a day moving into next year. Despite this, oil benchmarks fell around 3% on the day, the overall consensus being that participants have little incentive to actually stick to targets given the voluntary nature of the agreement.
Despite encouraging inflation data, the Dollar Currency Index rose 0.66% yesterday with all major currencies in the basket seeing consequent hits. An odd move on the face of it, markets perhaps realising that some players are getting a little ahead of themselves in anticipating a cut in interest rates from the Fed. Next Friday brings us Non-Farm Payrolls; the data will offer some much-needed direction.
December 01, 2023
Much like an insecure dork painstakingly analysing the latest social media post from his crush, the market is trying to pull apart the latest announcements from various Federal Reserve members in order to determine their true intent. Mixed messages are not uncommon for this part of the cycle, some members “increasingly confident” monetary policy is restrictive enough to drive inflation lower, others hinting at yet more future rate hikes.
Markets generally took the optimistic path. The Nasdaq Composite managed a 0.29% gain yesterday, the Dow shot up initially before settling down for a modest 0.24% gain on the day and the S&P 500 brought up the rear ending just 0.10% in the black on Tuesday. In Asia, the Hang Seng Index continued to bleed this week, falling 0.98% yesterday. In Japan, the Nikkei 225 also closed 0.12% in the red after also losing half a percentage point on Monday. European markets, sticking to the overarching theme of the week, were decidedly mixed.
There was nothing mixed about the reaction in currencies however, the DXY fell 0.44% on speculation the era of high interest rates may finally be coming to a close. USDJPY lost 0.81% on the day, now down to the 147 Yen range, recent forays above the 150 mark abandoned for the time being. It was enough for the Euro to touch $1.10 for the first time since August. Cable also gained, closing the day at $1.27.
Gold was the true outlier yesterday, gaining 1.33% on Tuesday to close above $2040 an ounce. It is now approaching the technical resistance it first started pushing against back in August 2020.
November 29, 2023
Friday was a relatively boring trading day that marked the end of relatively boring week. US markets, closed on Thursday due to Thanksgiving celebrations, moved so little on Friday that they are barely worth mentioning. In fact, the same can be said for stock indices worldwide, traders perhaps content to let the month fizzle out rather than end with a bang.
The trend seems set to continue early this week with very little news to speak of. If anything, it is the European markets that could breathe some life into the financial news cycle, Wednesday and Thursday in particular offering up a slew of economic data from the major Eurozone countries. Perhaps the most important announcements we’ll get this week are central bank related. Fed members will speak at a number of events this week. The consensus remains that the Fed will continue to push the message that inflation is still to high and therefore to expect absolutely no interest rate cuts in the medium-term future.
Oil markets a little directionless at the moment after the OPEC meeting, which was supposed to take place on Sunday, was delayed to Wednesday after petroleum exporting countries struggled to agree on output levels. In light of falling global demand and a recent build-up of supplies, as well as no further escalation in the Middle East, oil has continued to bleed since September with WTI closing the week at $75 a barrel on Friday, down from highs of almost $94 two months ago.
Gold, taking advantage of a weaker dollar, managed a close above the psychologically important $2000 mark on Friday, closing at $2002 after gaining a solid percentage point on the weekly. Quite telling that this was the most important thing to happen all week.
November 27, 2023
