Morning Bid: Markets turn risk-averse after bumper month. Wayne Cole previews the day’s events in the European and international markets. Asia began the week hesitantly and has since been increasingly pessimistic, although there isn’t an apparent reason behind the risk-off attitude. Wall Street and European futures are slightly down, as are most regional share markets.
Although Treasury rates have increased by a few basis points, the dollar has lost strength against the generally stronger yen. While gold reached a six-month high above $2,017 an ounce, oil prices declined. However, there were no obvious underlying reasons for the increase.
China’s Central Bank declared that it will support financial institutions in helping private enterprises by giving them more leeway to accept non-performing loans. The market didn’t appear thrilled, as seen by the 1.2% decline in China’s blue chips (.CSI300).
Reports about government initiatives to assist the real estate industry, such as allowing businesses to get loans, have been building. Still, most of the activity has been talk rather than action.
On Thursday, the official China PMI for November is scheduled to be released. Typically, experts anticipate a little increase and maybe a number above 50.0.
The fact that investors are holding on to sizable profits might potentially prompt some caution as the month’s conclusion approaches. The S&P 500 and Japan’s Nikkei (.N225) have gained more than 8% in November, marking their most outstanding performance since mid-2022.
According to LPL Financial, almost 55% of the component shares of the S&P 500 are trading above their 200-day moving averages, which is the most significant proportion in almost two months.
In the days leading up to OPEC+’s meeting on November 30, which was rescheduled from Sunday due to producers’ inability to agree on a stance, the oil market is expected to be very volatile.
According to OPEC+ sources, African oil producers want more extraordinary ceilings for 2024. Meanwhile, media reports speculate that Saudi Arabia would prolong its voluntary production reduction of an extra 1 million barrels per day, which is scheduled to expire at the end of December.
With another 0.8% decline today, Brent has dropped 8.6% for the month. If this trend continues, it will be positive for consumer spending power and the fight against inflation.
On Thursday, the Federal Reserve anticipates that personal consumption expenditures, its preferred measure of inflation, will rise to 3.1%. At 3.5%, the core is expected to drop to its lowest level since mid-2021.
Thursday is also the deadline for EU inflation data and Germany’s and Spain’s data. The lowest level of core EU inflation since the middle of last year is predicted to occur at 3.9%.
If accurate, this will validate market bets that there won’t be any further rate increases and that the policy will ease in 2024. Beginning in June, futures suggest cuts of about 80 basis points for the Fed and the ECB.
At a fireside chat on Friday, Fed Chair Jerome Powell will have an opportunity to counter the doves, and this week, at least seven additional Fed speakers are scheduled.
Christine Lagarde, the president of the European Central Bank, has also conveyed that she is not in a rush to loosen, and she will have another chance to emphasize this point on Monday in the EU parliament.
Significant events that might affect Monday’s markets include:
ECB President Christine Lagarde during the ECON Hearing before the European Parliament’s Committee on Economic and Monetary Affairs
Distributive trades for November by UK CBI
U.S. construction permits and new house sales for October
