Oil and Gold rally, stocks largely unmoved

Gold continued to impress, up 1.4% to $2,040 (versus a one-year high of $2,085). Oil spiked 2.2% to $76.5 per barrel. Today’s consumer sentiment and holiday spending data were very strong. Two Fed governors indicated different opinions on official interest rates: Michelle Bowman thinks the Fed will have to raise rates further to bring inflation down, but Christopher Waller said he believes current rates are about right. Stocks again made little progress, with the economically sensitive Russell 2000 off 0.6%.

TODAY’S MAJOR NEWS

Cyber Monday highlights US consumer’s confidence

According to early estimates, Cyber Monday sales reached a record $12.4 billion yesterday as consumers responded to deep discounts aimed at enticing shoppers to splurge on holiday purchases. Online shopping in the United States was up 9.6% versus the previous year. Shoppers leaned heavily on Buy Now, Pay Later (BNPL) services to avoid extra fees and interest costs that come with credit card usage, for a record $940 million of their purchases, up more than 42% on last year. US consumers discovered the “joy” of shopping online during the pandemic, using their stimulus checks to have goods shipped to their door. That “good feeling” continues today, and consumers are addicted to the thrill of consumerism delivered to their door, rapidly building up consumer debt to sustain the habit.

Consumer’s confidence continues, but is a recession comng?

• American consumers once again showed their confidence after blow-out holiday sales data and with credit card debt hitting record-high levels.
• The Conference Board's consumer confidence index jumped to 102.0 in November, better than the forecast 101.0, and up from a downwardly revised 99.1 in October,
• However, the Expectations Index for income, business, and job market in the next six months rose to 77.8 in November from 72.7 in October – a closely watched indicator of future recession when below 80 – remained below 80 for a third consecutive month

Modest IPO volumes despite strong markets

IPOs have been slow this year despite booming stock markets, with the volume of US issues barely surpassing 2022, the worst 12 months in over a decade.  Chinese fast-fashion retailer Shein filed with US regulators for a listing that may take place next year. Kim Kardashian’s Skims clothing brand is weighing a possible public debut.  Social media giant Reddit is again holding talks with potential investors on going public as soon as the first quarter. Microsoft-backed data protection firm Rubrik is also considering an IPO as soon as next quarter.

Oil price waits for OPEC+ decision

The oil price has found support in the $70-$75 per barrel area despite OPEC+ still no closer to production agreements. Saudi Arabia is asking OPEC+ members to reduce their supply quotas, a call that some African countries resist. Some key players are reducing their exposure to oil. Looking at the latest CFTC data, hedge funds reduced net long positions in WTI crude oil futures to a 3-year historical low, with net long positions in Brent at a six-week.

China talks growth at home and abroad

The People’s Bank of China – the equivalent of our Federal Reserve – sees a future domestic economy less dependent on infrastructure and real estate. Instead, PBOC Governor Pan Gongsheng sees a shift toward a more sustainable path, including new growth drivers like renewable energy. He said that the PBOC is committed to an accommodative monetary policy, alongside expectations for a gradual bottoming out of consumer inflation, particularly food prices.

President Xi Jinping spoke of strengthening the rule of law in foreign affairs to protect China’s interests and its “going global” strategy after returning from the APEC meeting in San Francisco. China’s state media reported how China faces increasing external risks and challenges in its global expansion as it places people and resources in many countries around the world at a time when Western governments are enforcing restrictive policies against Chinese expansion. Xi is now focused on protecting these overseas citizens and interests.

TODAY’S MAJOR MARKETS

Equities continue the week quietly

• US equities continued quietly this week, with the Russell 2000 off 0.6%, while the Nasdaq and S&P 500 were unchanged
• The Dax rose 0.2%, the FTSE 100 was unchanged, and the Nikkei 225 fell 0.1%
• The VIX, Wall Street’s fear index, was unchanged at 12.9 (its recent all-time low was 9.2 on the final day of 2017)

Bonds yields rally, Dollar dips

• 2- and 10-year yields fell to 4.78% and 4.36%, respectively
• The dollar index fell 0.3% to 102.9
• Versus the dollar, the Yen was up 0.7%, Sterling was up 0.4%, and the Euro was up 0.2%

Gold moves higher, oil rallies

• Oil prices rebounded 2.4% to $76.6 per barrel, with news that hedge funds have generally cut their long positions
• Gold prices continued to rise, up 1.4% to $2,040 per ounce, while Silver prices rose 1.1% to $24.9 per ounce
• The grain and oilseed markets were mostly higher in morning trade
• Wheat also found support from a buy signal on historical trading signals

Analysis by Arlan Suderman, Chief Commodities Economist: Arlan.Suderman@StoneX.com

Market outlook by Paul Walton, Financial Writer: Paul.Walton@StoneX.com