North American News
S&P 500 decline extends to 60 points
- Not a good start to the week as the index declines 1.5%
It’s a strange day in the market with an early US dollar drop turning into a rip. Stocks have been under pressure all day but fell further in the second half of the day and have now erased nearly all of the three-day rally from late last week.
Dallas Fed November manufacturing index -14.4 vs -19.4 prior
- Dallas Fed manufacturing survey
- Details:
- Employment 5.9 vs 17.1 last month
- Hours worked -1.0 from -0.1 last month
- New orders -20.9 from -8.8 last month
- Production 0.8 vs 6.0 last month
- Raw material price paid 22.6 vs 32.0 last month
- Prices received 13.9vs 22.2 last month month
- Shipments -7.6 vs -1.6 last month
- Growth rate of new orders -19.9 vs -13.2 last month
- Finished goods inventories 2.2 vs -12.6 last month
- Wages and benefits 36.5 vs 36.7 last month
- Capital expenditures 9.3 vs 7.1 last month
Fed’s Bullard: Markets are under-pricing the risk the FOMC might be more aggressive
- Sounds like something Bullard would say
- Rates need to go higher to bring inflation down
- We’ve got a ways to go
- Repeats that he will defer to Powell on the pace of hikes
- Rates won’t come down as much as markets would like
- 200K jobs created in Nov would still be well-above historical trend
- GDP is trending very strong for Q4
- Says upcoming disinflation skews message from yield curve, means it’s not sending ‘quite the same signal’ as earlier episodes
Commodities
Silver struggles at the 200-DMA and tumbles below $21.00
- Silver price falls below the psychological $21.00 after failing to hurdle the 200-day EMA.
- The break of an upslope trendline exacerbated a fall from daily highs around $21.60s.
- XAG/USD Price Analysis: Break below $20.89 to pave the way to $20.00.
Silver price tumbles below $21.00 late in the North American session amidst risk aversion and the recovery of the US Dollar (USD), as shown by the US Dollar Index (DXY) gaining 0.40% in the day. At the time of writing, the XAG/USD is trading at $20.95, below its opening price by almost 2%.
Silver Price Analysis (XAG/USD): Technical outlook
After XAG/USD failed to crack the 200-day Exponential Moving Average (EMA) at $21.34, the white metal is extending its losses below the $21.00 figure. It should be noted that Silver broke below a 20-day-old upslope trendline, exacerbating Silver’s drop. The Relative Strength Index (RSI), aiming towards the 50-midline, is accelerating, suggesting that sellers are gathering momentum.
Short term, the XAG/USD 4-hour chart portrays sellers’ strength. Notably, XAG/USD hit a daily high of around $21.61 before tumbling and reclaiming the 50 and 100-EMAs. Therefore, the XAG/USD path of least resistance is tilted to the downside. That said, the XAG/USD first support would be November 23, swing low at $20.89. Once cleared, the next support would be the November 21 pivot low at $20.56, followed by the 200-Exponential Moving Average (EMA) at $20.15.
As an alternate scenario, XAG/USD first resistance would be the confluence of the S1 pivot and the 40-EMA at $21.16, followed by the daily pivot point at $21.36, ahead of the R1 pivot at $21.55.
Gold drops below $1750 on risk-off due to China’s Covid protests
- Gold price tumbles below $1750 on traders’ negative sentiment, spurred by geopolitical reasons.
- China’s Covid-19 riots across the country keep Gold on the defensive.
- Soft US Dollar, courtesy of the Fed’s moderating rate hikes, stalled the XAU/USD downfall.
- US Dollar to get direction on a busy economic calendar in the United States.
- Gold Price Analysis: Neutral-upwards, but capped around the $1725-$1770 range.
Gold price edges lower as trading in the United States (US) begins after hitting a daily high of $1763.75. China’s protests about its Covid-19 zero-tolerance policy and its economic consequences weigh on sentiment even though Federal Reserve (Fed) officials laid the ground for moderated rate hikes. A busy economic calendar in the United States might cap last week’s losses in the US Dollar (USD) after the Fed’s dovish November minutes. At the time of writing, the XAU/USD is trading at $1747.11, below its opening price by 0.40%.
Negative sentiment spurred by China’s crisis keeps Gold defensive
Global equities are trading in the red, spurred by China’s civil unrest, as protesters take the streets sparked by the Covid-19 zero-tolerance policy and mass testing. According to Bloomberg, “the protests are shaping up one of the biggest threats to the Communist Party since the 1989 Tiananmen crackdown,” keeping investors on their toes. However, Gold’s safe-haven status kept the yellow metal from falling further while also benefitting from a soft US Dollar.
Federal Reserve ready to moderate borrowing costs increases
Since the last couple of weeks, Federal Reserve policymakers opened the door to some moderation in the pace of interest-rate increases. However, they emphasized that inflation is too high and that the Federal Funds rate (FFR) peak would be higher than September’s projections. It should be noted that the Federal Reserve Open Market Committee (FOMC) minutes for the last meeting indicated that “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” further confirming the aforementioned.
Of late, the Cleveland Federal Reserve President Loretta Mester stated that she does not believe that the Fed is close to a pause on tightening, reiterating its hawkish stance. Traders should know that Mester expects the FFR to end at around 5%.
Busy economic calendar in the United States
In the meantime, the US docket will be busy. On the labor market side, the release of November’s ADP Employment Change report, October’s JOLTs Job Openings, Initial Jobless Claims for the last week, and the Nonfarm Payrolls for November would update the employment situation. Regarding the PMIs, the ISM Manufacturing PMIs would be released alongside the Chicago PMI and the S&P Global PMI.
On the Fed speaking side, ahead of the blackout period, for the December meeting, Williams, Bullard, Cook, Bowman, Logan, Barr, Evans, and Powell will speak during the week.
Oil jumps into positive territory on report OPEC+ will ‘seriously consider’ output cut
- OPEC+ to consider cut next week?
It’s turned into quite a day in the oil market.
“Given overall market conditions, OPEC+ will seriously consider a new production cut at its upcoming meeting, particularly if crude prices fall much below their current level in the next week,” analysts at Eurasia Group say in report.
“Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how much disruption is evident in markets because of the EU sanctions”
EU News
EU talks on Russian oil cap end without a deal
Everything is lining up delicately in the oil market in the week ahead.
EU member states met today to try to hammer out the Russian oil price cap level, which has been criticized as too low at $65 per barrel. Poland and the Baltic states want a lower number while Greece and Cyprus’ powerful shipping lobby want it higher.
The G7 is waiting on that deal to put its own in place.
The Baltic states have leverage here because a ‘no deal ‘ scenario means that the previously-agreed blanket ban goes into effect.
Next for oil is the Dec 4 OPEC+ meeting and the Dec 5 ban date.
Lagarde: ECB committed to bring down inflation to medium-term target
- Comments from Lagarde at a hearing at European Parliament
- Decisions will follow a meeting-by-meeting assessment
- In December we will also lay out the key principles for reducing bond holdings
- It is appropriate that balance sheet is normalized over time in a measured and predictable way
- Incoming data suggests that wages are picking up, we will continue to assess that implication
- Fiscal policy needs to be considerate and to not add to inflationary pressures
- Growth is expected to continue weakening for the remainder of this year and the beginning of next year
- Strong labor markets are likely to support higher wages
Other News
Hu Xijin says ‘China may walk out of the shadow of COVID-19 sooner than expected’
- Signal from the former mouthpiece?
Hu Xijin was formerly an official spokesman for the Chinese government as chief editor of the Global Times but now he’s retired. At the same time, he still touts the party line on almost everything, so this could be the start of a big pivot from the leadership. I can’t imagine he would be saying something like this if there was no plan to ease measures.
Cryptocurrency News
BlockFi files for bankruptcy, as rumored
- BlockFi files Chapter 11 in New Jersey
This has been rumored since the downfall of FTX and most thought it was coming last week. Even though it’s not a surprise, there’s always the risk of counterparty calls on capital and dominoes falling. The company says it has $256.9m in cash on hand, which should support ongoing activities. It also said platform activities will remain suspended at this time.
However the headline itself shouldn’t be a big market mover in crypto, which is trading is a curiously tight range today.
Ethereum price dips as China triggers risk-off wave
- Ethereum price slips over 1.5% in ASIA PAC trading on Monday after riots and protests across China.
- ETH gets global selling pressure as financial markets are dipping as well.
- Expect to see another leg lower in search of support together with all other asset classes.
Ethereum (ETH) price saw a lackluster weekend regarding its price action and performance. On Saturday, some hopes were there that the pivotal level at $1,243 could get a test, but bulls never made it up that far. Instead, prices slipped lower on Sunday, and this morning, on the back of widespread social unrest in China that is hardly ever seen, overall markets are choosing to go with a risk-off tone for today.
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