North American News
Major Indexes Hold Steady, While Russell 2000 Retracts 1.5% Following Yesterday’s Impressive Surge
It was a choppy day with no big moves as the market consolidates after some big gains. A flat day for stocks after such larger gains qualifies as a win for the bulls.
- S&P 500 +0.1%
- Nasdaq Comp +0.1%
- Russell 2000 -1.5%
- DJIA -0.2%
US initial jobless claims 231K vs 220K estimate
- The weekly US initial jobless claims in continuing claims data
- Prior week 217K
- initial jobs claims 231K vs 220K estimate. Highest since August 18
- 4-week moving average 220.25K vs 212.50K last week.
- Continuing claims 1.865M vs 1.847M estimate. Highest since November 2021
- Prior week continuing claims 1.834M were revised to 1.833M
- 4-week moving average of continuing claims 1.823M vs 1.789M
Philadelphia Fed November manufacturing index -5.9 vs -9.0 expected
- The latest manufacturing survey from the Federal Reserve Bank of Philadelphia
- Prior -9.0
- Employment +0.8 vs +4.0 prior
- Prices paid +18.4 vs +23.1 prior
- Prices received +14.8 vs +14.6 prior
- New orders +1.3 vs +4.4 prior
- Shipments -17.9 vs +10.8 prior
- Delivery times -8.7 vs -21.4 prior
- Inventories -3.1 vs -7.0 prior
Expectations component i.e. six months from now:
- Business activity index -2.1 vs +9.2 prior
- Employment +4.3 vs +7.8 prior
- Prices paid +37.9 vs +48.5 prior
- Prices received +34.5 vs +46.9 prior
- Capex -1.3 vs -4.8 prior
- New orders +11.3 vs +18.9 prior
- Shipments +16.3 vs +5.4 prior
- Delivery times -22.4 vs -17.1 prior
- Inventories +0.1 vs +4.9 prior
US October import prices -0.8% vs -0.3% expected
- US import and export prices
- Prior import prices +0.1%
- Export prices -1.1% vs -0.5% expected
US October industrial production -0.6% vs -0.3% expected
- Highlights of the October US industrial production report
- Prior was +0.3% (revised to +0.1%)
- Manufacturing output -0.7% vs -0.3% expected
- Capacity utilization 78.9% vs 79.4% expected
30-year old Millenials are way behind Boomers at the same age on home ownership
- A look at the gap in home ownership from the St Louis Fed
At age 30, only 38% of college-educated millennials owned homes.This was less than the 54% of similarly educated baby boomers at the same age and also less than the 49% of non-college-educated baby boomers at the same age.
US November NAHB housing market index 34 vs 40 expected
- US home builder sentiment data
- Prior was 40
- Single family 40 vs 46 prior
- Next six months 39 vs 44 prior
- Traffic of prospective buyers 21 vs 26 prior
KC Fed November manufacturing index -3 vs -8 prior
- Data from the KC Fed
- Prior was -8
- Composite index -2 vs -8 prior
NY Fed’s Nordstrom: Foreigners bolstering treasury holdings adjusted for market valuations
New York Fed Nordstrom (Head of domestic and international markets) says:
- Foreigners bolstering treasury holdings adjusted for market valuations
- Lower foreign official treasury holdings due to idiosyncratic reasons.
- It is clear investors evaluate safety and the liquidity of treasury securities.
- Foreign repo facility is effective liquidity backstop.
Fed’s Mester: I am expecting growth to slow below trend
- Mester on CNBC
- I don’t have a recession in my forecast
- It’s been a strong and resilient economy but inflation has moved down
- Term premium played a role in the rise of Treasury yields
- Do data suggests things are going off a cliff in the economy
- Has not assessed whether she will pencil in another rate hike in her December projections
- We’re currently in a very good spot for policy
- We are now in a more balanced place
- It’s not about cutting rates, it’s how long we stay in a restrictive stance, and possibly higher
Feds Cook: Risk are two sided. I believe that a soft landing is possible
- Feds Cook speaks on the economy
- I believe that a soft landing is possible
- Risks are two-sided, must balance risk of not tightening policy enough against risk of doing too much
- There’s a risk that continued demand momentum could slow pace of disinflation
- Small business conditions, housing sector. Lower-income households may be signaling loader stress ahead
- Also attentive to risk of renewed global economic shocks, including geopolitical and muted growth in China, Europe
- Fed policies have spillovers abroad
- Concurrent global central bank tightening may mean each central bank need do a bit
- Supply chain improvements, drop in commodity prices has also helped inflation’s fall
- Increased multifamily housing supply will contribute to the expected further reduction in inflation
- Labor supply, demand coming into better balance
Federal Reserve’s rate cut speculations boost US equities, Deutsche Bank offers caution
- US equities rise as markets anticipate a potential dovish pivot by the Federal Reserve in 2024
US equities continued their climb on Wednesday, spurred on her again by thoughts of Federal Reserve pivot to rate cuts in 2024 (pricing for cuts in May is surging.)
Deutsche Bank analysts are wary, pointing out that:
- this is at least the 7th time in this cycle that markets have seen a clear reaction to a potential dovish pivot
And outlines the six previous times these expectations were not fulfilled:
- a consistent story of this cycle so far has been that markets have pushed out the timing of future rate cuts
Alibaba shares down as Jack Ma’s family plans to sell down shares
- Ma’s family trusts, JC Properties, and JSP Investment, plan to sell a total of $870.7 million worth of shares
That is seeing Alibaba fall roughly 8% in pre-market trading now as Jack Ma’s family trusts intend to reduce their holdings by 5 million shares each. The sale will go through on 21 November, according to a disclosure from the SEC today.
Three Fed officials see case for ‘considerable Fed balance sheet decline’ – report
- Comments from the Fed’s Cook, Kugler and Jefferson in letters to a US Senator
- See case for considerable balance sheet decline
- Balance sheet wind-down depends on markets and the economy
- Not targeting a dollar value for balance sheet
- There may be considerable decline in reverse repo reserves
The comments from the trio were sent in a letter to Senator Rick Scott.
Moody’s on recession risk and Federal Reserve rate cuts next year
- Moody’s assess a 25% chance of recession by 2024.
Moody’s offered up views on the Federal Reserve and recession risk on Wednesday in a report and also in a TV interview with Mark Zandi, chief economist at the rating agency.
In summary:
- the CPI data confirms that the rate hikes are over
- I don’t think the the bar is high for them to actually cut rates
- they need to be absolutely sure that inflation is going to get back to their target before they do that
- rate cuts probably not until mid-next year, after that I think they cut rate slowly
- the economy is going to be able to avoid recession
- job growth is slowing
- wage growth is moderating
- “We put the odds of a recession beginning in 2024 at 25%. …Behind the still-elevated recession probabilities are the considerable number of downside risks evident in our U.S. risk matrix.”
US Senate votes to approve temporary funding to avert a government shutdown
The House passed the bill on Tuesday. The Senate has now passed it.
It’ll now head to the White House for US President Biden to sign into law, thus averting a government shutdown. The funding bill will keep federal agencies running for another two months. it left out aid to Ukraine and Israel.
Fed Reserve’s Barkin hints at normalizing rates amid credit pullback
- Barkin suggests gradually returning interest rates to normal citing despite housing market slowdown
Federal Reserve Bank of Richmond President Thomas Barkin remarks being reported. He is sounding vague on moves lower for Fed Funds rates:
- hope to eventually bring interest rates back to normal
- a lot of frenzy has been taken out of the housing market
- seeing banks pull back credit, a not-unexpected outcome
Canada October housing starts 274.7K vs 252.9K expected
- Canada October 2023 housing starts
- Prior was 270.5K (revised to 270.7K)
Commodities
Gold surges with gains in three of the past four days
- Gold up $25 today
Falling Treasury yields and a weaker US dollar have helped gold gain in 3 of the 4 trading days this week.Today it’s up $24 to $1983 after starting the week at $1935.
One of the under-the-rader moves in the fixed income market this month is the fall in real yields. The combination of lower implied inflation and the pining for Fed rate cuts along with decent global growth is a good sign for good. In addition, China and Russia continue to accumulate reserves.
Silver soars amid soft Indutrial Production and Jobless Claims figures from the US
- Silver trades at $23.80, its highest since early September.
- The USD and Treasury yields tumbled after soft economic data was reported from the US.
- As long as investors bet on a less aggressive Fed, it will benefit the grey metal.
The white metal saw significant upward movements in Thursday’s session, soaring to $23.80, seeing more than 1.50% gains.The metal increased amid soft Industrial Production and Jobless Claims, which fuelled a decline in US yields, allowing the metal to gain interest.
Crude oil settle at $72.90
- Down -$3.76 or -4.90%
The price of crude oil tumbled $3.76 or 4.9% at $72.90.The low price reached the $72.22. The high price was up at $76.58. The low price i reached its lowest level going back to July 7. At the low, the price tested the low of 8 swing area between $72.30 and $73.31. The price is settling between those 2 levels.
The demand concerns are the catalyst today with initial jobless claims in continuing claims showing some tilt toward the weaker side. The low for the year reached near $63.60. The high price for the year was at $94.99. The midpoint of that comes in at $79.30. For the year, the price is now down -9.55%, down $16.80
Brent crude oil and “green shoots of hope” in China
- China to fuel a more positive outlook on oil prices
World’s biggest independent oil trader, Vitol, views oil usage:
- expects net additions of gasoline-fueled cars in China to rise by 12 million units this year and by 11 million in 2024
- there are some concerns about China’s construction sector but there are “green shoots of hope” for the nation’s oil demand
- gasoline and jet fuel consumption is still growing
US to enforce oil sanctions on Iran, will reduce Iranian oil exports
- President Biden’s energy security adviser confirms US will crack down on oil sanctions against Iran
ICYMI, President Joe Biden’s energy security adviser Amos Hochstein spoke with Bloomberg News on Wednesday, saying that the US will enforce oil sanctions against Iran amid the renewed conflict in the Middle East, and that will bring down Iran oil exports:
- sanctions amounted to more than 1 million barrels a day of oil exports from Iran
- “Those numbers will come down”
EIA weekly US natural gas inventories +60 bcf vs +40 bcf expected
- Weekly natural gas storage
- Prior was +40
EU News
BOE’s Greene: I am not thinking about rate cuts
- Remarks by BOE policymaker, Megan Greene
- Latest inflation data is good news
- But there are reasons to worry about inflation persistence
- We might need to stay restrictive for longer
- UK wage growth is still incredibly high
- Need to see how UK activity is holding up before next rate vote
BOE’s Ramsden: Latest projections indicate monetary policy to be restrictive for extended period
- Comments from the MPC’s Ramsden
- Latest projections indicate that monetary policy is likely to need to be restrictive for an extended period
- Monetary policy will need to be sufficiently restrictive to for sufficiently long to return inflation to 2% target
- I do not judge that there are any financial stability grounds for adjusting our approach to mon pol or the level of interest rates
ECB’s Lagarde says Europe’s financial system has avoided worst-case scenario
- Remarks by ECB president, Christine Lagarde, to open the ESRB conference
- Europe’s financial system has avoided the worst-case scenario of severe systemic risks materialising at the same time
- Policymakers need to remain proactive and alert to financial stability risks as and when they arise
- Firmly convinced that the joint action of the EU financial stability community at large will be sustained and unwavering
- That allows the warnings issued to help avoid damage to the economy
ECB’s Centeno: Interest rates will not desirably return to zero
- Remarks by ECB policymaker, Mario Centeno
- But interest rates will come down eventually
Other News
China October new house prices -0.1% y/y (prior also -0.1%) and -0.3% m/m (prior -0.2%)
- All China house prices
Aggregated “All China” new home prices in October 2023.
- -0.1% y/y
- prior -0.1%
-0.3% m/m
- prior -0.2%
Investors still bearish on most Asian currencies, latest Reuters poll shows
- A snapshot of sentiment in Asia shows that the dollar is still very much favoured in the region
The poll is one that reflects what analysts and fund managers believe are the current market positioning for emerging market currencies in Asia.The latest snapshot reveals that short positions have eased in most Asian currencies but the dollar is still very much well favoured amid higher interest rates in the US. In reading the table below, it is scored based on net long or short positions using a scale of +3 to -3 respectively. As an example, a score of +3 would indicate that the market is significantly long in the dollar against said currency.
China state planner comments. Says plans to attract foreign investment, boost consumption
- China’s National Development and Reform Commission
Reuters report on the intentions of China’s state planner, the National Development and Reform Commission, has to increase efforts to attract foreign investment, and to improve consumption among low and mid-level income groups.
- “More vigorous (foreign) investment policies will be introduced,”
- “we will continue to expand domestic demand.”
- “We will accelerate the implementation of projects enabling the issue of an additional 1 trillion yuan of government bonds,”
China is ready to be a partner and friend of the US, says Xi
- Remarks by China president, Xi Jinping
- There is plenty of room for US-China cooperation
- The door of US-China relations cannot be shut
- The world needs China and US to work together
- Have reached important consensus with Biden to enhance people-to-people exchanges
- China has no intention to challenge the US
- US should not bet against China or interfere with its internal affairs
China’s Xi says the US should stop arming Taiwan
- Amidst soft language comes the more pointed comment on Taiwan.
Xinhua is a Chinese Communist Party State media outlet, reporting comments from Xi after meeting with US President Biden:
- Hopes the two countries can be partners, respect each other, coexist peacefully
- We must not let differences become a chasm
- Both sides should have more dialogue, discuss more, handle differences calmly
- Both sides should promote mutually beneficial cooperation in fields including economy, trade, agriculture, climate change, artificial intelligence
- China, US should set an example of coordination, cooperation between major world powers on international, regional issues
Australian October employment +55K, smashing the +20K estimate
The bulk in the +55K gain in jobs was part-time, which will take some of the heat out the headline.
Nevertheless it points to still strong demand for labour and keeps wage pressures on the simmer.
- Unemployment rate 3.7% as expected, despite a higher participation rate
Japan – Former JPY intervention official says it would be ineffective to prop up yen
- Rintaro Tamaki, former Vice-Minister of Finance for International Affairs
Rintaro Tamaki was Vice-Minister of Finance for International Affairs at the Ministry of Finance from 2009 – 2011. This meant he had responsibility for yen intervention.
- While in office, Tamaki intervened in the market after the March 2011 earthquake and tsunami devastated much of northeastern Japan and triggered the Fukushima nuclear crisis.
- “We intervened in the market to respond to rapid yen rises in order to regain a sense of stability,” Tamaki said. “It was nothing but a smoothing operation. We cannot think of intervention as a means to change currency levels.”
Cryptocurrency News
XRP price likely to extend fall as Ripple legal officer asks firms to fight regulation by enforcement
- Ripple price remains trapped under the $0.6603 support level after filling up a symmetrical triangle and breaking below it.
- XRP could extend the fall 5% to invalidate its big-picture bullish outlook below the $0.5981 critical support level.
- A decisive move above the $0.7000 psychological level would invalidate the bearish thesis.
Ripple (XRP) price is trading with a bearish bias even if it remains bullish from a big-picture perspective. Meanwhile, a legal expert has come forward with interesting insights for firms and individuals going against the SEC.
BlackRock’s spot Ethereum ETF filing fails to catalyze ETH price sustained rally
- BlackRock filed a form with the US SEC to issue a spot Ethereum ETF on November 15.
- The firm’s application failed to catalyze a sustained rally in Ethereum price, the asset traded at $2,048, early on Thursday.
- BlackRock is seeking to list a spot Bitcoin ETF, which is pending approval from the US financial regulator.
BlackRock, the largest asset manager in the world, filed for a spot Ethereum Exchange Traded Fund (ETF) with the US financial regulator, the SEC.The firm’s spot Ethereum ETF plans were confirmed with the registration of its ETF division iShares’ Ethereum Trust in Delaware last week.
According to a report by The Block, trading firms Jane Street and Jump Trading are working on providing liquidity for BlackRock’s proposed Bitcoin ETF if the US financial regulator approves the product.
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