North American News
Wall Street Sees Tepid Close as US Stock Indices Edge Down Slightly
- November Nears End with Subdued Market Activity
The major US indices are closing modestly lower to start the week. The major US indices are on a 4-week up streak. It is only one day, but traders are pausing today.
A snapshot of the major indices is showing:
- Dow industrial average is down -56.68 points or -0.16% at 35333.46
- S&P is down 8.89 points or -0.19% at 4550.40
- NASDAQ index is down -9.84 points or -0.07% at 14241.01
US treasury auctions $55B of 5 year notes at a high yield of 4.420%
- WI level at the time of the auction 4.425%
- High Yield: 4.420%
- Previous: 4.899%
- Six-auction average: 4.316%
- Tail:-0.5 bps
- Previous: 1.9 basis points
- Six-auction average: 0.1 basis points
- Bid-to-Cover Ratio:2.46X
- Previous: 2.36x
- Six-auction average: 2.52x
- Dealers: 16.9%
- Previous: 19.4%
- Six-auction average: 13.3%
- Directs:17.6%
- Previous: 19.1%
- Six-auction average: 19.1%
- Indirects:65.5%
- Previous: 61.5%
- Six-auction average: 67.6%
Unlike the 2 year note auction from earlier, there was a negative tail.
U.S. Treasury auctioned off $54 billion of 2-year notes at a high yield of 4.887%
- WI at time of the option 4.876%
The US treasury auctioned off $54 billion of two-year notes:
- High-yield 4.887%
- WI at the time of auction 4.876%
- Tail: 1.1 basis points versus 6-auction average of -0.4 basis points.
- Bid-to-Cover Ratio: 2.54X versus 6-auction average of 2.79x.
- Dealers: 18.76% versus 6-auction average of 15.6%.
- Directs: 23.9% versus 6 average of 19.2%.
- Indirects: 57.4% versus 6 -auction average of 65.2%.
The 2 year note auction was met with poor international demand. The domestic demand was actually stronger than expectations, but overall, the bid to cover was less than the 6-month average. The dealers are saddled with more than the 6-month average, and a tail of 1.1 basis points was needed to sell the issue. That compares to a 6 month average of -0.4 basis points. So overall it was a loser of an auction.
US new home sales 0.679M versus 0.723M estimate
- US new home sales for October 2023
- Prior month 0.719M revised from 0.759M previously reported
- New home sales -5.6%
- US homes for sale at the end of October 0.439 million units versus 0.433 million units in September
- New home sales supply 7.8 months in October from 7.2 months in September
- Median sale price $409,300 which is down -17.6% from October 2022
- average sale price of $487,000 versus $543,300 from October 2022
Regionally
- Northeast -13.2%
- Midwest -16.4%
- South +2.1%
- West -23.3%
Dallas Fed manufacturing business index -19.9 versus -19.2 last month
- Dallas Fed manufacturing business index for November 2023
- Prior month -19.2
- Dallas Fed manufacturing business index for November -19.90 versus -19.2 last month
- Output index -7.2 in November versus +5.2 in October
Bank of America warns that signs of caution have emerged for S&P 500
- Bank of America’s ‘Bull & Bear Indicator’ exits its ‘Buy’ zone
Bank of America’s chief strategist, Michael Hartnett, has been busy since Friday, when he wrote in a note to clients that investors piled US$40 billion into equities over the past two weeks, which has helped the S&P500 to its best monthly performance, so far, since July 2022.
He noted, though that signs of caution have emerged and that Bank of America’s proprietary “Bull & Bear Indicator” has now exited its “Buy” zone, back to “Neutral:
- this suggests a potential shift in investor sentiment and is a sign that prudence is best for now.
And, he now thinks that the “3C”s of Credit, Crude, Consumer are signalling slower growth:
- Credit is tightening, spreads rising, defaults rising, delinquencies rising;
- oil has entered an unexpected bear market;
- while the US Consumer has been so far bulletproof (job security& wealth security) unemployment is now rising;
Hartnett sees no 2023 recession but 2024 will be more challenging:
- we await the classic combo of bearish Positioning, recessionary Profits & Policy easing (“3P”s)
- believe the risk of a “hard landing” for the economy is higher-than-expected
- a soft landing which takes bond yields from 5% to 4% is bullish risk, but a deeper recessionary decline in yields from 4% to 3% is bearish risk; driven by weak growth & EPS we expect risk asset downside in early-24, lower yields-lower stocks correlation
Strong auto sales hide slowing Canadian disretionary spending
- Canadian retail sales weren’t as strong as they appeared
Friday’s Canadian retail sales report for September far-surpassed expectations at +0.6% compared to a flat reading expected. In addition, the advance reading for October was +0.8% in a sign of even-more strength.
CIBC highlights a contrast in consumer spending patterns in the report. While auto sales surged, there was a noticeable dip in discretionary spending in areas like clothing, sporting goods, and furniture. The latter could reflect the ongoing correction in house prices and a slowdown in home sales.
“The September print suggests that overall GDP in that month will have looked slightly better than the advance estimate, at 0.1% m/m,” CIBC writes. “And while the underlying core group of sales continues to suggest a wilting consumer, solid auto sales may prevent another drop in goods consumption in the final quarter.”
CIBC also notes that the October print could have been impacted by auto sales, which surged in part due to a delay in deliveries following a port strike.
Commodities
Silver remains bullish, though faces strong resistance at around $24.90
- Silver prices climb to a new three-month high at around the $ 24.80 area.
- US Treasury bond yields pullback, driving the grey-metal price higher.
- Silver is bullish above $24.50, otherwise, expect a pullback below $24.00.
Silver price encounters solid resistance at around $24.90, though it remains trading in the green, posting solid gains of more than 1.30% on Monday due to a retracement of US Treasury bond yields, weakening the buck.
That, alongside a scarce economic calendar, keeps investors focused on the release of the Personal Consumption Expenditures (PCE) Price Index later in the week. The white metal is trading at $23.65 after hitting a low of $24.27.
Crude oil futures settle at $74.86
- Down -$0.68 or -0.90%
The price of WTI crude oil futures are settling at $74.86 down $0.68 or -0.90%.
The high price for the day reached $76.18 the low price reached $74.11. Prices have been lower for 4 consecutive days. The softer U.S. Dollar provided support to the oil market, balancing the impact of the extended ceasefire between Israel and Hamas. The market’s anticipation of the upcoming OPEC+ meeting, where members are expected to discuss deepening and extending production cuts despite earlier internal disputes, also influenced prices. Adding to the day’s volatility were reports that Saudi Arabia is advocating for OPEC+ quota cuts, facing resistance from some members, and as of Monday, no agreement had been clinched. This ongoing uncertainty within OPEC+ contributed to the day’s price movements.
Saudi Arabia sees OPEC+ rate cuts, while some members resist
- According to Bloomberg
Bloomberg is reporting that Saudi Arabia sees OPEC+ cuts, but says that there are countries that do resist.
The meeting will take place on November 30.
EU News
Major European indices start new trading week lower
- Declines of near 0.4% for the German, France, UK markets
The major European indices are starting the week off with the declines. The German, France, UK markets all fell around -0.4%. A snapshot of the closing levels shows:
- German DAX -0.39%
- France CAC -0.37%
- UK FTSE 100 -0.37%
- Spain Ibex -0.03%
- Italy FTSE MIB -0.25%
UK November retailing reported sales -11 vs -36 prior
- Latest data released by CBI – 27 November 2023
- Prior -36
SNB total sight deposits w.e. 24 November CHF 473.7 bn vs CHF 476.9 bn prior
- Latest data released by the SNB – 27 November 2023
- Domestic sight deposits CHF 465.3 bn vs CHF 467.7 bn prior
Swiss sight deposits fall in the past week but still sits in the recent range of overall levels seen since the end of October. Here’s a snapshot:
ECB’s Lagarde: PEPP will be discussed in the not so this the future
- ECB’s Lagarde speaking
- Observes that Euro area activity has stagnated in recent quarters and is likely to remain weak for the rest of the year.
- Advises that it is premature to start declaring victory in the current economic scenario.
- There are indications of potential job growth slowdown towards the end of the year.
- Emphasizes the need to stay focused on the mandate of price stability, considering various forces affecting inflation.
- Notes that wage pressures remain strong.
- Looking beyond 2024, the ECB’s Governing Council is committed to exploring ways to further decarbonize corporate portfolios.
- Expects the weakening of inflationary pressures to continue.
- States that the medium-term outlook for inflation is still surrounded by considerable uncertainty.
- PEPP will be discussed in the not so this the future
- We will re-examine a proposal to keep reinvesting until the end of 2024
German finance ministry: Cabinet agrees on a draft of 2023 supplementary budget
- The German Finance Ministry reports that the cabinet agrees on the draft of the 2023 supplementary budget.
- The Ministry plans to take out a net credit of 27.4 billion EUR and an additional 43.2 billion EUR net credit for the Economic Stabilisation Fund.
- The Ministry is still examining the further effects of a court decision on special funds.
- According to the Ministry draft, the 2023 supplementary budget aligns with the government’s sustainability strategy.
- The Ministry draft notes that the effects of the Ukraine war will continue to significantly impact the government’s revenue and spending in 2023.
- A draft from the Ministry highlights the persistent risk that falling consumer spending could trigger a downward economic spiral.
- The Finance Ministry presentation indicates that there are sufficient funds available to cover planned climate function expenditure in 2024.
BOE’s Bailey: It is too soon to discuss about cutting interest rates
- Remarks by BOE governor, Andrew Bailey
- Getting inflation down to 2% will be hard work
- A lot of the recent fall in inflation is due to unwinding of energy cost surge
Bank of England faces urgent overhaul over laggardly inflation response – “inadaquate”
- The House of Lords calls for extensive reforms at the Bank of England in a critical report
The upper house of the UK Parliament, the House of Lords, has released a report on the Bank of England that examines the Bank’s response to rising inflation.
UK inflation began to rise in 2020 and, eventually, the Bank raised its cash rate (“Bank Rate”) 14 times.The Economic Affairs Committee of the Lords says significant reform is needed at the Bank:
- policymakers too slow to respond
- policymakers too reliant on inadequate forecasting models
ECB’s Nagel says inflation is slowing, but its not yet at level desired by the Bank
Germany’s Bundesbank President (and European Central Bank Governing Council member) Nagel spoke at a youth event in Frankfurt on Saturday. He spoke mainly on German fiscal matters but did add, on the European Central Bank:
- that the Bank’s rate hikes were impacting on the economy, slowing inflation
- but that inflation is not yet back down to a level where the ECB wants it
Asia And World News
Boosting financial support for private firms: the People’s Bank of China takes action
- PBOC signaling increased simulus assistance for the sector
The People’s Bank of China has issued a notice to strengthen financial support for private firms
- support private enterprises in listing and financing, mergers and acquisitions, and restructuring
- to use monetary policy tools, fiscal subsidies to incentivizefinancial institutions to service private companies
- China supports M&As, IPOs, refinancing by private firms
- encourage lenders to not to cut or suspend loans for private companies facing temporary difficulties but have competitive technologies
- to reasonably meet the financing needs of private property companies
China Industrial profits for October YTD -7.8% (prior -9.0%)
- China’s Industrial profits for October show the contraction in earnings abating slightly
China Industrial profits for the January – October 2023 period -7.8% y/y
- prior -9.0%
For October alone +2.7% y/y
- prior +11.9%
Beijing exchange suspends share reduction by major shareholders of listed companies
Reuters with the info citing unnamed sources. three people familiar:
- Beijing Stock Exchange has asked major shareholders of listed companies not to reduce holdings even if they are eligible to do so
- for fear that a surge in stake-selling “could dull market excitement”
Reuters added:
- Neither the Beijing exchange nor the China Securities Regulatory Commission immediately replied to requests for comment
ICYMI – Top Chinese ship finance leader detained for investigation – COSCO chairman
- Joins the list of targetted executives in China
ICYMI – Liu Chong, chairman of Shanghai and Hong Kong listed Cosco Shipping Development Co. Ltd., has been detained by authorities for investigation.
Chinese media had the report over the weekend.
Details are sparse:
- COSCO Shipping Development, the finance and leasing arm of the world’s largest shipowner, COSCO, said in a filing earlier this week that Liu had submitted a written resignation from all duties in the company, citing “personal reasons”.
- Liu also relinquished his board positions at China Merchants Securities and Everbright Bank.
The report adds:
- Many other senior names within the Chinese ship finance and leasing scene have been detained over the past couple of years
China’s Health Ministry says the surge in respiratory illnesses not a novel virus
- China’s Health Ministry says the surge is caused by flu and other known pathogens
China’s health Ministry says that the
surge in respiratory illnesses across China that has drawn the attention of the World Health Organization is caused by the flu and other known pathogens and not by a novel virus.
Reserve Bank of New Zealand (RBNZ) preview: No change expected in the Official Cash Rate
- Reserve Bank of New Zealand meeting on November 29 – Shadow Board recommendation insight.
The Reserve Bank of New Zealand meeting this week is scheduled for November 29.The announcement is due at 2pm, local New Zealand time:
- which is 0100 GMT, and 2000 US Eastern time on Tuesday the 28th
- the current RBNZ Official Cash Rate (OCR) is 5.5% – no expectation of any change in this
From the New Zealand Institute of Economic Research (NZIER), the recommendation of its ‘Shadow Board’ is to leave the cash rate at 5.5%. The Shadow Board said, in summary, that some members felt that the Reserve Bank would be somewhat reassured that the OCR increases to date would be sufficient to limit inflation back towards its 1 to 3 percent inflation goal zone given recent developments in the labour market, inflation, and waves of mortgage refixing.That is, most recent data also shows a reduction in labour market pressures and inflation, and many households are switching now to considerably higher mortgage rates.
BOJ governor Ueda: Cannot say with conviction that inflation will hit 2% sustainably
- Ueda continues to play down the odds of Japan sustainably hitting the 2% inflation target
- Japan economy is recovering moderately
- The output gap has narrowed to near zero
- Some positive signs seen in wages and inflation
- But there is still high uncertainty on whether this cycle can strengthen further
Japan data: PPI Services for October +2.3% y/y (expected +2.1%)
- Japan’s Corporate Services Price Index for October outperformed predictions
Japan PPI Services (Corporate Services Price Index) for October 2023 +2.3% y/y
- expected +2.1%, prior +2.0%
- measures the average change over time in the prices received by service providers (in the private sector) for their services in Japan
- Data published by the Bank of Japan
- covers services such as transportation and communication, finance and insurance, wholesale and retail trade, and others
- this is not consumer inflation but rather business level inflation
Surge in Japan wholesale services inflation driven by a tight job market, inbound tourism
- Speculation about the Bank of Japan ending its negative interest rate policy in April
Reuters have posted recap points on the data:
- business-to-business service inflation accelerated in October
- a tight job market lifted labour costs
- underscoring a broadening of price pressures
- surge in inbound tourism drove up hotel fees 49.9%
- The data suggest Japan’s economy is making progress towards achieving sustained rises in inflation accompanied by solid wage growth.
Cryptocurrency News
Binance trading volume hits April high despite CZ’s exit
- Binance daily trading volume has increased to a $10 billion average, suggesting no major decline in usage.
- New CEO Richard Teng suggested the company will focus on becoming a traditional financial company.
- Teng stated institutions will result in crypto users growing from 5% today to 20% of the global population soon.
Binance is going through what is known in the traditional finance world as a stress test.The recent fiasco that ended up with the resignation of Changpeng Zhao has set the exchange up for an opportunity to showcase its resilience, and against market expectations, it is standing strong.
Binance shows signs of resilience despite CZ exit
Binance was expected to lose its customer base and the total volume of assets traded on the platform after the founder and former Chief Executive Officer (CEO) Changpeng Zhao (CZ) resigned last week. The crackdown of the government of the United States and the Department of Justice on Binance and CZ was unexpected bearishness.
Surprisingly, however, the crypto exchange did not witness a drawdown in the activity but instead a surge. The monthly trading volume on the exchange rose from $201 billion in October to $272.5 billion month to date. This shows that the average daily trading volume has risen from $6.4 billion to $10.2 billion.
XRP price finds support, eyes 15% climb as collaboration with HSBC boosts Ripple sentiment
- Ripple price has found support at $0.5981, breaking a 20% fall that began on November 7.
- It comes on the back of a collaboration with HSBC, combining Metaco with Ripple for banking infrastructure.
- XRP price could pull north if bulls defend this position, with a 15% climb to $0.6820 in the cards.
- The bullish thesis will be invalidated upon a decisive candlestick close below the critical support at $0.5981.
Ripple (XRP) price has found support after a multi-week fall, pivoting around this level as it calculates a possible correction. The inflection is influenced by a new partnership between Ripple and HSBC, one of the world’s largest banks.
Metaco’s HSBC deal with Ripple foreshadows possible growth for XRP
Ripple acquired Swiss digital asset custody firm, Metaco, earlier in the year.However, recent revelations that the firm is working with one of the world’s largest banks, HSBC, have excited bullish sentiment for XRP community members.
According to XRP community members, HSBC choosing Ripple as its custody technology partner is a clear manifestation of financial institutions looking to adopt XRPL and most importantly XRP token.
According to Metaco CEO Adrien Treccani, “There is an indirect link between Ripple protocols and Metaco’s banking clients. Treccani explains this correlation as the adoption of Ripple and Metaco’s solutions further promoting the adoption of the XRPL as a protocol,” adding that, “Every success of Ripple the company is also a success for the XRP Ledger.”
Ripple has been active in courting banks with the goal of streamlining cross-border payments. Treccani points to XRPL as one of the longest-serving examples of a private tokenization blockchain.
As such, the amalgamation of Metaco and Ripple provides a complete suite, made up of an infrastructure layer and a services layer, delivering a financial powerhouse with a well-packaged vertical stack comprising tokenization life cycle, payments primitives, and liquidity management all from one vendor.
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