North American News
US stocks close higher but seems like a down day
- Major indices give up most of the gains
The major US stock indices are closing the day up, but it seems like a down day.
The prices moved higher in pre-market trading with the Dow up about 800-900 points (implied by futures), on the back of the CPI data. However, the prices at the open were lower and the market continued to chip away at the gains through the day.
- The Dow moved up 707.24 points at the high but closed up 103.61 points up 0.30% at 34108. The low for the day reached -114.16 points.
- The S&P moved up 110.39 points at the high, but closed up 39.07 points up 0.73% at 4019.64. The low for the day came in at up 2.46 points.
- The Nasdaq traded as high as up 427.90 points but closed up 113.09 points or 1.01% at 11256.82. The low for the day came in at 16.80 points.
US sells 30-year bonds at 3.513% vs 3.482% WI
- Highlights of the long-bond sale
- Prior was 4.080%
- Bid to cover at 2.25 vs 2.42 prior
US November CPI +7.1% y/y vs +7.3% expected
- Highlights of the US November 2022 CPI report
- Prior was +7.7%
- m/m CPI +0.1% vs +0.3% expected
- Prior m/m reading was +0.4%
- Real weekly earnings +0.2% vs -0.1% prior (prior revised to 0.0%)
Core inflation:
- Ex food and energy +6.0% vs +6.1% y/y expected
- Prior ex food and energy +6.3%
- Core m/m +0.2% vs +0.3% exp
- Prior core m/m +0.4%
The details of the report show shelter running hot with owners-equivalent rent was up 0.7% vs +0.6% a month ago.
- Used cars -2.9% m/m vs -2.4% m/m prior
- Food +0.5% m/m vs +0.6% m/m prior
- Energy -1.6% vs +1.8% m/m prior
- Gasoline -2.0% m/m
- Fuel oil +1.7% m/m +19.8% m/m prior
- New vehicles 0.0% m/m vs +0.4% prior
- Apparel +0.2% vs -0.7% prior
- Medical care +0.2% m/m vs 0.0% prior
Biden: Inflation is coming down but is still too high
- Comments from the President
- Today’s inflation report is welcome news
- Prices are still too high but things are getting better
- Where is it written that America once again can’t lead the world in manufacturing?
Shares of Tesla complete reverse early rally and fall 3% to new two-year lows
- Elon Musk is no longer the world’s richest man
On a strong equity market tape yesterday and today, shares of TSLA have fallen 8.8%. It’s encouraging that the fall of Tesla isn’t bringing down the broader equity market and there’s a good argument for that disconnect to continue but it bears watching very closely.
Timiraos: Fed on track for 50 bps tomorrow but lower inflation could complicate 5% target
- The latest from the WSJ Fedwatcher
“Tuesday’s inflation report is likely to intensify the officials’ debate over whether to further dial down the size of rate rises to a more traditional quarter percentage point at their subsequent gathering, Jan. 31-Feb. 1,” he writes.
Commodities
Gold bulls cheer Fed pivot sentiment after US CPI miss
- The Gold price is making fresh bull cycle highs after the United States Consumer Price Index miss.
- The United States Federal Reserve interest rate announcement will be key for the Gold price.
- Gold price 4-hour chart shows the bears moving in and there are eyes on the prior resistance near $1,800.
The Gold price is higher after US Treasury yields declined due to a report that showed that inflation in the United States was less than estimated last month. At the time of writing, XAU/USD is higher by 1.5% and has travelled from a low of $1,781.02 to a high of $1,824.52.
The Consumer Price Index (CPI) rose +7.1% from a year earlier in November, compared with the consensus forecast for a +7.3% gain and the October reading of +7.7%. Prior to the data, markets were getting set in the case of a softer reading that could have been the catalyst for a dovish Federal Open Market Committee (FOMC) this week. As a consequence of the Consumer Price Index, the curve bull steepened sharply as the market lowered the terminal Federal Reserve rate and increased the number of cuts being priced in. Risk assets found a bid with the US stocks rallying hard, the commodities complex up and the US Dollar down.
”Given the strength in core services inflation, it is clear the Fed will need to remain in a tightening mode beyond the December meeting. We will be looking for any Fed communication tomorrow regarding a further downshift in the hiking pace for the February meeting,” analysts at TD Securities said after today’s Consumer Price index.
Federal Reserve and European Central Bank up next
The FOMC is meeting today and will wrap things up on Wednesday with their statement and interest rate decision followed by the Federal Reserve’s chairman, Jerome Powell, who will speak with the press. Jerome Powell’s press conferences are an event in themselves which can create immense volatility in financial markets.
Money markets are currently pricing a 50bps Federal Reserve rate hike after four successive 75bps rate increases. However, changes in the peak rate or whether policymakers think there will be a need to become more hawkish could be more fundamental than the interest rate decision itself and that is where Jerome Powell will be pushed by the press.
Nevertheless, another moderation in the monthly core Consumer Price Index in the United States has helped to reaffirm that the US Dollar peak could be here which is lifting spirits as reflected in the emerging market indexes. The Gold price, however, will now also depend on the outcome of the European Central Bank, (ECB)
There is the risk that the ECB sounds and acts more hawkishly than the Fed this week. If this were to transpire, the US Dollar is going to have a hard time correcting whatever potential unwind comes of a dovish Federal Reserve and today’s inflation data.
ECB President Christine Lagarde will of course continue to underline their determination to fight inflation.
”We expect a 50bps hike, but can’t completely rule out 75bps,” analysts at TD Securities (TDS) said.
”Focus is likely to be on Quantitative Tightening guidance, which the Governing Council has announced will come alongside the decision New forecasts are likely to show a worsening trade-off between growth and inflation, but the ECB likely only has another hike or two left before turning to QT as its main tool,” the analysts at TDS added.
WTI crude futures settle at $75.59
- Up $2.22 or 3.03%
The price of WTI crude oil futures are settling at $75.39. That’s up $2.32 or 3.03%. The high price reached $76.34. Low price extended to $73.23.
Looking at the hourly chart, the price moved above its 100 hour moving average yesterday, and stayed above it in training today. The high price was able to extend above the swing highs from December 7 and December 8 near the $75.41 level and then get above it 200 hour moving average currently at $75.77. However, momentum faded. The price has been waffling above and below that moving average over the last few hours.
EU News
Major European indices close with solid gains
- Gains led by France’s CAC
The major European indices are closing the session with solid gains:
- German DAX +1.34%
- Francis CAC +1.42%
- UK’s FTSE 100 +0.76%
- Spain’s Ibex +0.83%
- Italy’s FTSE MIB +1.31%
Other News
Impact from Wednesday’s FOMC on USD will likely be muted – BofA
- We’re in the countdown to the FOMC decision
Bank of America Global Research discusses the USD outlook around tomorrow’s FOMC policy decision.
“With broad general expectations of a 50bp move from the Fed, the impact for the USD from the rate move itself will likely be muted. In particular, the rate hikes from the Federal Reserve that had been fueling USD upside over the past year are being matched at other central banks, such as the expectations that the European Central Bank and the Bank of England will also hike by 50bp this week as well. However, messaging about the future could well be the key story for FX markets, particularly around their refreshed projections as well as of course the press conference,” BofA notes.
China state media admits that the number of covid cases in Beijing is rapidly rising
- This is admitting what everyone already knows
China has opted for a messy reopening that is going to overwhelm its healthcare system and severely crimp demand for the next few months. The upshot is that by the springtime, the country should be closer to normal. For the most part, the market will look through that but there are some risks around the intensity of the wave that will hit the country in the interim.
Cryptocurrency News
SBF took aim at Binance in his planned testimony to congress
- The 18-pages of planned testimony have been given to the WSJ
Sam Bankman-Fried is now under arrest and won’t be making an appearance at Congressional hearings on the downfall of FTX but the Wall Street Journal acquired the full text of his planned comments.
But he had this to say on Binance:
There is much more to say about Binance, its role in the cryptocurrency ecosystem, and its relationship with FTX, but this is neither the place nor the time for it.
To be fair, he’s said the same kind of thing before but in his testimony he also highlighted that Binance was causing KYC issues for FTX.
It’s particularly notable because there’s a bit of a run on the bank going on at Binance at the moment.
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