Round up of today's market news *

Equities Maintain Steady Performance: A Week of Consistent Gains Closes with Another Positive Finish

On the day:

S&P 500 +0.1%
Nasdaq Comp +0.1%
DJIA flat
Russell 2000 +1.2%

On the week:

S&P 500 +2.2%
Nasdaq Comp +2.4%
DJIA +1.9%
Russell 2000 +5.3%

US October housing starts 1.372m vs 1.350m expected

US home starts and building permits for October 2023

Prior was 1.358m
Starts up 1.9%
Building permits 1.487m vs 1.450m expected
Prior permits 1.471m

Atlanta Fed GDPNow Q4 2.0% vs 2.2% prior

Updated tracker

The latest tracker is down to 2.0% from 2.2%.

After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, and the US Department of the Federal Reserve Board of Governors, the nowcast of fourth-quarter real gross private domestic investment growth decreased from -0.8 percent to -1.8 percent.

JP Morgan’s 2024 US Economic Outlook: Federal Reserve to start cutting rates in H2 of 2024

JPM say the FOMC will cut to avoid a recession, despite still-high inflation

Summary points from JP Morgan’s 2024 US Economic Outlook:

The economy easily avoided recession in 2023, but labor market activity has been slowing
We look for momentum to slow further into 2024 as growth slips below trend…
…and the economy walks a fine line between expansion and contraction
Drags from monetary policy will persist, and in some cases build, into 2024
We expect fiscal support from recent years will turn to a modest fiscal drag in 2024
We see real GDP up 0.7% in 2024, down from near-3% in 2023 (%q4/q4)
Job growth is expected to slow, and the unemployment rate to continue its recent upward trend
Wage inflation should moderate further next year in a softer labor market
Inflation trends are already cooling: a softer labor market should bring more moderation
Core PCE inflation to be up 2.4% in 2024. down from 3.4% in 2023 (%q41q4)
With slowing job growth, and further disinflation, we think the FOMC will stay on hold for a while
FOMC to start lowering rates in H2 of 2024 to avoid a recession, with inflation close to, but still above, target

Fed’s Daly: Fed needs ‘the boldness to wait’ given uncertainty

Comments from the SF Fed President
Patience needed, measured adjustments
Fed uncertain if current economic dynamics are ‘remnants’ of pandemic recovery or the new normal
Fed not certain if inflation is on track to 2%
Fed unsure about length of policy lags
Debates are no centred on what constitutes sufficiently restrictive and how long to maintain that stance

New York Fed official says the Treasury market is functioning smoothly, no dysfunction

Rising yields driven more by uncertainty than changing views of monetary policy

Robert Perli is the New York Federal Reserve official responsible for implementing monetary policy:

says the Treasury market is functioning smoothly, no dysfunction
the U.S. bond market is functioning well amid recent volatility
rising yields are being driven more by uncertainty over the economic outlook as opposed to shifting views of monetary policy
“In general, if factors such as the longer-run fiscal balance or the prevalence of supply shocks over demand shocks going forward will be the drivers of term premiums, it is possible that term premiums will stay higher than they used to be for some time”

Fed’s Collins: I wouldn’t take additional hiking off the table

Collins appearing on CNBC
We are seeing some moderation in inflation, we’ve had ‘promising news’
Data is noisy, progress is uneven
I won’t overreact to promising news, we’re positioned to be patient
Three-month core is still at 3.4%
I don’t see additional hikes off the table, we really need to stay the course
The work we’ve done is working its way through the economy
It’s important for us to be patient
Goods inflation is back to pre-pandemic levels
Rents in particular have been uneven
I look overall on financial conditions and there’s some restrictiveness on bank lending
I’m seeing positive signs that labor supply and demand are more aligned

Fed’s Goolsbee: We will do whatever it takes to beat inflation

Comments from Goolsbee

There is a ‘big gap’ between the data and how consumers/businesses feel about the economy
Inflation is front-of-mind to me
Inflation is improving but still too high

Fed’s Barr concerned over risks of highly leveraged hedge fund trading in Treasury market

Particularly the ‘basis trade

ICYMI – The Fed’s Barr expressed concerns over the risks of highly leveraged trading by hedge funds in the Treasury market. In particular the “basis trade”.

His remarks in summary:

“leverage can also increase risks to both market participants and to Treasury market functioning and must be managed appropriately by both investors and their counterparties, including through collecting margin to manage counterparty risk”
although the Fed collects information on the triparty repo market, Barr said there’s less data on trades that aren’t centrally cleared
said the government needed more information about these trades

Canada PPI data for October -1.0% versus 0.4% last month and 0.2% expected

Canada PPI data for October

Prior month 0.4%
PPI (industrial product price index) MoM -1.0% versus 0.2% expected
PPI YoY -2.7% versus 0.6% last month
Raw material prices MoM -2.5% versus 3.9% last month (revised from 3.5%)
Raw material prices YOY -0.8% versus 2.9% last month (revised from 2.4%)

Details for industrial product prices:

Energy and petroleum product prices fell 5.7% in October, primarily due to a significant drop in finished motor gasoline (-8.4%), influenced by lower crude oil prices and weak gasoline demand in North America.
Softwood lumber prices decreased by 6.4% in October, mainly due to weak seasonal demand and the impact of high interest rates on real estate activities.
Intermediate food product prices dropped by 1.9% in October, driven by declining prices for canola oil (-7.5%) and soybean oil (-9.4%), driven by factors like reduced consumption and increased global soybean production.
Prices for primary non-ferrous metal products declined by 1.2% in October, with unwrought nickel, copper, and precious metals seeing drops due to supply factors, reduced industrial consumption during Chinese holidays, and strong US dollar.
Pulp and paper product prices rose 1.5% in October, mainly due to higher wood pulp prices (+8.2%) driven by strong demand and a global price increase announcement by a major pulp producer in Brazil.

Details for raw material price index:

Crude energy product prices fell 4.7% in October, mainly due to a drop in conventional crude oil prices (-3.7%).Prices were volatile, initially rising due to Middle East tensions but ultimately declining due to concerns about demand.
Metal ores, concentrates, and scrap prices declined by 1.6% in October, driven by lower prices for nickel ores and gold, silver, and platinum group metal ores.
Hog prices decreased by 3.6% in October due to ample supply and slow seasonal demand, while cattle and calf prices rose by 1.6% due to tight domestic supply.
Yearly cattle slaughter counts decreased in Canada and the US in October, and beef cold storage has been falling in both countries, with US storage down by 20.1% in September compared to the previous year.

Canadian pullback in discretionary services spending becoming more evident — RBC

The latest RBC Canadian consumer spending tracker

Spending on physical merchandise continues to show signs of slowing. Our tracking of retail sales excluding motor vehicles (and controlling for price changes) is down an annualized ~1.0% in Q3. October sales were slightly stronger as Canadians bought more gas and clothes. But most other spending categories were either weakly positive or outright declined.

The report said discretionary service spending fell by the most in six months, with restaurants and hotels slowing. Home-related spending also remains ‘very weak’ with housing cooling.

Heading into Q4, we expect consumer activity to continue to soften. On a per capita basis, demand has declined since the second half of 2022. As cumulative mortgage servicing costs continue to mount and renewals rise, we expect Canadians will tighten their belts this holiday season.

Silver consolidates gains, still outlook looks bright

The white metal surged to a daily high of $24.15 and then settled at $23.70.
Dovish bets on the Fed weight on the US Dollar and yields favouring the metal.
Fed’s Susan Collins warned markets that tightening may not be over.

Silver surged to a high above $24.00 on Friday and then settled around $23.70 as investors seemed to be taking profits, still closing a 6% winning week. Dovish bets on the Federal Reserve (Fed) put pressure on the US Dollar and in US yields, allowing the metal to find demand.

Saudi Arabia highly likely to extend 1m BPD ‘lollypop’ cut until spring – report

More bullish oil talk

WTI crude is up $2.94 to $75.84 as it has nearly erased yesterday’s sharp decline. The latest positive news is a sources report saying that Saudi Arabia is highly likely to extend its voluntary cut “at least until the spring”.

The next OPEC meeting is Nov 26. Saudi Arabia has around 3 million barrels per day of spare capacity. The report also says that an additional 1 mbpd OEPC cut is on the table.

Baker Hughes oil rig count +6 to 500

The weekly Baker Hughes rig count

The Baker Hughes weekly rig count:

Oil rigs +6 to 500
Gas rigs, -4 to 114
Total rigs +2 to 618

OPEC+ sources:To consider whether to deepen oil output cuts at next meeting on November 26

OPEC+ sources comment on output

The OPEC+ is to consider whether to deepen oil output cuts at next meeting on November 26.
The existing curbs don’t seem to be enough
OPEC considering additional oil supply cuts due to a nearly 20% price drop since late September.
Concerns about future demand and potential surplus despite OPEC+ cuts and Middle East conflicts.
OPEC+ pledged total oil output cuts of 5.16 million bpd, 5% of daily global demand, starting in late 2022.
Some sources suggest current cuts may not be enough, deeper cuts might be discussed.
Market volatility rising ahead of Nov. 26 OPEC+ meeting.
OPEC’s monthly report cites strong oil market fundamentals despite the price drop.
International Energy Agency predicts lower 2024 demand growth and potential market surplus in Q1.
Debate among OPEC members on whether more cuts are needed; some say it’s too early to decide.
OPEC does not have an oil price target; members heavily rely on oil revenue.
Saudi Arabia’s extended oil cuts raise concerns about economic contraction.
Saudi Arabia emphasizes the need for strong compliance with production cuts among all members.
In June, OPEC+ agreed to limit supply into 2024, with Saudi Arabia extending its voluntary production cut until the end of 2023.
Some analysts expect Saudi Arabia to maintain the voluntary cut through at least Q1 2024.

Oil demand growth to remain solid in 2024, Goldman Sachs forecasts Brent at $92/bbl

Snippet from Goldman Sachs on oil:

Oil demand growth will likely remain solid
Core OPEC supply to remain low in 2024
GS expect supply growth outside core OPEC to slow down in 2024, especially in the US
postpandemic easing in supply constraints and higher-than-expected oil supply from certain sanctioned economies are one-off factors and unlikely to further boost supply growth
recent oil slump is due to supply surprise
forecasts Brent crude oil to average USD 92/bbl in 2024

EU News

European equity close: A strong finish to a great week

European stocks post a banner week

Closing changes on the day:

Stoxx 600 +1.0%
German DAX +0.8%
UK FTSE 100 +1.2%
French CAC +0.9%
Italy MIB +0.8%
Spain IBEX +1.0%

On the week:

Stoxx 600 +2.8%
German DAX +4.5%
UK FTSE 100 +1.9%
French CAC +2.7%
Italy MIB +2.7%
Spain IBEX +4.1%

Eurozone October final CPI +2.9% vs +2.9% y/y prelim

Latest data released by Eurostat – 17 November 2023

Prior +4.3%
Core CPI +4.2% vs +4.2% y/y prelim
Prior +4.5%

Eurozone September current account balance €31.2 billion vs €27.7 billion prior

Latest data released by the ECB – 17 November 2023
Prior €27.7 billion; revised to €31 billion

UK October retail sales -0.3% vs +0.3% m/m expected

Latest data released by ONS – 17 November 2023

Prior -0.9%; revised to -1.1%
Retail sales -2.7% vs -1.5% y/y expected
Prior -1.0%; revised to -1.3%
Retail sales (ex autos, fuel) -0.1% vs +0.4% m/m expected
Prior -1.0%; revised to -1.3%
Retail sales (ex autos, fuel) -2.4% vs -1.5% y/y expected
Prior -1.2%; revised to -1.5%

ECB’s Holzmann: We stand ready to raise rates again if necessary

Remarks by ECB policymaker, Robert Holzmann

Markets should know that it’s not the end of the story yet
Anything can happen in December meeting

EU to ban sales to Russia of tankers for crude oil or petroleum products

The newest list of EU sanctions against Russia via a proposal seen by Reuters

To ban sales to Russia, or for use in Russia, of tankers, of any origin, for crude oil or petroleum products
To ban direct or indirect import, purchase or transfer of diamonds from Russia
Ban includes stones processed in third countries
To phase in ban on Russian diamonds processed in third countries from March next year

ECB’s Wunsch: We are in a weak form of stagflation today

Wunsch with a dose of sunshine

I think he’s talking about Germany here rather than the whole of the eurozone.

We need to be comfortable we’re going to 2% inflation before we cut rates
I’ve been pleading for a discussion on ending PEPP reinvestments early

Other News

Xi promises further opening of China’s economy, will he deliver?

Xi pledges to improve foreign investment mechanisms, shorten negative foreign investment list

President Xi says the country will further shorten its negative list on foreign investment

says China will continue to improve foreign investment mechanisms
China will ‘unswervingly advance’ a high standard of opening up

China’s Party Chairman and Japanese Prime Minister hold discussions

Kishida has ‘serious concerns’ on Chinese military activity, Russia collaboration

President Xi Jinping met with Japanese Prime Minister Fumio Kishida.

Kishida statements following the meeting, plenty of points of contention between the two:

There are many areas of common interests as well as issues between Japan and China
Was able to reaffirm that we will work towards a strategic relationship based on mutual interests
Sought calm response from china regarding release of Fukushima wastewater
Conveyed my strong concerns over situation over disputed Senkaku islands, as well as increasing joint activities with Russia near Japanese waters
Sought swift release of detained Japanese business persons
Held wide-rangingdiscussions that included high-level export control talks
Asked china toremove buoy around disputed Senkaku islands immediately
Will refrain from commenting on how China leader Xi responded to requests for release of detained Japanese person, removal of buoy

China, US agree to hold first commerce working group meeting in Q1 2024

As confirmed by the Chinese commerce ministry

This is a decent first step in letting the icy relationship between the two thaw a fair bit more.

Australia scraps AUD 11.6bn of infrastructure projects amid worker shortages and inflation

The “but” to this is the net infrastructure spend remains unchanged

ICYMI – Australia’s Federal government has cancelled 50 infrastructure projects worth AUD11.6 bn following a review into infrastructure spending.

Department of Infrastructure review recommended 82 projects be scrapped from federal funding, 36 should be rescoped and 156 should proceed.

Reasons cited include cost blowouts due to worker shortages, supply chain constraints and high inflation.

While scrapping more than 10bn AUD of projects would take some fiscal boost of the economy and assist the Reserve Bank of Australia in bringing down inflation there is more to the story that negates that take:

the move will divert approximately $7bn of savings to deliver existing projects
the total infrastructure spend will remain unchanged

ANZ change their RBNZ forecast – do not expect further interest rate hikes

ANZ forecast for the Reserve Bank of New Zealand ahead of the November 29 monetary policy meeting.

central forecast no longer includes a resumption of hiking, though we still see this as a significant risk
have pushed out our expectation for cuts by one quarter (to February 2025), with our terminal forecast at 4.75%, still considered contractionary
Recent data has been a little mixed but overall has gone the RBNZ’s way (particularly key labour market data).
We expect the RBNZ to hold the OCR unchanged at 5.5% at its MPS on 29 November, and to publish an OCR track that is very similar to August (with a peak of 5.59% but potentially later cuts).
Either a fall or a lift in the OCR track could be justified by the data flow, but strategic considerations to avoid monetary conditions easing over the summer will be important, given the market is itching to price cuts more aggressively.

New Zealand Q3 PPI rises sharply from Q2

Evidence of continuing higher price pressure in this data. The Reserve Bank of New Zealand has paused its rate hike cycle as consumer level inflation has turned lower. This data indicating pipeline pressure for higher prices will not be welcomed by the bank.

PPI Input QoQ Q3 1.2%
prior -0.2%
PPI Output QoQ Q3 0.8%
prior 0.2%

Japan core inflation likely accelerated again last month – Reuters poll

Core consumer inflation estimated to stay above 2% for a 19th straight month

This is from the latest Reuters poll on Japan inflation estimates, ahead of the CPI data release on 24 November. The median estimate is for annual core CPI to be at 3.0% in October, up from the 2.8% reading from the month before. Mitsubishi UFJ comments that “the pace of year-on-year growth is expected to increases as the government’s subsidies on electricity and gas bills have been reduced”

BOJ Gov Ueda says cannot say right now when the BOJ will change ultra-easy policy

BOJ Governor Ueda testifies in parliament, stating uncertainty on when BOJ will change ultra-easy policy
Cannot say decisively that weak yen is negative for Japan’s economy
Weak yen pushes up
domestic inflation via rise in import costs
Weak yen is positive for exports, profits of globally operating Japanese firms
Won’t comment on FX levels
BOJ does not have specific plan yet on how it will sell ETFs
If achievement of our price target approaches, we can discuss strategy, guidelines on exiting ultra-loose policy including fate of our ETF buying
BOJ does not have specific plan yet on how it will sell ETFs
When we sell ETFs we will do in a way that avoids as much as possible causing market disruption, huge losses on the BOJ’s balance sheet
Don’t expect 10-year JGB yield to rise sharply above our 1% referenceeven if yields come under upward pressure
We will consider ending YCC, negative rate if we can expect inflation to stably, sustainably hit price target
In what order, what part we will change policy will depend on economic, price, market developments at the time
Making strong comments now on how we could change policy could haveunintended consequences in markets
When marketexpectations of future rise in long-term yields heighten, it is hard to deal with fine-tuning of YCC alone
Keeping yields across the curve low with monetary easing has had big positive effect on economy by stimulating demand, creating jobs
US Fed may at some point cut interest rates if effect of monetary tightening up till now works its way through US economy
If any US rate cutis a result of soft landing in US economy, that could have positiveimpact on Japan’s economy
It’s true consumption in latest gdp data somewhat weak
Want to gauge whether consumption continues to recover moderately by looking at various data
Service consumption is rising, but consumption of goods that saw sharp price rises such as food, daily necessities is somewhat weak
Key to consumption outlook is whether wages will continue to rise

Japan’s Deputy Finance Minister Akazawa promises JPY intervention if excess volatility

Intervention would aim to stabilize the yen and reflect economic fundamentals.

Japan’s Deputy Finance Minister Akazawa:

Don’t have specific FX level in mind in deciding when to intervene
Any FX intervention will be aimed at arresting excess volatility
We won’t intervene just because yen is weakening

Singapore non-oil domestic exports (NODX) +3.4% m/m in October (expected +1.5%)

Singapore’s non-oil domestic exports (NODX) data for October 2023.

+3.4% m/m
expected +1.5%, prior +11.1%
-3.4% y/y
expected -6.5%, prior +13.2%

Cryptocurrency News

FTT token down 15% as markets commemorate one year since FTX exchange went under

FTX exchange filed for bankruptcy exactly one year ago today, November 17, with John Ray III stepping in as CEO.
Its founder, Sam Bankman-Fried, was found guilty after a month-long trial with his counterparts taking the stand against his persona.
FTX native token FTT is down 15% with a 25% drop in trading volume.

FTX exchange comes to mind today, November 17, despite the cryptocurrency market’s focus on the US Securities and Exchange Commission (SEC) over spot Bitcoin exchange-traded funds (ETFs). Interest comes to the fallen trading platform as calendar shows it is exactly one year since the platform filed for bankruptcy.

SEC allegedly wants spot Bitcoin ETFs to do cash creates, not crypto, after possible meet-up with exchanges

ETF specialist’s says the SEC may have engaged with exchanges this week regarding spot Bitcoin ETFs.
Based on the rumors, the commission wants ETFs to do cash creates as opposed to crypto as broker dealers cannot deal in Bitcoin.
The financial regulator may have asked the trading platforms to make amendments.

With the market counting down the clock for the eight-day window the US Securities & Exchange Commission (SEC) has to approve a spot Bitcoin exchange-traded fund (ETF), recent developments point to the financial regulator turning to crypto exchanges for engagement.

SEC engages with exchanges

An ETF specialist with Bloomberg, has revealed speculation that the SEC may have engaged with cryptocurrency trading platforms on spot Bitcoin ETFs. According to them, the financial regulator’s Trading and Markets division discussed 19b-4 filings with exchanges this week. 19b-4 filings are used by self-regulatory organizations (SROs) such as exchanges to petition the SEC for new rule changes. The rumor is that the SEC has been trying to sell the idea that spot Bitcoin ETFs should do cash creates as opposed to trading in physical crypto.

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Round up of today’s market news

ByBilals Tech

North American News