Paul Walton
Dow makes all-time high in hopes of spring rate cuts
The Dow Jones achieved an all-time high of 35,802 in afternoon trade, signifying the equity market’s bullish tone spurred by hoped-for interest rate cuts. Traders are placing a 40% probability of a March rate cut in the Fed Funds rate. The Fed’s favored inflation measure cooled to 3.5% annual growth, welcome but still above its 2.0% target.
Gold approaches all-time high, oil rally continues
Gold stood out again, rallying within a few dollars of its August 2020 all-time high of $2,075, with supporters arguing that a peak in nominal and real interest rates would underpin a continuing bull market. Oil prices also continued to recover despite no news on next year’s production quota from OPEC. The Vix fear index continues to trade near multi-year lows, reflecting growing confidence that the economy can have a soft landing in 2024, with the Fed expected to cut rates by mid-year, even though it continues to insist that will not be the case.
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%.
USDBRL should reflect US data, IPCA-15, and the economic agenda in Congress.
Bullish factors November IPCA-15 may slightly accelerate versus October, bringing some points of concern regarding inflation dynamics for the upcoming months and potentially weakening the real. Bearish factors The possibility of advancing important economic agendas for the government in the National Congress could reduce the perception of fiscal risks for Brazilian assets and strengthen the real. Data for the American economy can reinforce the perception that the Federal Reserve will not raise interest rates further and contribute to the global weakening of the USD.
Small Gold ETP buying in China with interesting scope
The gold price is looking a little prematurely to the peak of the interest rate cycle. Seasonal December strength is historic, but do the fundamentals back it up this year? Technical considerations remain mixed but are supportive on balance. Gold and silver prices have been up 2.7% and 6.6%, respectively, since the start of last week – both are overbought in the short term.
Gold glistens, oil halts slide
Gold was the standout asset today, rising 0.5% to $2,013 per ounce (its peak was $2,050 earlier this year), while the slide in oil prices was halted at $75 per barrel. Bond and equity markets in quiet trading. This post-holiday week sees important data on inflation, consumer sentiment, and the publication of the Fed’s often persuasive Beige Book guide to economic conditions.
Yuan rallies as domestic property sector declines continue
China saw little market-moving economic or financial news last week. The continuing slow-motion decline of its property sector dominated the headlines as more property companies and now wealth managers reported an inability to repay their debts. The continuing yuan rally was the highlight, likely supported by domestic intervention by the People’s Bank of China.
Oil price falls on OPEC disarray, VIX falls again
Today's market highlight is oil off 2% on a simmering OPEC+ row. The Russell 2000 rose 0.7%, but stocks were stagnant in this holiday-shortened trading session today. The VIX made a new low below 13 for its current move, reflecting calm on Wall Street as traders watched shoppers flock to stores for Black Friday while another record was set for people traveling across this country for the holiday.
OPEC wrangling leads to oil price volatility, Sterling rallies on UK Budget
Oil prices were volatile as news emerged of wrangling between Saudi Arabia and other OPEC+ members, with the growing suspicion that the Kingdom wants higher prices to be achieved through further production cuts. Sterling continued its recent rally after a growth-inclined budget statement and a worsening inflation outlook, pointing to higher UK interest rates for longer.
New Vix low suggests investors are relaxed, Russell 2000 and Nasdaq rally
Equity markets acknowledge little risk in coming months, judged by the Vix, Wall Street’s fear index, which dipped to a decade low of 12.9. Whether this is bullish, bearish, or has no real message is unclear. Elsewhere, the Russell 2000 and Nasdaq were up 0.7%, the dollar rallied, and Gold held above the $2,000 mark. Oil prices fell 1.0% despite the likelihood that OPEC+ will extend supply cuts.
Rate cut hopes dashed, Russell 2000 and Nasdaq end recent rally
Fed minutes of its last meeting dampened hopes of early interest rate cuts after lunch, with the cyclical and small-cap Russell 2000 off 1.1% and Nasdaq off 0.6% despite some AI-linked stocks rallying. Elsewhere, gold passed the 2K mark for the first time since May, but the rally in Oil wasn’t sustained. Sterling was firmer against the dollar on the eve of the UK Budget.