Economic Indicators & Central Banks:
- Treasury yields extended lower after the larger than expected decline in job openings. The data added to beliefs that the labor market is cooling and that the FOMC is done hiking, with the next move a cut in the coming months.
- Fed funds futures are reflecting about a 65% bet for a 25 bp March cut, with May fully priced in and then some.
- German manufacturing orders plunged. Orders corrected -4.6% in the three months to October, which is flagging recession risks and ongoing weakness even going into 2024.
Market Trends:
- Asian stock markets rallied, with Japanese markets leading the way. Futures are also higher across Europe and the US as markets buy in to hopes that major central banks have reached peak rates and will start to cut interest rates next year.
- GER40 is at all-time highs supported by slowing inflation and the prospect of lower interest rates next year boosting the country’s biggest stocks. It gained 8.8 % over the past month during a stock market rally on both sides of the Atlantic underpinned by growing hopes that major central banks have finished raising rates.
Financial Markets Performance:
- The USDIndex is to the upside for a 5th day, retesting the 104 level, as it found relative firmness as the markets priced in a more aggressive easing stance from the ECB than the Fed.
- EURUSD below 1.08, extending its 1-week dip, post a sharp correction in German manufacturing orders that added to concerns that growth is faltering. This is coupled with weaker than expected inflation data for November that will add to pressure on the ECB ahead of next week’s council meeting.
- Gold & Oil: The strength in the US Dollar weighed on commodities with USOIL dropping -0.88% to $72.10 and Gold falling -0.48% lower to $2009.97. Profit taking has knocked bullion from the record high of $2072.22 on December 1.
- Bitcoin hit 2022 highs at 44429. Currently it is traded at 43395 in an overbought condition, indicating a near term consolidation.
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Andria Pichidi
Market Analyst
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