North American News
Stocks close lower to start the trading week
- Dow up and down. Nasdaq never got out of the red today
The major US stock indices are closing the day lower. The Dow traded above and below unchanged for most of the day but gave up the gains into the close. The S&P and Nasdaq both had highs for the day that were still below unchanged.
The final numbers are showing:
- Dow down -45.43 points or -0.13% at33700.29. At the high, the index was up 118 29 points. At the session low, the index was down -186.52 points
- S&P index -15.3 points or -0.39% at 3949.95. At the high the index was down -3.33 points. At the low the index was down -31.91 points.
- The NASDAQ index -121.54 points or -1.09% at 11024.52. At the session high the index was down -17.28 points. At the low, the index was down -146.31 points
- Russell 2000 fell -10.59 points or -0.57% at 1839.14
The big winner today was Walt Disney which rose $5.77 or 6.29%. Disney announced the old CEO Bob Iger would return to lead the company over the next 2 years.
- Walgreens rose 2.11%
- Coca-Cola rose 1.56%
- Merck rose 1.33%
- Procter & Gamble rose 1.29%
- Home Depot rose 1.27%
Dow 30 stocks which was very today included:
- Intel -3.11%
- Unitedhealth, -2.42%
- Apple -2.17%
- Salesforce -2.15%
- Visa -2.15%
US sells $43B of 5 year notes at 3.974%
- Tail 0.7 bps
- High yield 3.974%
- WI yield 3.967%
- Tail 0.7 BPS
- Bid to cover 2.39X vs 6 month average 2.35X
- Directs 18.7% vs 18.2% 6 month average
- Indirects 66.2% vs 62.4% 6 month average
US treasury auctions off $42 billion of two-year notes at a high yield of 4.505%
- WI level at the time of auction 4.513%
The US treasury auctions off $42 billion of two-year notes:
- High yield 4.53%
- WI level at the time of auction 4.513%
- Tail -0.8 BPS vs. the six-month average of 0.5 basis points
- Bid to cover 2.64X vs. six-month average of 2.55X
- Directs (a measure of domestic demand) 22.39% vs. six-month average of 22.5%
- Indirects (a measure of international demand) 56.98% vs. six-month average of 56.6%
- Dealers 20.62% vs. six-month average of 21.0%
Fed’s Mester Fed is not anywhere near stopping rate hikes
- Speaking on CNBC
- Fed’s Mester is on CNBC. She is a voting member in 2022 but not in 2023:
- Makes sense to slow down a bit the pace of rate hikes
- Can it now be very deliberate in setting policy
- Need to be more judicious and bouncing risks
- Not anywhere near to stopping rate hikes though
- We’ve had some good news on inflation front
- need more good news on inflation and sustained good news
- Very grateful we are seeing some encouraging signs on inflation
- Question is how do we calibrate policy to get back to 2% inflation goal
- Getting back to 2% will take some time
- I do think we need to get into restrictive territory. Right now we are barely there
- Rate path will depend on the economy
- We are moving into a different cadence on the policy, letting data guide us
- I will be listening to my contacts, as their feedback is more forward-looking
- I think we can slow down from 75 at December meeting
- But we need to let economy tell us going forward the pace of hikes after that
- if we don’t see meaningful progress on inflation next year, we will need to react
- Journey back to 2% will have some pain involved
- Very much monitoring balance sheet runoff impact on financial market functioning
- Does not have a recession in her forecast
Fed’s Daly: The labor market is very strong while inflation is unacceptably high
- Fed’s Daly speaking at the Orange County Business Council
- US labor market is very strong
- Inflation is unacceptably high
- Still not at price stability, Fed has more work to do
- Currently the expects Fed Funds to top out at around 5%
- US has a shortage of housing
- Will be watching the data
- There are a lot of global headwind including China, war in Ukraine, the winter in Europe.
- My view that rates could peak in the 4.75%-5.25% range, it is not set in stone
Commodities
Gold drops below $1750, but buyers defend $1720 support
- Gold Price drops close to 0.80% on a strong US Dollar.
- Last week Federal Reserve’s hawkish commentary still weighed on investors’ mood.
- Gold Price Forecast: Supported around $1727, if broken, will expose the 100-DMA.
Gold Price grinds lower amidst a risk-off impulse, which triggered a flight to safe-haven assets. The US Dollar (USD) remains underpinned by investors’ concerns that the recent Covid-19 outbreak in China could spur authorities to reimpose restrictions. Therefore, the precious metals segment is down, as shown by the XAU/USD trading at $1735, below its opening price by 0.87%.
Buoyant US Dollar weighs on Gold Prices on sour sentiment
Sentiment remains negative, as shown by Wall Street posting losses between 0.32% and 1.08%. The financial markets narrative has not changed since October’s Consumer Price Index (CPI) report from the United States (US), which cooled down, while the Producer Price Index (PPI) followed suit. Even though both reports showed that prices are stabilizing, speculations that the Federal Reserve (Fed) might pause hiking rates were used to spur a rally in equities, which weighed on the US Dollar. However, last week’s solid US Retail Sales data increased the likelihood that the Fed would continue tightening conditions.
In that regard, US Federal Reserve officials continued to express their commitment to bringing inflation toward their 2% goal, but they said that the pace of hikes could moderate as soon as the December meeting. However, St. Louis Fed President James Bullard spooked investors, saying rates are not “sufficiently restrictive” and adding that he expects the Federal Funds rate (FFR) to peak at around 5% to 6%. Echoing some of his comments was Atlanta’s Fed President Raphael Bostic, adding that he supports slowing the rhythm of interest-rate increases and foresees 75 to 100 bps additional tightening to the FFR.
Data-wise, the US economic calendar featured the Chicago National Activity index falling to negative territory in October, to -0.05 from 0.17 in September, which triggered to reaction in the XAU/USD. In the meantime, the US Dollar Index, a measure of the buck’s value against its peers, extends its gains by 0.93%, at 107.967, registering a fresh one-week high.
Elsewhere, US Treasury bond yields are extending their gains, particularly the 10-year benchmark note rate yielding 3.818%, underpinning the USD. Another headwind for Gold Prices is Real yields, which are calculated by the US 10-year nominal yield minus inflation expectations for the same period, which remains positive at 1.71% as of last Friday’s close.
Ahead into the week, the US docket will feature Fed regional manufacturing indices alongside further Fed speaking.
WTI crude ends a wild down and up day down $0.25 at $79.73
- Tested the close from 2021 at the low for the day
WTI crude oil is settling at $79.73. That’s down $0.35 or -0.44% on the day.
The price low reached reached $75.27 which was $0.08 below the closing level from 2021 at $75.35. The fall lower was helped by a newswire headline that OPEC+ was mulling a 500K production increase at their next December 4 meeting. Later Bloomberg reported that a Saudi official had denied the rumour and that led to a sharp rebound to the upside. The full decline lower, was retraced back to the upside.
EU News
Spain’s Ibex higher but other indices in Europe close lower
- Spain’s Ibex rises by 0.75%
The major European indices are mostly lower. The one exception is the Spain’s Ibex.
The final closing levels show:
- German Dax -0.36%
- France’s CAC -0.15%
- UK FTSE 100, -0.12%
- Spain’s Ibex +0.75%
- Italy’s FTSE MIB -1.29%
Other News
Saudi official deny the production hike according to Bloomberg report
- Oil moves back higher
Saudi officials are denying earlier reports from the WSJ that OPEC is mulling a 500K BPD production increase.
- The current OPEC+ deal continues to the end of 2023
- If additional measures are needed to balance supply and demand, we will intervene.
ECBs Holzman: Supports a 75 basis point hike if situation stays the same
- EURUSD rebound stalls
ECBs Holzmann via Econostream, says that if the situation remains the same before the December 15 meeting, he would support a 75 BP hike. However, if there is a major HICP reduction, could be swayed back to 50 BPS.
- No major recession seen for now
- On QT sees strong concensus that we should start small to test the market
- Should start with APP. PEPP much later
- Still very much concerned with de-anchoring of inflation expectations.
- Adds that 75 bps would bring them in a neutral area.
Cryptocurrency News
Bitcoin dips to a new 2 year low
- Trades at its lowest level since November 2020
The price of bitcoin has slipped to its lowest level in 2 years. The low price just reached $15,588. That took the price below the low price from last week at $15,632, and to the lowest level since the week of November 9, 2020. The price has already rebounded to $15,798.
Looking at the hourly chart, it would take a move back above the $16,184 to $16,218 swing area, to give the buyers some comfort. Ultimately, however, a move back above the 100 and 200 hour moving averages near $16,550 would be needed to increase the bullish bias
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