Round up of today’s market news

North American News

Riding High: Russell 2000 Takes Center Stage Amidst CPI Surge, Propelling US Stock Indices to New Heights

• Catch the latest market rally as major US stock indices skyrocket following tamer-than-expected CPI data for October

In October, the Consumer Price Index (CPI) exhibited a milder-than-expected trend, with the headline number remaining stagnant (0.0% increase month on month), falling short of the anticipated 0.1%. The core measure, excluding volatile elements, rose by 0.2%, slightly below the expected 0.3%. Despite year-on-year levels surpassing the 2% target at 3.2% and 4.0%, respectively, they notably declined compared to the previous year. In response to these trends, the market is currently factoring in the likelihood of four rate cuts in 2024. Meanwhile, the Russell 2000 index experienced a significant surge of 5.44%, marking its most substantial gain since November 10, 2022, surpassing the highest 2023 increase of 3.561% recorded on June 2.

A snapshot of the closing levels for the other major indices shows:

• Dow industrial average rose 489.83 points or 1.43% at 34827.71
• S&P index rose 84.17 points or 1.91% at 4495.71
• NASDAQ index rose 326.63 points or 2.37% at 14094.37

The Russell 2000 is now up 2.10%. By comparison, the:

• NASDAQ index is up 34.66%,
• S&P index is up 17.09%, and
• Dow industrial average is up 5.07%.

25 of 30 Dow stocks rose led by:

• Home Depot up 5.46%
• Walgreens up 4.56%
• Dow up 3.68%
• Goldman Sachs up 3.64%
• Intel +3.01%

The losers in the Dow included:

• Walmart -0.01%
• Procter & Gamble -0.22%
• Merck and Company -0.28%
• UnitedHealth -0.40%
• Travelers -1.39%

Some of the other big winners in the market included:

• First Solar, +11.43%
• AIRBnB +6.32%
• Tesla +6.12%
• Block +5.96%
• Goodrx +5.94%
• PNC +5.94%
• Ford, +5.86%
• Moderna, +5.54%

Some losers today included:

• Celsius -3.48%
• RTX Corp, -1.66%
• Exxon Mobile, -1.65%
• Chubb, -1.16%
• Gilead, -0.28%
• Lockhead Martin -0.19%
• General Mills -0.02%

Atlanta Fed sticky CPI 4.9% vs 5.1% prior

• The Atlanta Fed’s inflation measure

The sticky price index sorts the components of the consumer price index into either flexible or sticky (slow to change) categories based on the frequency of their price adjustment.

• 12-month 4.9% vs 5.1% prior
• Flexible 12-month -0.3% vs +1.0% prior

US October core CPI +4.0% y/y versus +4.1% y/y expected

• US October 2023 consumer price index data

• CPI y/y +3.2% versus 3.3% expected
• Prior y/y 3.7%
• CPI m/m +0.0% versus +0.1% expected
• Prior m/m +0.4%

Core measures:

• Core CPI m/m +0.2% versus +0.3% expected. Last month 0.3%
• Core CPI y/y 4.0% versus 4.1% expected. Last month was 4.1%
• Shelter +0.3% versus +0.6% last month. Year on year % versus 7.2% last month
• Services less rent of shelter +0.3% m/m vs +0.6% prior
• Real weekly earnings % vs -0.2% prior
• Food +0.3% m/m vs +0.2% m/m prior
• Energy -2.5% m/m vs +1.5% m/m prior
• Rents +0.5% vs +0.5% prior
• Owner equivalent rent +0.4% vs +0.6% prior

What Home Depot is seeing in the US consumer

• Home Depot reported earnings today

Hardware giant Home Depot reported earnings today of $3.8 billion compared to $4.3 billion a year earlier.

Housing is naturally a drag on the US economy with interest rates high and that’s something the company emphasized.Comp sales in Q3 were down 3.1% overall and 3.5% in the US compared to last year.

“Our quarterly performance was in line with our expectations,” said Ted Decker, chair, president and CEO. “Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories.”

The company updated its guidance to a sales decline of 3-4% compared to fiscal 2022. That’s surprisingly resilient given the jump in US borrowing costs and the cool-down in the housing market. It speaks to residual strength in the sector that could come roaring back if/when rates are cut.The market is currently pricing in 99 bps in rate cuts by the end of 2024.

In the conference call, the company noted that big-ticket transactions of more than $1000 were down 5.2% compared to Q3 last year.Some of the softness was driven by commodity prices deflation, especially in lumber prices. It was also a quiet US hurricane season. The company did note positive comps on building materials overall in Q3.

Cleveland Fed November core CPI +0.29%

• The latest Nowcast from the Cleveland Fed

The Cleveland Fed inflation tracker doesn’t see a continued drop in inflation next month.

US October NFIB small business optimism index 90.7 vs 90.8 prior

• Latest data released by NFIB – 14 November 2023
• Prior 90.8

The Fed has reached the terminal point in the hiking cycle, CIBC drops call for Dec hike

• CIBC after today’s inflation report

Economists at CIBC note that core inflation rose by 0.2% month-over-month, and year-over-year core inflation slightly decreased to 4.0% from 4.1%.Importantly, core services inflation rose 0.3% in October, down from 0.6% in September as shelter inflation eased. However, the Fed’s preferred measure of prices tied to underlying demand, non-housing services, stayed at a steady 0.4% m/m.

“The Fed will likely be pleased with this additional bit of progress as core inflation has remained steady in a range close to target since June. As a result, we are removing our call for the Fed to hike in December,” CIBC writes.

The market is no longer pricing in any chance of a hike in Dec or January, with 20 bps of easing priced in for May.

While there remains a risk the Fed could reassess its stance in early 2024, today’s data, combined with evidence of a softening labour market and most importantly, the change in tone of the FOMC to show greater patience suggests December is likely off the table. The FOMC has time to wait to assess the emergence of further price pressures.

US Retail Sales report preview: a ‘tepid’ result is expected

• Bank of America citing their aggregated card spending data

Bank of America do not have a bright outlook for this data point, saying their in-house aggregated credit and debit card data indicates that total card spending fell 0.5% y/y in October

• household card spending also dropped 0.2% month-over-month in October on a seasonally adjusted basis

BoA forecasts a “tepid” retail sales report, but not as bad as you might expect:

• “However, the US Economics team forecasts a 0.1% increase in the Census Bureau’s retail sales ex-autos estimate for October. The softness in BAC card spending on the month was partly driven by the sharp drop in gas prices”

Fed’s Goolsbee: There are a lot of real pessimistic people that are spending a lot of money, that’s a puzzle

• Chicago Fed Pres. Goolsbee speaking
• Inflation progress continues, economic growth has been strong, labor markets and vibrant.
• This year could see the fastest non-war related one-year fall in US CPI inflation in a century, with an unemployment rate that never gets above a 4%.
• He attributed this unusual situation to factors such as a rebound in supply following COVID-19 disruptions, increased productivity, and well-anchored inflation expectations.
• Still have a way to go before US central banks a 2% inflation goal reached.
• Positive supply development allows blockbuster economic growth without added inflationary pressure.
• He is more concerned about possible external shocks than about the economy overheating.
• Central bank should focus its attention mostly on inflation data.
• Key to further progress on inflation is housing, there will be some bumps.
• October CPI report ‘looked pretty good’
• Labor force participation has come back more than we would have expected
• Commercial real estate remains an area of concern
• There are a lot of real pessimistic people that are spending a lot of money, that’s a puzzle
• Consumer sentiment data relationship to spending is ‘utterly broken’
• Inflation is a very real pain

Fed’s Jefferson: Uncertainty on inflation persistence may warrant stronger policy response

• Remarks by Fed vice chair, Philip Jefferson

• Some measures of economic uncertainty, particularly for inflation, are elevated
• Policy decisions taken under uncertainty may look different from those optimal under certainty

US 10-year yields fall below 4.50% on soft CPI

Yesterday, US 10-year yields touched 4.70% and looked like they were thinking about widening the top of the recent range. Now they’re just one basis point away from the range bottom.

US 10s are down 15 bps to 4.48%, just above last week’s low of 4.473%.

Fed’s Barkin: There are risks from over and under-correcting on inflation

• Comments from Barkin at an event in South Carolina
• The Fed is making real progress on inflation
• Housing prices remain strong despite slowing activity

AI-driven financial market trading algorithms might learn 2 collude without being detected

• AI traders can collude, generate substantial profits by manipulating order flows.

This is an interesting take:

• AI-powered trading algorithms might learn to collude without being detected.
• “What we were looking for is implicit collusion that occurs between machines,”
• “They come to behave in a way that is difficult to detect. And that’s what we tried to figure out.”
• “The collusion automatically happens, even when each machine is 100% autonomous without any communication or intention of coordination.”
• “AI traders can collude and generate substantial profits by strategically manipulating low order flows, even without explicit coordination that violates antitrust regulations,”

US Treas Sec Yellen: Higher interest rates a challenge to debt sustainability if they last

• Says Treasuries remain preeminent safe, liquid asset

US Treasury Secretary Yellen:

• Says disagrees with Moody’s decision to move US rating to negative outlook
• Higher interest rates would create a challenge to debt sustainability if they last
• A government shutdown would pose an unnecessary economic headwind; it’s critical that House Republicans work in a bipartisan manner
• Treasuries remain preeminent safe, liquid asset.
• I’m hopeful we’ll find satisfactory spending solution.
• APEC judged China economy is a downside risk to outlook.
• Discussed issues of oversupply with China vice premier 

Commodities

Silver rallies on soft US CPI data and falling yields

• The white metal ascended to $23.00, seeing more than 3% gains.
• Headline and Core CPI from the US came in lower than expected in October, fuelling dovish bets on the Fed.
• The US bond yields dived, allowing the metal to gather momentum.

Levels to watch

Analysing the daily chart, silver displays a neutral to bullish technical outlook as bulls have gained significant momentum. The Relative Strength Index (RSI) displays a bullish bias with an ascending slope above its middle point, while the Moving Average Convergence (MACD) histogram exhibits increasing green bars.Considering the broader technical landscape, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs, indicating that the bears are still holding some dominance over the bears on the broader time horizon.However, the outlook will remain positive for the short term while the bulls gather further ground and hold above the 20-day SMA. 

Gold surge’s as US CPI cools

• Gold prices climbed nearly 0.90% to $1963.70, reacting to a drop in US Treasury yields after a softer-than-anticipated US inflation report.
• October’s CPI in the US eases to 3.2%, below expectations, leading to a significant decrease in the US 10-year note yield and a 1.50% fall in the Dollar Index.
• Market focus shifts to upcoming US economic data, including PPI and Retail Sales, for further cues on the Federal Reserve’s policy direction.

Gold price climbs close to 0.90% on Tuesday after hitting a daily low of $1938.84 due to a plunge in US Treasury bond yields courtesy of a softer inflation report in the United States (US).That weighed on the Greenback, which so far has lost more than 1.50% of its value against a basket of currencies, hence the jump in the price of yellow metal.

WTI crude oil gives back gains to finish flat on the day. Inventory data next to watch

• WTI crude oil unchanged on the day at $78.26

WTI crude oil finished precisely flat on the day at $78.26 after rising as high as $79.77. The big figure appeared to be a hurdle along with worries about oversupply. That counteracted a broadly-positive risk tone that led to huge gains in equities along with a drop in the US dollar.

Normally, you would expect better than this from oil on a day like today but it’s been a struggle since the Middle East risk premium was taken out. After the US equity close, we will get weekly inventory data from the API and that will be followed by tomorrow’s re-worked EIA release.

Oil private survey of inventory shows headline crude build, not as much as was expected

• The official government report is due tomorrow

• API Inventory
• Crude +1.335 million (exp. +1.4 million)
• Gasoline +195,000
• Distillates -1.022 million
• Cushing +1.136 million
• SPR – no change

Oil demand growth forecast raised, defying economic slowdown – IEA

• The International Energy Agency (IEA) raises its oil demand growth forecasts for 2023 and 2024

• 2023 oil demand growth forecast raised to 2.4 mil bpd (previously 2.3 mil bpd)
• 2024 oil demand growth forecast raised to 930k bpd (previously 880k bpd)

Goldman Sachs say energy and gold potential effective hedges against geopolitical risks

• Goldman Sachs are looking for substantial returns in commodities in 2024

Goldman Sachs has forecast a 21% return on commodities over a 12-month horizon

• S&P GSCI Commodity Index
• looking for +31% in energy
• +17.8% in industrial metals

Citing:

• improving cyclical backdrop
• significant carry returns from structural tailwinds
• see hedging value against negative supply shocks
• OPEC-driven declines in oil inventories
• Federal Reserve and European Central Bank have finished raising interest rates, likely to ease pressure on GDP growth and support commodities demand
• sharp tightening in copper and aluminium stocks into the middle of the decade, driving up prices from the second half of 2024
• “Energy and gold can also be an effective hedge against negative supply shocks, from geopolitical or other developments, in scenarios where other assets (especially risk assets) suffer from lower growth”

EU News

European equity close: Big gains across the board

• Closing changes in Europe

• Stoxx 600 +1.4%
• German DAX +1.8%
• UK FTSE 100 +0.3%
• French CAC +1.5%
• Italy MIB +1.5%
• Spain IBEX +1.7%

Eurozone Q3 GDP second estimate -0.1% vs -0.1% q/q prelim

• Latest data released by Eurostat – 14 November 2023

UK October payrolls change 33k vs -11k prior

• Latest data released by ONS – 14 November 2023

• Prior -11k; revised to 32k
• September ILO unemployment rate 4.2% vs 4.3% expected
• Prior 4.2%
• September employment change +54k vs -198k expected
• Prior -82k
• September average weekly earnings +7.9% vs +7.4% 3m/y expected
• Prior +8.1%; revised to +8.2%
• September average weekly earnings (ex bonus) +7.7% vs +7.7% 3m/y expected
• Prior +7.8%; revised to +7.9%

Spain October final CPI +3.5% vs +3.5% y/y prelim

• Latest data released by INE – 14 November 2023

• Prior +3.5%
• HICP +3.5% vs +3.5% y/y prelim
• Prior +3.3%

Germany November ZEW survey current conditions -79.8 vs -76.9 expected

• Latest data released by ZEW – 14 November 2023
• Prior -79.9
• Outlook 9.8 vs 5.0 expected
• Prior -1.1

Switzerland October producer and import prices +0.2% vs -0.1% m/m prior

• Latest data released by SECO – 14 November 2023

Relative to the same period last year, producer and import prices are seen down 0.9%. As for the monthly breakdown, producer prices were seen up 0.1% in October while import prices were up 0.4% on the month.

BOE’s Pill: There is significant progress on inflation

• Comments from Pill
• 5% inflation would be much too high still
• We still have some work to do to curb inflation
• Resilience of the UK economy seems to be easing

SNB Jordan: Another interest rate move is possible

• Swiss National Bank Jordan is a speaking

SNB Jordan is on the wires saying:

• Another interest rate move is possible if the current monetary policy is not restrictive enough to ensure price stability in the long term
• Will review at the next meeting whether measures taken to date are sufficient to keep inflation within price stability range on a sustainable basis
• To this end, we will monitor inflation developments closely in the coming weeks

The Swiss National Bank has moved rates from -0.75% to +1.75%. At the September meeting, the expectations was for a rise to 2%. However, the central bank kept rates unchanged snapping a 5 meeting step higher. The Swiss National Bank will meet again on December 14.

German chancellor Scholz backs ECB actions on tackling inflation

• Scholz says that he “strongly agrees” with the central bank’s move

Other News

Shanghai cafe’s US$850 cup of ‘King of Coffee’ brew creates buzz

• A coffee shop in Shanghai has launched a luxurious coffee priced at $850 per cup

A coffee shop in Shanghai has launched a coffee priced at 6,200 yuan (US$850) per cup.

• The shop said the coffee is made from this year’s championship coffee beans.
• The beans are priced at US$10,005/kg, known as the “king of coffee”.

China’s October financing data: Mixed results (ICYMI)

• China’s financing data for October reveals a mixed performance for loans & total financing
• New yuan loans in October came in at 738.4bn CNY

• beating the expected 665bn, and well down from September’s 2310bn

Total (aggregate) Social Financing came in at 1850bn CNY

• barely missing the expected at 1900bn CNY, and also well down from September’s 4120bn CNY

The dip for both of these measures in October from September can be attributed to a combination of:

• the September result was end-of-quarter which has a tendency to jump
• other seasonal factors
• both are volatile data series

China finance minister says economy to maintain upwards trend in Q4

• Remarks by China finance minister, Lan Foan, in San Fransisco

• China will still be a key driver to stable growth of global economy

Australian monthly consumer confidence -2.6% to 79.9 (prior +2.9%)

• Biggest fall in six months

Westpac-Melbourne Institute index of consumer sentiment fell 2.6% in November

• biggest monthly drop in 6 months
• prior was +2.9%
• drop to 79.9 from prior 82.0
• index has been below the neutral 100 level since March 2022, the longest streak since the early 1990s recession
• survey found a 6% drop in confidence immediately after the Reserve Bank of Australia (RBA) last week lifted interest rates by 0.25% to a 12-year high of 4.35%

Westpac:

“The RBA’s hike has put renewed pressure on family finances and reignited concerns about both the rising cost of living and the prospect of further rises to come.”

Australian October Business Confidence -2 (vs. prior 0)

National Australia Bank Business Survey for October 2023:

Confidence -2

• prior 0

Conditions +13

• prior +12

The ‘conditions’ index tends to be more objective than the somewhat sentiment-driven ‘confidence’ index.

• sales index stayed very strong, up 2 points rise to +20
• profitability increased +3 points to +12
• employment fell 1 point to +8
• forward orders -2 points to 0
• labour cost growth eased to a quarterly 1.8%, as did growth in purchase costs
• retail price growth held at a quarterly pace of 1.9%, though overall price growth eased to it lowest since mid-2020 at 1.0%.

NAB comments:

• “Business conditions remain healthy, picking up in October and still well above average”
• and on confidence: “Businesses clearly remain cautious about the outlook for the economy despite the resilience we are seeing”
• “Inflation had been persistent through the middle of the year and the survey suggests this remained the case heading into Q4 … We still expect to see gradual moderation over time but it will be a protracted process, especially given the resilience of domestic demand thus far.”

Australian consumer confidence plummets to a 4-month low as the RBA raises cash rate

• ANZ-Roy Morgan survey reveals a sharp decline in consumer confidence to 74.3

The ANZ – Roy Morgan consumer confidence survey is conducted weekly.

Comes in this week at a horrid 74.3,

• down 3.5 points from last week’s 77.8
• 74.3 is the lowest in four months

New Zealand food prices drop 0.9% in October 2023, impacting Inflation

• Discover how the New Zealand Food Price Index (FPI) influences the country’s inflation rate.

New Zealand Food Price Index (FPI) fell 0.9% m/m in October 2023

• prior -0.4%
• for the y/y +7.1%

Former BOJ official says Bank expected to end its negative interest rate policy in April

• BOJ will likely raise short-term rates in April when more data becomes available wage negotiations

BOJ seen ending negative rates in April, keep hiking next year

• BOJ dismantled YCC in October, laying groundwork for next move
• Service prices already rising, BOJ just waiting for evidence
• BOJ must keep hiking once short-term rates at zero
• As the next step, the BOJ will likely raise short-term rates to around zero from -0.1% in April, when more data becomes available on next year’s spring wage negotiations
• Service prices are already rising and prospects of seeing solid wage growth next year are heightening. But the evidence (on wage growth) isn’t available yet

Kishida set for high stakes meeting in shaping Japan’s next monetary policy steps

• Japan prime minister, Fumio Kishida, will be meeting with business leaders and labour unions on Wednesday

This will be a much anticipated meeting as Kishida had previously touted for big wage hikes next year that will exceed what we have seen this year. Considering what is at stake, this is something worth keeping an eye out for as it tees up the upcoming spring wage negotiations next March. In turn, that will act as a cornerstone for the BOJ to start normalising monetary policy.

The meeting tomorrow will involve representatives from Japan’s largest labour group, Rengo, and business lobby, Keidanren, alongside other business leaders and labour unions.

Japan Finance Minister Suzuki with some verbal intervention to prop up the yen

• Japan’s fin min says he’ll take necessary steps to prevent excessive FX volatility

Japan finance minister Suzuki:

• Important for currencies to move in stable manner reflecting fundamentals
• Excessive forex moves undesirable
• Will continue to take all possible steps on FX moves
• Aware that there are pros and cons with a weak yen
• Won’t comment on FX levels

Bank of Japan Deputy Governor Uchida says will not comment on FX levels

• Says the Bank wants to see price rises accompanied by wage hikes

Bank of Japan Deputy Governor Uchida

• won’t comment on FX levels
• says the BOJ aims for price rises accompanied by wage hikes

BOJ Director-General of Monetary Affairs Dept Masaki:

• doesn’t see long-term interest rates to ‘greatly’ exceed 1% even withrising pressure

Cryptocurrency News

Bitcoin wasn’t invited to the party

• Bitcoin down 3.7% to a session low

The waiting game continues for a bitcoin ETF and it appears as though some bulls are losing patience, or taking profits.Bitcoin is down 3.7% today, or $1348 to $35,040 in the second day of selling.
There have been several false reports of bitcoin ETFs and an approval appears to be only a matter of time.

What’s driving the move today? Market participants may be cycling money into equities instead as the Nasdaq surges 2.3% and NVDA gains for the tenth consecutive day.

To be sure, bitcoin has plenty of altitude to give back before any real red flags as it only retreats to last week’s levels.

Bitcoin drops, $90 million in open interest wiped out amid jitter over spot BTC ETF window closing

• Bitcoin price has dropped almost 5% on Tuesday to lose the $35,500 level as crypto markets grow anxious ahead of November 17.
• The move has seen $119.246 million long positions liquidated with a $90 million drop in open interest for BTC.
• Altcoins have also been wiped out, recording $194.57 in total altcoin liquidations amid immense selling pressure. 

Bitcoin (BTC) holders and the entire cryptocurrency market have been awaiting developments from the US Securities & Exchange Commission (SEC) after recent declarations that the financial regulator had a narrow window of only eight days to approve a spot BTC exchange-traded fund (ETF). With the window closing fast, the markets are growing anxious.

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