North American News
Major stock indices take it on the chin today. Weaker than expected data/hawkish Fed hurt
- Bad news is bad news
You asked for it. You got it.
The Fed does not like rising assets like stocks as they continue to worry about inflation. More stock wealth will just encourage spending and speculation. The reality is the Fed created the speculation way back when they ignored inflation. Now they are trying to make up for it.
Moreover the ECB put on their hawkish hats and raise rates by 50 basis points with reports that one third of the members were actually looking for another 75 basis point hike. That prompted the ECBs Lagarde to barter 2×50 at least which will be 3x 50 if inflation does not cooperate as expected.
Data did not help either as Retail sales, Philly Fed, Empire manufacturing and Industrial production/capacity utilization were all weaker than expectations.
As a result, in the US stock market, the price action responded by marking down the major indices:
- Dow Industrial Average fell -764.15 or -2.25% to 33202.23 (largest decline since September 13)
- S&P index fell -99.59 points or -2.49% to 3895.74 (the largest decline since November 2).
- NASDAQ index fell -360.35 points or -3.23% to 10810.54 (the largest decline since November 2
- Russell 2000 fell -45.84 or -2.52% to 1774.60
Not a good day for stock investors.
US November retail sales -0.6% vs. -0.1% expected
- November 2022 US retail sales data
- Lowest since Dec 2021
- Prior was +1.3%
- Ex autos +-0.2% vs -0.1% expected
- Prior ex autos +1.3%(revised to +1.2%)
- Control group -0.2% vs +0.2% expected
- Prior control group +0.7% (revised to +0.5%)
- Ex autos and gas -0.2% vs +0.9% prior
- Gasoline stations -0.1% m/m vs +4.1% prior
- Electronics and appliance stores -1.5% m/m
- Furniture stores -2.6% m/m
US initial jobless claims 211K vs 230K estimate
- US initial jobless claims in continuing claims for the current week’s
- Initial jobless claims 211 vs 230K estimate. Prior week 230K revised to 231K
- four-week moving average of initial jobless claims 227.25 vs 230.25 last month
- continuing claims vs 1.671M estimate. Last week 1.671M revised to 1.670M
- four-week moving average of continuing claims 1.625M vs 1.582M last week
- The largest increases in initial claims for the week ending December 3 were in California (+15,306), New York (+8,777), Texas (+8,639), Georgia (+7,806), and Illinois (+5,083),
- While the only decrease was in Connecticut (-139).
US industrial production for November comes in at -0.2% versus 0.1% estimate
- US industrial production and capacity utilization for the month of November 2022
- Industrial production -0.2% versus +0.1% estimate. Last month -0.1%
- capacity utilization 79.7% versus 79.8% estimate. Last month 79.9%
- manufacturing output for November -0.6% versus -0.1% estimate. Prior month was revised higher to +0.3% from +0.1%.
- Mining output -0.7% versus -0.7% last month. Utilities output was 3.6% versus -1.3% last month
- motor vehicle assembly rate fell to 10.25 million units per year from 10.84 million units in October
- industrial output exit cars/parts +0.1% versus -0.1% last month
US October business inventories +0.3% vs +0.4% expected
- October business inventories
- Prior was +0.4%
- Retail inventories +0.3% vs +0.4% prior
- Retail inventories ex autos -0.5% vs -0.4% prior
Atlanta Fed GDPNow tracker 2.8% vs 3.2% prior
- GDP tracker trends lower
- Prior was +3.2%
The Atlanta Fed GDPNow tracking estimate as been trimmed to 2.8% from 3.2% on Dec 9 after today’s retail sales disappointment.
“After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, the US Department of the Treasury’s Bureau of the Fiscal Service, and the Federal Reserve Board of Governors, the nowcasts of fourth-quarter gross personal consumption expenditures growth, fourth-quarter gross private domestic investment growth, and fourth-quarter real government spending growth decreased from 3.7 percent, 0.7 percent, and 1.1 percent, respectively, to 3.4 percent, -0.1 percent, and 0.8 percent, respectively.”
Commodities
Silver Analysis: Highs locked in, focus is on the downside on break of $22.9600
- Silver bears are taking on the bullish correction that has so far made a 50% mean reversion of the prior bearish impulse.
- A downside extension towards $22.7250, $22.6070 and $22.4655 could be on the cards.
Silver has been on the back foot due to a rise in the US Dollar following hawkish outcomes from the central bank meetings this week. XAU/USD bears are on the prowl and have already tested a key area of the support structure. If the bears can fend off the bull’s correction below $23.2070, then there will be near-term prospects of a downside continuation. Analysts at TD Securities argued that a break below the $22.50/oz mark is needed for trend followers to flatten out their remaining length.
Gold tends to perform well during recessions – ANZ
Gold prices tend to come under pressure ahead of recessions, but then outperform other markets (such as equities) during them, strategists at ANZ Bank report.
Gold has performed well during past recessions
“We expect the US to enter a recession in 2023, with GDP falling to 0.2% YoY and contracting by 0.8% QoQ in Q3. The economic growth outlook is compounded by weakness in Europe as it faces ongoing geopolitical risks and energy shortages. This backdrop is typically positive for Gold.”
“Gold prices tend to come under pressure ahead of recessions, with returns over the six months before a recession averaging 2%. It then tends to outperform equities during recessions, with average returns of 16%. For the six months after a recession, Gold continues to deliver decent gains.”
WTI crude oil futures settles at $76.11
- Down $1.17 or -1.51%
The price of WTI crude oil futures are settling down $1.17 or -1.51% at $76.11. The high price rate $77.74. The low price was at $75.37. The high price stalled near the high price from Wednesday’s trade at $77.72. That high price was also near swing highs going back to December 5 and December 6. So for whatever reason, the $77.74 level is now a strong ceiling area for crude oil. Be aware
EU News
European equity close: Heavy selling on the ECB turn
- Losses of 1.0-3.3%
It was a rough one in Europe as Lagarde took a decidedly hawkish stance.
- Stoxx 600 -2.8%
- German DAX -3.2%
- France’s CAC, -3.2%
- UK’s FTSE 100 -1.0%
- Spain’s Ibex -1.7%
- Italy’s FTSE MIB -3.3%
The euro goes from pricing in higher rates to pricing in abysmal growth
- Lagarde is coming hard at growth
Get your umbrella because the message from Christine Lagarde today was that it’s going to be an ugly economy in Europe for awhile.
She touted a mild recession but also strongly hinted at rates rising above 3% and that’s into an economy that’s struggling with high energy costs.
ECBs Lagarde offered back to back 50 bp hikes to secure majority
- More sources comments
- ECBs Lagarde offered policymakersback to back 50 basis point hikes to secure majority after stiff opposition on Thursday.
- this could mean three, 50 basis point hikes by ECB if inflation outlook fails to improve.
Earlier the sources comments showed that there were up to 1/3 that wanted to hike by 75 basis points hence ECBs hawkish stance.
Other News
JPMorgan nows sees ECB terminal rate at 3.25% vs 2.50% previously
- That’s a material increase
There are some who think that economies will be struggling so badly by the spring that central banks will stop hiking but others are taking policymakers at their word.
Interestingly, Fed pricing has stubbornly stuck to 4.89% for May despite the higher dot plot. As for the ECB, JPM sees a path of another 50 bps hike then three 25 bps hikes to get to 3.25%.
Italian borrowing costs are surging following the ECB decision
- That debt isn’t getting any more sustainable
Lagarde certainly isn’t there to close spread today. Italian 10-year yields are up 26.8 bps today to 4.125% — all of it since the ECB’s decision.
Cryptocurrency News
Binance CEO Changpeng Zhao predicts challenging period after rumors of FTX-like collapse
- Binance exchange is consistently making headlines for massive user withdrawals and fear of an FTX-style collapse.
- Changpeng Zhao shrugged off user concerns and said the platform can survive any crypto winter and will get past this challenging period.
- BNB, the native token of the exchange, yielded 12% losses for holders over the last two weeks as they struggled with FUD on crypto Twitter.
Binance, the world’s largest exchange by trade volume, is the target of speculation on crypto Twitter as users raise concerns over similarities with doomed crypto broker FTX. CEO Changpeng Zhao tried to assuage employee concerns in a recent memo. The exchange’s native token BNB is bleeding in response to the fear, uncertainty and doubt (FUD).
BNB is bleeding in response to speculation
Binance’s native token BNB yielded 12% losses over the last two weeks as speculation regarding the platform’s insolvency started doing the rounds. BNB is used to pay transaction fees and distribute rewards among users. BNB price nosedived from $301.33 to $264.81 within fourteen days.
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