Round up of today's market news *

North American News

US stock indices ended the trading session with a mixed performance

NASDAQ moves higher. S&P and Dow Industrial Average close in negative territory

A snapshot of the closing levels shows:

Dow industrial average fell -79.90 points or -0.22% at 36124.57
S&P index fell -2.60 point or -0.06% at 4567.17
NASDAQ index rose 44.41 points or 0.31% at 14229.90

Looking at the S&P sectors, three sectors were higher, while eight were lower:

Winners:

S5INFT (Information Technology): Increased by 26.40 points, a change of 0.82%.
S5C0ND (Consumer Discretionary): Gained 4.25 points, up by 0.32%.
S5TELS (Telecommunication Services): Rose by 0.49 points, a 0.21% increase.

Losers:

SPN (Energy): Decreased by 10.92 points, down by 1.70%.
S5MATR (Materials): Dropped by 7.11 points, a decline of 1.38%.
S5INDU (Industrials): Fell by 7.89 points, a decrease of 0.86%.
S5UTIL (Utilities): Lowered by 2.60 points, down by 0.81%.
S5C0NS (Consumer Staples): Reduced by 5.92 points, a decrease of 0.79%.
SPF (Financials): Declined by 3.01 points, a 0.50% decrease.
S5REAS (Real Estate): Dropped by 1.08 points, down by 0.45%.
S5HLTH (Health Care): Fell by 2.56 points, a slight decrease of 0.17%.

JOLTs October job openings 8.733M vs 9.300M estimate. Lowest level since March 2021.

JOLTs job openings for October 2023 details

Prior month 9.553M (revised to 9.350M)
Hires 3.7% vs 3.7% prior.
Separations rate 3.6% vs 3.6% prior.
Quits 2.3% vs. 2.3% prior. It was the 4th consecutive month at the same rate

The low job openings for 2023 was at 8.92M in July. This is the weakest since March 2021.

Details:

Job Openings: In October, on its final business day, there was a notable decrease in job openings, dropping by 617,000 to 8.7 million. This decline was reflected in the job openings rate, which fell to 5.3%, a decrease of 0.3 percentage points from the previous month and 1.1 points from the previous year.Significant reductions in job openings were observed in several sectors: health care and social assistance (-236,000), finance and insurance (-168,000), and real estate and rental and leasing (-49,000).Conversely, the information sector experienced an increase in job openings, adding 39,000 positions. Lower job openings is an indication of a weaker jobs picture.

Quits: In October, the number of quitters changed little at 3,600,000 and the raate was 2.3% for the 4th
consecutive month. The number of quotes increased in professional business services (+97k).
When quits increases it is a sign of confidence in the job market. With the number staying little
change for the 4th consecutive month, the confidence is waning a bit.

US November ISM services 52.7 vs 52.0 expected

November 2023 US services survey from the Institute for Supply Management

Prior was 51.8

Details:

Employment index 50.7 versus 50.2 prior
New orders index 55.5 versus 55.5 prior
Prices paid index 58.3 versus 58.6 prior
New export orders 53.6 versus 48.8 prior
Imports 53.7 versus 60.0 prior
Backlog of orders 49.1 versus 50.9 prior
Inventories 55.4 versus 49.5 prior
Supplier deliveries 49.6 versus 47.5 prior
Inventory sentiment 62.2 versus 54.4 prior

Comments in the report from respondents:

“Restaurant sales and traffic trends are consistent with the previous month and at our annual seasonal lows — should pick up again in December. We continue to trend positive to pre-pandemic and last year.” [Accommodation & Food Services]
“Opportunities across the construction industry remains strong. Thelabor market for skilled trades workers is tight.”[Construction]
“Supplies and merchandise are holding steady.” [Educational Services]
“Business conditions remain steady to the end of 2023. Annual cost escalations are a bit higher than planned, more than 5 percent versus 3 percent due to overall economic conditions and concerns.” (Finance & Insurance)
“Signs of recovery are on the horizon — (profit) margins remain tight, but revenue is improving and labor appears to be stabilizing.Supply chains are operating well, but a few major manufacturers continueto show signs of constraints that have persisted for some time. Capital investment remains constrained; however, optimism has returned for a turnaround in calendar year 2024.” [Health Care & Social Assistance]
“There are fewer new projects in comparison to last month and November 2022. Customers are not requesting quotes for new services.” [Information]
“Customers are conservative in spending, so competition to maintain market share is tight.” [Management of Companies & Support Services]
“Fourth-quarter revenues lower than projected. Seeing negative revenues trend into the first quarter of the new year. We remain positive yet concerned about 2024.” [Professional, Scientific & Technical Services]
“Prices for most items increasing, but only slightly. Increase in pricing for services much more noticeable and impactful on the organization.” [Public Administration]
“Candidate expectations during the hiring process have made staffing up more difficult.” [Retail Trade]
“Solid activity heading into the final stretch of the fourth quarter.” [Transportation & Warehousing]
“Labor, equipment and material price escalation requests are increasing, both through existing contracts as well as re-pricing of markets via requests for proposal.” [Utilities]
“A comparably flat month of business activity — no major swings one way or the other. Inventories in our extended supply chain look healthy, and fill rates are improving.” [Wholesale Trade]

US S&P Global November global final services PMI 50.8 vs 50.8 prelim

The final reading on the November services PMI from S&P Global

Prelim was 50.8
Prior was 50.6
Composite PMI 50.7 vs 50.7 prelim
Prior composite PMI 50.7
input cost inflation eased to the slowest in over three years (likely fuel)
Output prices rose at a quicker pace, to the fastest since July
New orders returned to growth

Chris Williamson, Chief Business Economist at S&PGlobal Market Intelligence, said:

“The latest PMI data point to a further cooling of inflation pressures, but the surveys also signal only modesteconomic growth and near-stagnant employment, withthe risk of the expansion losing further momentum as we head towards 2024.

“While service sector businesses continued to report further output gains in November, growth remains considerably weaker than seen earlier in the year, and forward-looking indicators point to growth slowing in the months ahead.

“Firms providing both goods and services have become increasingly concerned about excessive staffing levels in the face of weakened demand, resulting in the smallest overall jobs gain recorded by the survey since the early pandemic lockdowns of 2020.

“The cooling jobs market has been accompanied bylower wage growth which, combined with recent oil price falls, helped pull business cost growth down to its lowest for three years, dropping in November to a levelindicative of inflation approaching the Fed’s 2% targetin the coming months.”

BlackRock’s CIO Rieder says the Fed Funds rate is too restrictive today, sees mid-24 cut

BlackRock’s CIO Rieder expects the Fed to begin cutting rates in May or June

BlackRock Chief Investment Officer of Global Fixed Income Rick Rieder was interviewed on CNBC, some of his main points:

Inflation is coming down, the data is clear on inflation
The narrative of the economy falling off a cliff, that we’re moving to a recession and the Feds have to start cutting, we are facing a cut in January … is absurd. I don’t believewe’re going into a significant recession.
economy …I think we are moderating from a period of extraordinary growth.We are normalizing from what is extraordinary monetary and fiscal policy and we are just normalizing. Next, year we’ve got real GDP running at about one and a half with inflation running about two and a half. that is a normal economy.
(Federal Reserve) I think they are done (hiking rates)
fund rate … the real rate is too high
I think the Fed has got to start cutting
I think the market is ahead of itself in March … that is over the top. But I think in May, June they’ll start cutting … start doing something like 25 basis cuts to get the real rate down to what is a level that, by the way, would be restrictive. It is too restrictive today.

Driving stock market volatility: Morgan Stanley warns of fluctuations mid rate cut hopes

Advise waiting for a more opportune entry point to capture a seasonal rally in small caps

Morgan Stanley equity strategists have warned their clients about potential volatility in the stock markets this month due to fluctuating rates.

Pointing out the current active narrative of expectations that the Federal Reserve can implement rate cuts next year as inflation falls, saying:

130bps of cuts are now priced into Fed Funds futures through the end of 2024
this is a dovish expectation in the context of stable economic growth in 2024
large caps historically outperform small caps before and after the initial rate cut

MS compare the market pricing in Fed pivots several times over the past year to the current pricing, saying investor are more supportive of rate cut expectations now than in the past:

advise waiting for a more opportune entry point later in December to capture a seasonal rally in small caps instead of chasing the recent outsized move
“December may see some near term volatility in both rates and equities before more constructive seasonal trends for equities and market expectations of a potential ‘January Effect’ have an impact.”

ICYMI – Mark Zuckerberg sold Meta shares for the first time in two years

Learn more about insider selling as Facebook boss Zuckerberg sells 682K shares

Mark Zuckerberg sold shares in his tech firm in November 2023 for the first time since November 2021.

Info comes via media reports on Monday US time.
Sold around 682,000 shares in multiple trades. He did so according to his 10b5 plan, which allows insiders to sell shares under a prearranged structure.

BofA: Preview for Wednesday’s BOC policy meeting and CAD outlook

The Bank of Canada decision is on December 6

Key Points:

BoC Expected to Hold Rates: BofA anticipates the BoC will maintain the overnight rate at 5.0% in the December meeting.
Economic Weakness and Inflation Trends: The Canadian economy showed weakness with a GDP contraction in Q3, and while inflation is falling, core inflation remains high.This mixed picture suggests continued caution from the BoC.
Potential Shift in BoC Language: There is a risk that the BoC might shift from a “hawkish hold” to a “dovish hold” in its language, although BofA believes it might be too early for such a change.
BoC Rate Cut Cycle in 2024: BofA expects the BoC to start cutting rates in June 2024, with the possibility of an earlier start if inflation moves lower.
Comparison with US Rate Cuts: Slower growth in Canada might allow for faster rate cuts compared to the US.
CAD Performance: Amid the broad USD selloff, the CAD is expected to lag behind other G10 high-beta currencies until the Fed begins its rate-cutting cycle.
Seasonal CAD Trends: December traditionally shows the most bearish trends for CAD against the New Zealand Dollar (NZD) and Scandinavian currencies.

Conclusion:

BofA’s preview of the BoC’s December policy meeting indicates a likelihood of maintaining the current rate, with careful monitoring of inflation and economic trends. The potential for a shift in language from the BoC towards a more dovish stance, and the expectations for rate cuts in 2024, could impact CAD’s performance, especially in comparison to other G10 currencies and in the context of broader USD movements. CAD is likely to underperform against high-beta currencies until the Fed commences its rate-cutting cycle, with specific bearish trends expected against NZD and Scandinavian currencies in December.

Commodities

Gold glitters no more after diving close to $100 in two days

Gold’s two-day plunge, down $100, defies traditional safe-haven status amidst rising Greenback appeal.
The US Dollar Index (DXY) gains 0.29%, reaching 103.93, highlighting a shift in market sentiment towards the Greenback.
The US economy remains resilient after the ISM Non-Manufacturing PMI exceeded expectations at 52.7.
JOLTs report reveals record-low vacancies, suggesting the labor market is easing.

Gold price extended its losses for the second straight day after reaching an all-time high (ATH) above the $2,100 figure, and it has dived more than $100.00 in two days of trading. Even though a risk-off impulse is the primary driver and usually bolsters appetite for the yellow metal, traders are shifting to the Greenback.
Consequently, the yellow metal is trading at $2018.00, down 0.54% after hitting a daily high of $2041.

WTI crude oil falls for the fourth day, but holds the November low

Oil clings to support

WTI crude oil settled down by 72-cents to $72.32 today.

It fell as low as $72.17, which was just a cent above the November low. The settlement today is the lowest since July. It was a choppy session as oil bounced from the November low and got some support from higher Saudi-grade pricing and positive comments on extending the OPEC deal from Russia’s Novak.

Private oil survey data shows headline crude build vs. the draw that was expected

The private oil survey shows an unexpected increase in crude inventory

Crude +594,000 (-2.267 million exp.)
Gasoline +2.83 million
Distillates +890,000
Cushing +4.28 million
SPR +300,000

Russia says Putin and Saudi crown prince are to discuss OPEC+ cooperation

Putin is to visit Saudi Arabia and the UAE on Wednesday this week

The Kremlin confirms that Putin will meet with Mohammed bin Salman to discuss their partnership within OPEC+, adding that coordination between the two through the bloc is a firm guarantee of safeguarding stability in the oil market. And for Putin’s visit to the UAE, heads of Russian oil companies will accompany him as part of his delegation.

Russia’s Novak: We will tighten restrictions on oil and fuel supplies as early as Dec

Comments from Russia’s Novak

Russia intends to fully fulfill its obligations to voluntarily reduce oil and fuel supplies as early as January
OPEC+ countries are ready to strengthen oil production cuts in Q1 2024 to eliminate speculation and volatility

ICYMI: OPEC+ oil supply cuts can “absolutely” continue past Q12024 said Saudi oil minister

Saudi energy minister citing phased-in approach and market conditions.
production cuts of 2.2 mn bbls/day agreed last week will only be withdrawn through a “phased-in” approach based on market conditions
“I honestly believe that the delivery of the 2.2 million will happen”

EU News

German DAX index trades to a new all-time record high

Price is up for 6th consecutive days

The German Dax is trading up 131.25 points or 0.80% at 16536. That takes the index to its highest level on record, extending above the July 31 high of 16528.97. The high priest today has just reached 16540.44.

The index is now up for the 6th consecutive day. Since bottoming on October 23 31 trading days ago, the index is up 13.05%.For the trading year, the index is up 18.79%, its largest gain since 2019.

Looking at European indices today:

German DAX closed at a record level today.The index rose 128 points or 0.70%
France CAC rose 0.74%
UK FTSE 100 fell -0.31%
Spain’s Ibex rose 0.59%
Italy’s FTSE MIB rose 0.56%

Eurozone November final services PMI 48.7 vs 48.2 prelim

Latest data released by HCOB – 5 December 2023

Prior 47.8
Composite PMI 47.6 vs 47.1 prelim
Prior 46.5

The downturn in the euro area economy extends to a sixth month in a row now but at least it is seen easing in November. That being said, we’re finally starting to see cracks in the labour market as employment conditions fell for the first time since January 2021. Overall demand conditions remain soft and to make things more problematic, there was a slight intensification of price pressures whereby input prices rose at the joint-fastest pace since May. HCOB notes that:

“The service sector maintained its downward slide in November. The modest improvement of the activity index does not leave much room for optimism regarding a swift recovery in the immediate future. The sombre outlook is reinforced by the fifth consecutive monthly shrinkage in new business, albeit at a slightly tempered rate in November. Business expectations were subsequently subdued, remaining well below the long-term average and showing a slight dip. As per our GDP nowcast, factoring in the latest PMI indicators, a fall in GDP is on the cards for the fourth quarter. If two consecutive quarters of negative growth define a recession, we find ourselves currently on the brink.

“Service sector narratives in the top four eurozone economies were varied. Spain’s service sector maintained a moderate growth pace, France witnessed a rapid contraction, while Germany and Italy find themselves in the realm of stagnation. The contrasting dynamics show France, the second-largest economy, putting the biggest downer on the overall performance of the eurozone’s service sector.

“Service providers navigate a pricing puzzle. While depressed demand calls for price cuts to spark interest, uncomfortably high input price inflation urges an increase to avert losses. Presently, firms are choosing the latter path, but the strategy is not without risks. Consumer pullbacks to rising prices might escalate, dampening appetites for consumer services even further.

“Taking the perspective of the European Central Bank (ECB), the persistence of strong service provider pricing power amid an economic slowdown is worrisome. It means that the tightening of monetary conditions faces some difficulties in having its desired impact on inflation. The ECB confronts a pivotal decision: continue with interest rate hikes or place faith in the ongoing transmission of these hikes to prices. As of now, indications suggest a strong bias towards the latter choice.”

Eurozone October PPI +0.2% vs +0.2% m/m expected

Latest data released by Eurostat – 5 December 2023

Prior +0.5%
PPI -9.4% vs -9.5% y/y expected
Prior -12.4%

Looking at the breakdown, the increase largely comes from a push higher in energy prices (+1.0%) on the month. There was also an increase in prices for durable consumer goods (+0.1%) while prices remained stable for capital goods. Meanwhile, there were declines in the prices of non-durable consumer goods (-0.1%) and intermediate goods (-0.3%). If you strip out energy prices, producer prices actually declined by 0.2% in October.

Germany November final services PMI 49.6 vs 48.7 prelim

Latest data released by HCOB – 5 December 2023
Prior 48.2
Composite PMI 47.8 vs 47.1 prelim
Prior 45.9

That’s a decent revision higher, which shows that the German services sector just marginally contracted last month. This comes as the downturn in new businesses are seen easing. However, wage pressures are accelerating and that is pushing up overall costs. So, that is something to be wary about in the months to come as well. HCOB notes that:

“These numbers for the German service sector defy the gloom one might have anticipated amid the manufacturing sector recession. Although service activity saw marginal shrinkage in November, a consistent downward spiral is notably absent. Instead, most indicators show that the problems of the sector are starting to ease a bit. Nevertheless, our GDP nowcast model signals negative growth for the fourth quarter.This would mean that Germany is in a recession after having registereda 0.1% drop in the third quarter.

“Employers are still very hesitant when it comes to reducing their staff. Indeed, in November they even started to increase employment a little bit after two consecutive months of slight trimming. This aligns with the prevailing sentiment that labourshortages persist as a major challenge, leading firms to prefer keeping their workforces intact.A significant downturn in employment is anticipated only in the event of a surge in insolvencies, a scenario not currently in sight.

“Service providers are still wrestling with a decline in new business, both domestic and international. Yet, the November survey signals a significant easing of the demand dip. Notably, consumer services stand tall, buoyed by a steady job market. Companies also noted a slower contraction in outstanding work, hinting at a potential stabilisation. With the seismic constitutional court decision painting an unclear picture for the 2024 public budget and geopolitical uncertainty, the services sector braces for only modest growth.

“The high-wage agreements of the past months are leaving their traces in the form of higher costs for the generally labour-intensive service sector.Input price inflation significantly increased in November from an already historically high level.Companies are grappling with the challenge of not being able to fully pass on the hike to customers, resulting in a pinch on their bottom line. Nevertheless, against the backdrop of a lacklustre economy, they persist in hiking prices at rates that defy the norm.”

UK November final services PMI 50.9 vs 50.5 prelim

Latest data released by S&P Global – 5 December 2023
Prior 49.5
Composite PMI 50.7 vs 50.1 prelim
Prior 48.7

That’s a decent improvement in overall business activity, with it expanding for the first time since July. There were slight rises in new work and employment, so that’s a positive. However, prices charged inflation climbs up to a four-month high. S&P Global notes that:

“UK service providers moved back into expansion modeduring November as stabilising demand conditions helped to lift business activity from its recent malaise. Although only marginal, the upturn in service sector output was the fastest since July and slightly stronger than the earlier ‘flash’ estimate for November. Staffing numbers also returned to growth, supported by a modest improvement in business activity expectations for the year ahead.

“Despite tentative signs of a turnaround in new orders, survey respondents once again commented on a lack of willingness to spend among clients. Many firms notedthat low levels of business and consumer confidence,alongside elevated borrowing costs, had constrained sales opportunities in November. Overseas marketscontinued to show resilience, with strengthening USdemand often cited as a driver of increased new export orders.

“November data provided a note of caution with regard to the near-term inflation outlook as service providers signalled another round of strong input cost pressures, largely due to rising staff wages. Squeezed margins from higher salary payments and rising prices for essential business services in turn contributed to the fastest increase in output charges across the service economy for four months.”

UK BRC Sales Like For Like in November +2.6% y/y (exp +2.5%)

The British Retail Consortium (BRC) data.

like-for-like sales +2.7% y/y

vs expected +2.5%, prior +2.7%

BRC data is not adjusted for inflation, so November’s sales growth represents a fall in the volume of goods purchased.

“The cost-of-living crisis has taken its toll on Christmasspending for many households, and the continued economic conditions are testing consumer resilience,” said Paul Martin, UK head of retail at accountants KPMG

Separate figures from Barclays:

Consumer spending payment cards rose by 2.9% y/y in November

prior 2.6% in October

France November final services PMI 45.4 vs 45.3 prelim

Latest data released by HCOB – 5 December 2023
Prior 45.2
Composite PMI 44.6 vs 44.5 prelim
Prior 44.6

Demand conditions continue to falter and put a drag on France’s services sector, as new orders slumped at its quickest pace in three years. Employment conditions also suffered amid the economic drag, with it being the weakest since May 2021. Adding to the problems is that cost pressures remain elevated with firms reporting higher operating expenses with wage pressures and hikes in suppliers’ fees. HCOB notes that:

“French service companies are in a tight spot. Activity has fallen for the sixth month in a row, demand remains weak and input prices have once again risen at a rapid pace. This development prompted service companies to reduce their pace of hiring in November and to be more pessimistic in their expectations for the coming twelve months. Our nowcast model assumes a slight contraction in the services sector in the fourth quarter, with the private services sector likely to shrink relatively sharply.

“Employees are increasingly coming under pressure. According to the HCOB PMIs, layoffs in the manufacturing sector continued in November and the pace of hiring in the service sector has been steadily declining for several months. This labour market weakness trend can also be seen in the recent official unemployment figures from INSEE, which have risen for two consecutive quarters from 7.1% to recently 7.4%.

“Prices are in precarious territory. Higher wages and elevated supplier costs were cited as the main reason for November’s sharp rise in input prices, and these pressures are translating to a rise in sales prices, which were up at a faster pace in November. The recent figures offset hopes that French inflation will return to 2% in the near time.

“Clouds of gloominess hover around service firms. The generally downward trend in future expectations, that has been ongoing since mid-2021, continued in November, and the corresponding PMI remains well below the long-term average. The companies surveyed are particularly concerned about weak demand and tougher financing conditions in 2024. Our forecast is that domestic demand will strengthen in the coming year, subsequently causing expectations and activity to increase again.”

Italy November services PMI 49.5 vs 48.2 expected

Latest data released by HCOB – 5 December 2023
Prior 47.7
Composite PMI 48.1
Prior 47.0

The contraction in the services sector eases in November but the main thing to note is that inflation pressures are flaring up again. Firms signaled a steeper rise in operating costs and passed that on to consumers through greater selling prices. HCOB notes that:

“Italy’s service sector is turning more optimistic. The HCOB Business Activity PMI, which has been in contractionary territory for four months straight, moved towards stagnation, rising by 1.8 points to 49.5 in November. An upward move in the forward-looking Future Output Index feeds some hope that the sector might move beyond contraction in the coming months.

“Employment remains stable, with no further decline. Amid the weak economy, service providers hesitate to ramp up hiring.This may also have to do with wage increases, which are the result of ongoing labour shortages.Upward pressures on inputprices also came from energy, fuel and raw materials, leading input cost inflation to remain above the long-term average.Surveyed companies struggled to pass on cost increases fully to customers.

“Italy’s service providers again reported a drop in domestic orders, citing the dual impact of high interest rates and a decelerating economy. Companies surveyed note that foreign orders are struggling due to geopolitical uncertainties and subdued demand. The good news is that the drop in new orders, both total and international, has softened significantly.

“Italy’s service sector experiences an ongoing order drought, highlighted by a reduction in outstanding orders during November. Thus, it is no wonder that future activity expectation remains below the long-term average, even though the index has increased in November. Overall, while there are some signs of stabilisation, we expect the service sector to grow at only a rather modest rate.”

Spain November services PMI 51.0 vs 51.5 expected

Latest data released by HCOB – 5 December 2023
Prior 51.1

Overall activity rises in Spain’s services sector, albeit marginally. However, the more important detail is that price pressures are seen ticking higher as output charge inflation rises to a five-month high. Considering what markets are pricing in for the ECB, this particular point in the report might be well worth noting. HCOB says that:

“Resilience remains the name of the game in the Spanish services sector. After a soft patch during late summer, service providers have recovered modestly. This provides stability to the whole economy which is about to outperform the big three eurozone economies this year and probably next year, too. This stability also benefits the labour market for service jobs as companies continue to hire people at a solid pace.

“The stage seems set for a decent growth performance, yet beneath the surface, there are signs of fragility. New business, in particular, has been stuck in a state of stagnation for four months running, while new export business continuously decreased over the same period. Having said this, confidence in the outlook improved somewhat, even though it remains well below its long-term average. Overall, our base case scenario remains one of modest growth for this part of the economy over the coming months.

“The service sector showed some strength through the ability of companies to pass through higher costs to their customers. Input prices inflation eased a bit but was again at an historical high level and output prices were even increased at a faster pace than the month before. Apart from a general rise in supplier prices and more expensive refinancing conditions, higher wages were an important factor that pushed up operating expenses, according to panellists. This points to continued upward pressure on inflation over the coming months.”

ECB’s Vujcic: My baseline is for no more rate hikes and data dependent decisions

ECB’s Schnabel: Further rate hikes “rather unlikely” after latest inflation data

Remarks by ECB executive board member, Isabel Schnabel

Inflation developments are encouraging, fall in core prices remarkable
Must be careful about guiding policy for many months out
Current level of restriction is sufficient, has increased confidence 2% target will be met in 2025
Further rate hikes “rather unlikely” after November inflation data
But must not declare victory prematurely
Inflation is on the right track but more progress is needed
No prolonged recession is seen
Data suggests economy may be bottoming out

BOE rate cut pricing starts to favour June next year as first move

Markets are pricing in quicker rate cuts by major central banks everywhere

It’s now 23 bps (~93%) priced in for a rate cut June 2024, as traders are aggressively pricing in faster moves by major central banks over the last two weeks. Once again, I’d just want to reiterate that if there is going to be any readjustment to the pricing we’re seeing, it is going to be a very painful squeeze for markets in general.

Traders have more or less priced in a rate cut by the ECB for March next year now

Money market pricing shows a 24 bps cut in rates priced in for March 2024

The ECB pivot is well and truly on but I’m not sure we’re right up against the turning point already to be confident enough to say that they’re done in the inflation fight in the next three months. But that is what markets are saying now, or at least in terms of pricing. If major central banks are able to push back and truly keep rates higher for longer, this is going to be one painful exercise for markets heading into the early stages of 2024.

Asia-Pacific-World News

China data – Caixin Services PMI for November 51.5 (expected 50.8)

November exceeds expectations at 51.5, a strong rebound in business activity & new orders

China Caixin Services PMI for November 2023

expected 50.8, prior 50.4

Key points from the report:

Business activity and new orders increase at quickest rates in three months
Confidence around the year-ahead improves
Inflationary pressures weaken

Composite is 51.6

prior 50.0

Reserve Bank of Australia leaves the cash rate unchanged at 4.35%, as expected

RBA December 2023 monetary policy decision and statement, expected “hawkish pause”… leans dovish

Reserve Bank of Australia (RBA)

Headlines via Reuters:

Board remains resolute in its determination to return inflation to target
The limited information received on the domestic economy since the November meeting has been broadly in line with expectations
Outlook for household consumption also remains uncertain
The monthly CPI indicator for October suggested that inflation is continuing to moderate, driven by the goods sector; the inflation update did not, however, provide much more information on services inflation.
Measures ofinflation expectations remain consistent with the inflation target
Conditions in thelabour market also continued to ease gradually, although they remaintight.
Domestically, there are uncertainties regarding the lags in the effect of monetary policy
Higher interest rates are working to establish a more sustainable balance between aggregate supply and demand in the economy.
Holding the cash rate steady at this meeting will allow time to assess the impact ofthe increases in interest rates on demand, inflation and the labour market.

Australian Q3 current account balance shows surprise deficit vs. a large surplus expected

Net exports contribution to Q3 GDP decreases by 0.6%

Australian balance of payments, current account balance for Q3 2023 has come in at a shock deficit of A$0.2bn

vs. expected surplus A$3.2bn, prior $7.7bn

Net exports contribution to Q3 GDP -0.6%, much worse than expected

expected -0.2%, prior +0.8%

Public demand will add 0.3% to Q3 GDP

rising government spending and thus fiscal stimulus is playing havoc with the Reserve Bank of Australia’s efforts to tame inflation
Australia government spending rose 1.0% in the quarter
spending on operational items rose 1.1% in Q3
total investment in fixed assets by the government and public enterprises rose 0.7%

Australian November Services PMI 46.0 (prior 47.9)

The latest report on Australian November Services PMI indicates a decline in economic activity

Judo Bank / S&P Global November Services PMI comes in at a dismal 46.0, which is its lowest reading (outside of periods of lockdown during the pandemic) in the survey’s 8-year history

prior 47.9

Composite is 46.2

prior 47.6

Key points made in today’s report:

Incoming new business declines at fastest rate in over two years
Marginally faster job creation recorded
Price pressures intensify

Commentary from the report, in brief:

“Complicating the economic picture was an improvement in the employment index in the services sector, indicative of continued strong demand for labour. A unique feature of the current cycle has been the resilience of labour demand despite the slowdown in overall activity. This looks to be more than the normal process of labour hoarding that occurs at the start of a cyclical downturn in economic activity.
“While the RBA will welcome the further slowdown in business activity in November, the strong employment index and an increase in the price indexes is likely to keep them alert to inflation risks in 2024. Specifically, the RBA will need to remain attentive to the risk that inflation does not fall as quickly or by as much as they would like to see.
“Both the input and output price indexes increased in November and remain above levels consistent with the RBA’s inflation target. This is consistent with sticky domestic inflation recorded by the Australian Bureau of Statistics in October where, excluding the impacts of Government rent subsidies, another strong increase in domestic inflation was recorded. “These results will most likely give the RBA Board further confidence that the economy is slowing into the end of 2023 but provides little comfort that inflation pressures will materially decline further over the first half of 2024.”

Australia Consumer Confidence dip to 76.4: ANZ citing significant inflation changes needed

Another truly awful reading for this persistently weak index.

ANZ-Roy Morgan Australian Consumer Confidence weekly survey, comes in at 76.4 from 76.7 the week before.

Comment from ANZ:

A serious turnaround in inflation would likely be required to see the index move meaningfully higher in 2024
It was practically unchanged last week ahead of the December

New Zealand data shows non-residential building activity down in September quarter

Data from Stats NZ shows that the seasonally adjusted volume of building activity in New Zealand was $8.6 billion in the September 2023 quarter. This is down 2.4% on the quarter:

+10% y/y
volume of non-residential building work was down 5.9% q/q
volume of residential building work was down 0.6% q/q

From the report:

“The September 2023 quarter marked the first time since the December 2022 quarter that there was a fall in the volume of non-residential building activity,”

New Zealand data: ANZ Commodity Price Index for November -1.3% m/m (prior 2.9%)

The index tracks the prices of 17 of New Zealand’s major commodity exports, including dairy products, meat, wool, forestry products, and seafood.

Fell 1.3% m/m in November

vs. prior +2.9%
In New Zealand dollar terms, the index fell 2.5% m/m as the NZ dollar trade weighted index lifted 0.2%

As part of this report ANZ look each month at gGlobal shipping prices. For November:

were mixed
The Baltic Dry Index, which tends tobe the most volatile of the shipping indices, more than doubled during the month of November. The higher costs were driven by improved demand for shipping.
From January 2024, ships visiting Europe will be subject to emissions costs. These costs will vary depending on emissions prices (in the EU) but changes in fuel costs are expected to vary much more from monthto-month

Japan data: Final November Jibun Bank Services PMI: 50.8 (prior 51.6)

Despite the decline, the growth outlook remains strong, and cost pressures ease.

The final numbers for Jibun / S&P Global PMIs from Japan for November 2023.

Services show a big drop, but remain in expansion, at 50.8. This is the slowest in a year.

vs prior 51.6

Composite slips into contraction at 49.6

prior 50.5

From the report, the key points:

Rate of expansion eases for fifth time in six months in November
Growth outlook remains among strongest on record
Cost pressures lowest in over two years

And, analyst comment:

“November data signalled a further loss of momentum in the services sector, but this should be viewed in the context of a year of strong growth. Over the course of 2023 the Business Activity Index is currently trending at 53.7, easily the highest annual reading since the survey began in 2007.
“Looking beyond the headline figure the latest survey results contain more positives. New business rose at a slightly faster rate to extend the second-longest spell of growth on record. Employment growth was maintained and outstanding work rose. Moreover, the 12-month outlook for activity improved and was among the strongest on record.
“Price pressures eased further in November but remain well above their long-run trends. Companies continue to highlight growing cost burdens due to wages, fuel and utilities.”

South Korea November CPI -0.6% m/m (expected -0.15%)

South Korea’s inflation in November experiences its fastest fall since October 2020, surpassing expectations.

Data from South Korea for inflation in November 2023

-0.6% m/m, the quickest fall since October 2020

expected -0.15%, prior -0.3%

+3.3% y/y

expected 3.7%, prior 3.8%
the core rate is +3.0% in the month, its slowest rise since March of 2022

Also published were data for economic growth and trade in Q3 2023, these are the final readings from the preliminaries published earlier:

Revised q3 GDP +0.6% q/q vs +0.6% estimated earlier
Revised q3 GDP +1.4% y/y vs +1.4% estimated earlier
Revised q3 private consumption +0.3% q/q vs +0.3% estimated earlier
Revised q3 facilities investment -2.2% q/q vs -2.7% estimated earlier
Revised q3 construction investment +2.1% q/q vs +2.2% estimated earlier
Revised q3 exports +3.4% q/q vs +3.5% estimated earlier
Revised q3 imports +2.3% q/q vs +2.6% estimated earlier

Cryptocurrency News

Bitcoin skyrockets above $43,000, as the renewed rally continues

Bitcoin’s price surge continues as it bypasses the $43,000 milestone, reaching $44,011 today. The upward trend remains strong, with an increase of 15.16% over 5 consecutive days.

The price of bitcoin is continuing its run to the upside with an extension above the $43,000 level. The high price today has reached $44,011. The current price is trading at $43,353.

Technically the price has extended above – and away from – its 50% midpoint of the move down from the 2021 all-time high of $69,000. That midpoint level comes in at $42,240. Staying above that level tilts the technical bias even more to the upside/bullish. It would now take a move below that midpoint level to give sellers some hope.

Optimism price sees 53% increase in two months, but profits remain bleak

Optimism price witnessed considerable growth over the past two months to trade at $1.73.
This motivated investors to bet on a further rise, which was squashed, resulting in the highest long liquidations since October.
Optimism investors have not been charting profits despite the price rise due to a lack of accumulation.

Optimism price had a slow but significant rally over the past two months, which likely profited investors, but by the looks of it, gains were limited since investors did not positively accumulate enough.

Optimism price rally leads to demand shortfall

Optimism price increasing by 53% over the past two months had a positive impact on investors as well as traders, with the latter confidently betting on the rally to continue. Trading at $1.73 at the time of writing, the altcoin is currently testing the $1.66 support level as it has been for the past month on multiple occasions.

There is a 25% probability of Solana flipping Ethereum: Santiago Santos

Former ParaFi Capital partner Santiago Santos said Solana could flip Ethereum in the next crypto market cycle.
The web3 investor said there is a 25% probability that SOL flips Ethereum.
Solana trades at $59.90, losing around 3% on the day.

In a recent episode of the Empire podcast, Santiago Santos, former Partner at ParaFi Capital, shares his views on how Solana’s market capitalization could exceed Ethereum’s in the next market cycle.

Santos’ views are shaped by expectations of higher capital inflows in the crypto ecosystem, and a larger share for Solana funds.

Solana could flip Ethereum if these conditions are met

Santos recalls his investment in Ethereum and says that when he first purchased ETH, he did not imagine the altcoin’s market capitalization would climb to billions. At the time of writing, ETH market capitalization is $274.51 billion, and Solana is at a $25.51 billion market cap, according to CoinGecko data.ETH price slowly and consistently increased as capital inflows to altcoin climbed and Ethereum funds received capital from institutional investors.

Santos’ argument is that an increase in funding in Solana could help the altcoin flip Ethereum’s market capitalization. The former ParaFi Capital partner explains that the overall crypto market capitalization does not need to increase necessarily. Instead, capital rotation from Ethereum and the ETH ecosystem’s Layer 2 protocols to Solana and the SOL ecosystem could help drive the change.

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Round up of today’s market news

ByBilals Tech