Market Talk: What’s up today? | Swissquote

The OECD said the global economy will avoid a recession this year, and next year, and that unemployment rates won’t skyrocket. That was the good news.

But growth will be low and slow, and inflation will remain high, keeping central bank policies tight. That was the bad news

The S&P500 gained, as strong earnings from retailers improved sentiment before Thanksgiving. Energy stocks performed well on the back of a sustained recovery in crude oil.

Shell rallied 5% on announcement that the company will be reviewing its investment in the UK to avoid paying windfall taxes to the British government. BP rallied 6.52%.

In central bank news, the Reserve Bank of New Zealand (RBNZ) raised its rates by 75bp as expected today. The US dollar softened, and the EURUSD rebounded past 1.0320 in the middle of mixed comments about what the European Central Bank (ECB) should do at its next meeting.

In precious metals, gold slid yesterday despite a softer US dollar, and softer yields.

In China, stocks were not looking good as Beijing and Shanghai put stricter rules to slow the Covid contagion, again! But Alibaba rebounded almost 4% in HK today, on news that Ant Group would pay a fine over a billion USD.

In cryptocurrencies, traders remain on the edge, on news that a ‘substantial amount’ of FTX assets have either been stolen or are missing. Bitcoin however resists. The price of a coin recovered above $16K yesterday, but risks remain tilted to the downside.

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Stocks in Asia fell this Monday on news that China reported its first death in six months from Covid on Sunday, and two other deaths followed. The news spurred fear that the government could make a U-turn on its decision of easing the strict Covid zero rules, and wreak havoc in Chinese markets, yet again.

Elsewhere, the US-inflation-data boosted rally faded last week, on the back of a too-strong-to-be-happy retail sales print, and a couple of hawkish comments from Federal Reserve (Fed) Presidents, including a chart from Mr. Bullard where the Fed’s terminal rate stretched up to 7%!

This week, investors will focus on interest rate hikes and the US Black Friday sales. The Reserve Bank of New Zealand is expected to raise its rates by another 75bp on Wednesday, the Fed will reveal the minutes from its latest meeting a little bit later that day, and the US will find out how much and of what people will be buying this Black Friday, after the Chinese Alibaba kept its 11.11 sales secret this year, and we had a devastating Q3 earnings and a gloomy guidance from Target last week.

In commodities, the barrel of US crude slipped below the $80 psychological level last week, below the post-pandemic ascending trend base.

In the FX, the US dollar kicks off the week on a positive footage, on the back of a retreat in dovish Fed expectations.

In cryptocurrencies, contagion news from the FTX collapse continues making the headlines in cryptocurrencies. According to the latest news, FTX owes more than $3 billion to its unsecured creditors, and crypto.com, Binance and OKX suspended deposits of dollar-backed stablecoins, USDC and Tether before last weekend.

In sports, the world’s most expensive World Cup kicked off this weekend in the middle of the Qatari desert, with a lot of unusual news, speculation and backlash about the CO2 emissions and limited sales of alcohol, among other criticism. Investors hope sports betting and beverage companies would see a boost from the event…

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Inflation in Japan soared to the highest levels in more than 30 years, to 3.7% in October, up from 3% printed a month earlier

High inflation print sure revived the Bank of Japan (BoJ) hawks, and the calls for a policy rate hike, and kept the dollar-yen below the 140 level, but it’s unsure whether the BoJ will give up on its ultra-soft policy stance. Therefore, if the US dollar picks up momentum, which will certainly be the case, the USDJPY could easily rebound back above its 50-DMA, which stands near 145.

And the reason I think the US dollar will recover is because most Fed members remain relatively hawkish regarding the Fed’s policy tightening. Plus, option traders are building topside structure over the one-month tenor that covers the next US inflation report and the Fed’s next policy meeting in December.

So, the ambiance in the stock markets is not as cheery as it was at the end of last week.

In the UK, the autumn budget statement went happily eventless. Gilts rallied, pound saw limited sell-off, while energy companies’ reaction to windfall taxes remained muted.

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US stocks extended rally yesterday, as the unexpected easing in producer prices beefed up the optimism that the Federal Reserve (Fed) would soften the monetary tightening and the better-than-expected New York Empire State Manufacturing index hinted that the US economy is holding up well.

News that Russian missiles fell to Poland somehow killed a part of that falling-inflation, resilient growth optimism. But escalation of the tensions has been avoided so far, with US President Joe Biden saying that the missile was ‘unlikely’ fired from Russia.

On the index level, the geopolitical fears remained short-lived, and the S&P500 finally rebounded to close the session a touch below the 4000 psychological mark.

On the individual level, TSM jumped on Warren Buffet and Apple news, as Walmart gained on earnings, revenue beat and $20-billion buyback.

In energy, US crude gained on the geopolitical concerns after the Poland attack, and on a more-than-5-million-barrel decline in US oil inventories last week.

In the FX, the US dollar eased after the mixture of soft PPI and solid Empire Manufacturing revived the dovish Fed expectations. The EURUSD traded briefly above its 200-DMA, and Cable hit the 1.20 for the first time since this summer.

On the data front, UK inflation data showed that inflation in the UK hit 11.1% in October vs 10.7% penciled in by analysts, revived the hawkish Bank of England (BoE) expectations but not GBP-appetite.

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Equities saw some profit taking in last week’s post-US inflation rally, as some Federal Reserve (Fed) officials reminded investors that the 7.7% inflation is still high and that the Fed would continue fighting to bring it lower.

In geopolitics, yesterday’s meeting between Jow Biden and Xi Jinping went well. US-listed Chinese stocks extended gains.

In energy, American crude dived on the news that OPEC cut its oil demand outlook and warned of uncertainties around global growth.

In earnings, big US retailers Walmart and Home Depot are due to release earnings today

And in fun news, Donald Trump will make an important announcement! Whoo!

It has been an ugly weekend for cryptocurrencies, even though the selloff remained relatively contained in the sector giants like Bitcoin, compared to the size of the bad news that flew in last Friday.

Market mood outside crypto is extremely joyful after last week’s inflation data surprised investors to the downside and China announced to relax Covid measures, and boost its shattered property sector.

Although the US inflation remains relatively high to contain a perhaps premature bull run on dovish Fed expectations, news from China could help keeping the mood nice and sweet.

We will yet discover if the latest news will be enough to get international investors back on board of a Chinese dream that has been shot to the ground by the very Xi Jinping.

Joe Biden and Xi Jinping will talk today on the sidelines of the G20 summit in Bali. Talks could go either way; they could either boost, or hit risk appetite in Chinese, and global assets.

Other than that, investors will watch the Q3 earnings from Nvidia, and some US and Chinese retail giants throughout this week!

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The US headline inflation fell to 7.7% in October, versus 8.0% expected by analysts and from 8.2% printed a month earlier, core inflation fell more than expected as well.

And because soft inflation is the only thing that matters to the Federal Reserve (Fed), and to the Fed expectations, we saw a jaw-dropping repositioning in the markets posterior to the release.

Equities skyrocketed, the US yields and the US dollar tanked on the expectation that the Fed may be content with a lower end rate to call victory in its fight against inflation.

Investors reacted to the latest US inflation data as if a miracle happened, but did they overreact?

US is closed today, but there is a last piece of data, the University of Michigan’s consumer sentiment index, that could temper joy into the weekend, as it is expected to have further eased this month.

But who cares, inflation is what matters the most.

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Less aggressive support for the Republicans, and more importantly, looming uncertainty, are the major factors that weighed on investor sentiment yesterday. The S&P500 slid more than 2%, Dow Jones lost 1.95%, while Nasdaq dumped 2.40%. The selloff was also fueled by the shaking crypto markets, and perhaps some investors taking risk off the table before the US inflation data, due today.

In cryptos, watching, what used to be the world’s 4th biggest crypto exchange go under the water, triggered panic across the sector, getting investors to question, whether FTX is an isolated case, or this is just the tip of the iceberg, and if and how many of the cryptocurrency exchanges may haves similar insolvency problems, that are only waiting to get revealed.

In FX & commodities, US dollar rebounded yesterday on the back of a better-than-expected Democrat results, and some repositioning before today’s inflation data, gold held ground above $1700 per ounce, while US crude fell on China Covid news and weekly rise in US oil inventories.

On the geopolitical front, news that Russia announced to pull out troops from Kherson triggered mild, and short-lived gains in equities.

On the data front, investors hold their breath before the US inflation data due today. Headline inflation in the US is expected to have eased from 8.2%, to 8% in October, and core inflation is seen softer at 6.5%, compared to 6.6% printed a month earlier.

PS: in six of the prior seven months, inflation exceeded expectations. So, there is a good chance that it’s the case this time around as well.

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