The holidays got a little cheerier amid signs that the major central banks have come to the end of their aggressive tightening postures. Despite protestations from policymakers to the contrary, the markets are now building in the start of rate cuts in 1H 2024. Those hopes underpinned one of the best November’s on record for bonds and stocks, and helped boost gold to a new record high!
Economic Indicators & Central Banks:
- The market sentiment remains uncertain, as Chair Powell did not offer much pushback to expectations that rate cuts are the next move on the agenda or that there was a massive easing in financial conditions in November.
- The US November payrolls report on Friday is crucial for market expectations of rate cuts.
- Analysts anticipate a soft landing for the US economy, with positive but below-potential growth in the next six quarters.
- BofA notes a positive outlook for emerging markets, which are experiencing historically positive returns after the last Fed hike.
Market Trends:
- Fed Chair Powell reminded investors the bank is not in a hurry to cut rates and yields are off Friday’s lows.
- Treasuries and Gold declined from session highs. Yields rose across various tenors in Treasuries, with the 10-year trading around 4.23%.
- Asian shares showed mixed results, with gains in Australian and Korean stocks, while Japanese equities fell. JPN225 closed down 0.6% at 33,231.27 after earlier sliding as much as 1.22%. European and US stock futures remained stable.
Financial Markets Performance:
- The USDIndex nudged higher with Treasury yields and is at 103.43.
- EURUSD broke below 1.09, indicating a possible reversal of the 2-month rally, however 1.0820-1.0865 remains the key support area.
- USDJPY dipped to 146.22, reaching a nearly 3-month high against the US Dollar. Currently though, it has reverted some gains, as speculation about an eventual unwinding of the Bank of Japan’s policies added pressure on the Yen.
- Gold down from all-time highs above $2,100, benefiting from lower yields.
- Oil prices faced challenges due to doubts about OPEC+ maintaining output cuts, high US production, and increasing rig counts. UKOIL eased to $78.37 a barrel, while USOIL fell to $73.63. Geopolitical tensions in the Middle East added to market considerations.
- Bitcoin surpassed $41,000, reaching its highest level since April 2022. Bitcoin’s rebound continued, reaching $41,746, with expectations of interest-rate cuts and potential ETF approvals. Smaller tokens like Ether and Dogecoin also experienced gains.
- Key Mover: EURJPY down by 1.92%. Next Support levels: 159 and 158.50.
This week:
- Investors are closely watching economic indicators, including Australian growth, Chinese inflation, and US non-farm payrolls data.
- The Reserve Bank of Australia is expected to maintain a hawkish stance.
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Andria Pichidi
Market Analyst
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