Markets ended the week somewhat subdued due to the US Thanksgiving holiday, with liquidity shortages evident on Thursday and Friday as markets tried to sort out broader developments in the geopolitical arena.
Earlier this week, Trump threatened to impose tariffs, with Mexico, Canada and China being the main targets. The Mexican president did not sit still and floated the idea of retaliatory tariffs, which was a brave move for the incoming president, but it remains a concern for market participants and has impacted currencies like the Australian dollar.
In geopolitics, Israel and Hezbollah agreed to a ceasefire, which began on Wednesday local time. Israel considers its operations in Lebanon a success, having eliminated most of Hezbollah's leadership and destroyed many of its weapons. At the same time, Hezbollah also considers it a success, as Israel has not made any progress in southern Lebanon. It is a stalemate similar to the 2006 war between the two countries.
Awkwardly, on Thursday, the second day after the ceasefire came into effect, both sides accused each other of violating the ceasefire.
As a result, oil prices have fluctuated wildly this week as the geopolitical risk premium has come and gone, but overall, at least most of it has disappeared.
U.S. stocks closed surprisingly strongly this week, with the S&P hitting new highs and posting its biggest monthly gain since November 2023, driven by technology and retail stocks. Technology stocks such as Nvidia helped the S&P 500 rise, while industrial and financial stocks drove the Dow higher. The Russell 2000 hit a record high earlier this week, posting its biggest gain so far this year.
The performance of Wall Street indexes was reflected in fund flow data, with investors pouring a massive $12.19 billion into global stock funds, up 32% from the previous week's inflows of about $9.24 billion, LSEG Lipper data showed. It was the ninth consecutive week of inflows into stocks.
The US dollar index weakened this week, but despite the weakness, the euro failed to break through the 1.0600 mark against the US dollar, and the pound rose against the US dollar and returned to above the 1.2700 mark. Gold experienced a sharp sell-off on Monday, but it rebounded to above $2,650 per ounce on Friday.
Next week, US employment data will dominate. Here are the key points that the market will focus on in the new week (all in Beijing time):
Central Bank News: Will Powell "pour cold water" on market expectations of rate cuts? Gold investors need to be careful now!
Fed:
At 04:15 on Tuesday, Fed Governor Waller delivered a speech
At 05:30 on Tuesday, FOMC permanent voting member and New York Fed President Williams participated in a dialogue hosted by the Queens Chamber of Commerce
At 01:35 on Wednesday, Fed Governor Kugler will speak on the labor market and monetary policy
At 04:45 on Wednesday, Goolsbee, 2025 FOMC voting member and president of the Chicago Fed, delivered closing remarks at the Midwest Agricultural Conference
At 21:45 on Wednesday, 2025 FOMC voting member and St. Louis Fed President Moussalem delivered a speech
At 02:45 on Thursday, Federal Reserve Chairman Powell was invited to be interviewed at the DealBook/Summit conference hosted by the New York Times
At 03:00 on Thursday, the Federal Reserve released the Beige Book on economic conditions.
At 00:30 on Friday, Barkin, the 2024 FOMC voting member and chairman of the Richmond Fed, delivered a speech
At 22:15 on Friday, Federal Reserve Board Governor Bowman delivered a speech
At 23:30 on Friday, Goolsbee, 2025 FOMC voting member and president of the Chicago Fed, will participate in a fireside chat
At 01:00 on Saturday, Hammack, 2024 FOMC voting member and Cleveland Fed President, will speak on the economic outlook
At 02:00 on Saturday, Daly, 2024 FOMC voting member and President of the San Francisco Fed, delivered a speech
Uncertainty about the Fed’s interest rate trajectory has grown in recent months amid a string of strong economic data, raising concerns that if the central bank cuts rates too much, inflation could rebound, undoing two years of efforts to fight inflation.
The minutes of the Federal Reserve's November monetary policy meeting showed that policymakers generally supported a cautious attitude towards future interest rate cuts as the economy remained solid and inflation slowly cooled. The Fed said that due to the uncertainty of the neutral interest rate level, the assessment of the degree of monetary policy restrictions was complicated, so "gradually reducing policy restrictions is appropriate."
Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, said the Fed is "starting to question aloud how much accommodation the economy and especially the labor market needs."
Wall Street has already lowered its expectations for the Federal Reserve to cut interest rates next year. Fed funds futures show investors betting rates will fall to 3.8% by the end of next year from the current range of 4.5% to 4.75%. That's more than 100 points higher than pricing in September.
Federal Reserve Chairman Jerome Powell also said earlier this month that the Fed does not need to rush to cut interest rates, citing a solid job market and inflation that remains above its 2% target.
Next week, many Federal Reserve officials, led by Powell, will deliver speeches, and investors need to pay special attention to the Fed chairman's views on the pace of the Fed's interest rate cuts in December and next year.
As for gold, on Monday, gold suffered its biggest one-day drop in four years. However, some investors do not seem to be worried.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said he was not making any reading into gold's performance this week due to the U.S. holiday. "Gold is very volatile, cryptocurrencies are very volatile, and of course, we've seen gold move in both directions. It's hard to read into it because a lot of people are on vacation," he said.
In terms of the medium-term trend of gold, Cieszynski believes that the support levels of gold are still in play, but does not expect a strong rise in gold prices in the short term. He said, "Gold has recently found some good support around $2,600 and has climbed from there. The first resistance is around $2,690 to $2,720. These are the two recent small highs, one in September and one in November. It looks like gold may be forming a head and shoulders top, so this is something we have to keep a close eye on, are we seeing a top forming, or are we just in consolidation and this uptrend continues? So far, I think the uptrend seems to be continuing."
However, Cieszynski warned that both the technical and fundamental aspects of gold are uncertain at the moment, and advised investors to proceed with caution. He added, "We need to pay close attention to the non-farm payrolls data released next Friday. If the employment data is good, it may indicate that the Fed is more likely not to cut interest rates, which will then boost the dollar and may have a chain reaction on gold. But there are a lot of things going on, and this is just part of it. Gold looks like it has experienced a big rally, several corrections, and may now start to consolidate for a while."
Other central banks: Will ECB President Lagarde agree to a 50 basis point rate cut?
At 21:30 on Wednesday, ECB President Christine Lagarde made an introductory speech at a hearing of the European Parliament's Economic and Monetary Affairs Committee.
At 10:00 on Wednesday, New Zealand Reserve Bank Chairman Orr held a monetary policy press conference
In the eurozone, although Germany's preliminary inflation figures for November came in below expectations, they still showed some stickiness, with headline inflation rising to 2.2% from 2.0%. Headline inflation in the eurozone also rose to 2.3% from 2.0%.
This, combined with hawkish comments from ECB member Schnabel, who said rate cuts should be gradual, has reduced the chances of a 50bp cut at the ECB's upcoming meeting despite disappointing PMI data. Currently, markets are pricing in about a 20% chance of a big rate cut on December 12.
With this in mind, next week, euro traders will likely focus on ECB President Christine Lagarde’s speech on Wednesday, when she will give her opening remarks before the European Parliament’s Economic and Monetary Affairs Committee (ECON). Investors may be eager for more information on how the ECB plans to cut interest rates.
Important data: "Data frenzy" is coming! Will non-agricultural data reshape market expectations?
Monday 09:45, China's November Caixin Manufacturing PMI
Monday 16:50-17:30, final values of November manufacturing PMI for France, Germany, Eurozone and UK
Monday 18:00, Eurozone October unemployment rate
At 22:45 on Monday, the final value of the US S&P Global Manufacturing PMI for November
At 23:00 on Monday, the US November ISM manufacturing PMI and October construction spending monthly rate
Tuesday 23:00, US October JOLTs job vacancies
At 08:30 on Wednesday, Australia's third quarter GDP annual rate
Wednesday 09:45, China's November Caixin PMI
Wednesday 16:50-17:30, final service PMI values for November in France, Germany, Eurozone and UK
At 18:00 on Wednesday, the Eurozone October PPI
Wednesday 21:15, US November ADP employment data
Wednesday 22:45, US November S&P Global PMI final value
At 23:00 on Wednesday, the US November ISM non-manufacturing PMI and October factory orders monthly rate
At 23:30 on Wednesday, the EIA crude oil inventory in the United States for the week ending November 29
Thursday 15:45, France's October industrial output monthly rate
At 18:00 on Thursday, the monthly rate of retail sales in the euro area in October
At 20:30 on Thursday, the number of layoffs of challenger companies in the United States in November
At 21:30 on Thursday, the number of initial jobless claims in the United States for the week ending November 30 and the October trade account
At 23:00 on Thursday, the US November Global Supply Chain Pressure Index
At 15:00 on Friday, Germany's October seasonally adjusted industrial output monthly rate, Germany's October seasonally adjusted trade account, and the UK's November Halifax seasonally adjusted house price index monthly rate
Friday 15:45, France's October trade balance
At 18:00 on Friday, the revised annual GDP rate of the euro area in the third quarter and the final seasonally adjusted employment rate in the third quarter
At 21:30 on Friday, the seasonally adjusted non-farm payrolls in the United States in November, the unemployment rate in the United States in November, and the number of Canadian employees in November
At 23:00 on Friday, the initial value of the US one-year inflation rate forecast for December and the initial value of the US University of Michigan Consumer Confidence Index for December
Investors will get a fresh look at the health of the U.S. economy in the coming week, with the release of a closely watched nonfarm payrolls report likely to help investors determine the path of U.S. interest rates in the coming months. Job openings for October, due out on Tuesday, and the ADP employment report for November, due out on Wednesday, may also offer clues about the performance of the U.S. labor market.
While investors have largely welcomed evidence of a strong economy, another round of solid jobs data on Dec. 6 could further undermine expectations for a Fed rate cut next year or even in December and heighten officials’ wariness about inflation.
The jobs data "will provide a clearer picture of the underlying trend, which is important given the amount of debate and uncertainty surrounding the Fed's path for interest rates," said Angelo Kourkafas, senior investment strategist at Edward Jones.
This is evident from the fact that Fed Funds futures are still pointing to a high probability that the Fed will pause rate hikes at the end of the year. Specifically, there is a 35% chance that the Fed will stay on hold in December, while the probability of a pause in January rises to about 58%. Also interesting is that there is also a 27% chance that the Fed will not cut rates at both meetings.
The market expects non-farm payrolls to increase by 183,000 next Friday. Last month, non-farm payrolls increased by only 12,000, far below expectations. Hurricane Milton caused a large number of workers in Florida to lose their jobs. Now that these problems have been resolved, non-farm payrolls this week may be higher, and some analysts even predict that the number of jobs is likely to reach around 220,000.
The unemployment rate is also a key indicator to watch ahead of the Fed's December meeting. If the unemployment rate rises to 4.2% and employment unexpectedly softens, the likelihood of a December rate cut by the Fed would increase, which could lead to a weaker dollar.
In addition to the non-farm data, next week, market participants may also focus on the US November ISM manufacturing and non-manufacturing PMI data (released on Monday and Wednesday respectively).
With inflation data coming in higher than expected in October, the price component of the PMI is likely to be closely watched to see whether its stickiness continues into November. The employment index will also be watched for early clues on the performance of the labor market ahead of the official nonfarm payrolls data on Friday.
If the PMI data confirms that the world's largest economy continues to perform well, the likelihood of the Fed staying on hold at the end of the year will increase, providing momentum for the dollar's rise. However, whether the potential rebound will turn into a strong impulsive rise in the current upward trend still depends on the non-farm data released on Friday.
Will the Bank of Canada cut interest rates twice in a row?
The Canadian employment report for November was released at the same time as the US non-farm payrolls data. The Bank of Canada cut interest rates by 50 basis points at its latest meeting on October 23 to support economic growth and keep inflation around 2%, adding that further rate cuts would be needed if economic developments were roughly in line with its forecasts.
Investors quickly priced in a high probability of two big rate cuts in a row, but higher-than-expected Canadian CPI data for October changed their minds. The market now sees only a 25% chance that the Bank of Canada will take such a bold move, and is increasingly confident that a 25 basis point rate cut would be enough.
With that in mind, Friday's strong report could further reduce the odds of two big rate cuts from the Bank of Canada, supporting the Canadian dollar. Still, an upbeat jobs report may not be enough to change the Canadian dollar's trajectory and start an uptrend, and President-elect Trump's threats of more tariffs on Canadian goods could cause the currency to take more hits.
Is it possible that the Reserve Bank of Australia will keep interest rates unchanged for a longer period of time?
On Wednesday, Australia will release its third-quarter GDP data. It is worth noting that the Reserve Bank of Australia is the only major central bank in the world that has not yet pressed the interest rate cut button in this round of easing cycle. Market participants believe that the Reserve Bank of Australia may only start cutting interest rates in May next year.
The latest monthly inflation data showed that Australia's weighted CPI remained at 2.1% year-on-year, but the overall inflation rate rose from 2.1% to 2.3%. As the quarterly data also showed that the weighted and trimmed average inflation rates in the third quarter were 3.8% and 3.5% respectively, it may take some time for the central bank to start considering rate cuts, and the strong third quarter GDP data may prompt investors to further postpone the timing of the first rate cut by the RBA.
This could be positive for the Australian dollar, but similar to the Canadian dollar, it is also likely to feel the impact of Trump's tariffs.
Important event: After being moved online and then postponed, what are the highlights of this OPEC+ conference?
OPEC+ unexpectedly postponed a key meeting this week on its plans for future production cuts as members negotiate compliance with existing quotas.
Earlier, OPEC said some ministers had schedule conflicts and the meeting of the Joint Ministerial Monitoring Committee would be postponed from this Sunday to December 5.
However, the announcement came a day after three-way talks on Wednesday between the Saudi and Russian energy ministers and their Kazakh counterparts. The Central Asian country has repeatedly angered the other 22 members by exceeding production quotas.
Saudi Energy Minister Abdulaziz bin Salman and Russian Energy Minister Alexander Novak on Tuesday visited the Iraqi capital Baghdad, another country that often overproduces.
Amrita Sen, director of analysis at analytics firm Energy Aspects, said compliance was expected to be a "key focus" at the ministerial.
Jorge León, head of geopolitical analysis at energy consultancy Rystad and a former OPEC staffer, said Kazakhstan’s position was “a bit problematic” as the country looks to increase oil production following the development of its new Tengger field.
Earlier this year, Iraq and Kazakhstan submitted plans to OPEC to reduce production in the second half of the year to make up for exceeding their agreed figures in the first half.
Kazakhstan is one of eight members of the group that has been pursuing a voluntary production cut policy since November to support oil prices. The country has been asking for a reassessment of its production capacity so it can increase output. A dispute over quotas last year prompted Angola, Africa's second-largest oil producer, to withdraw from OPEC.
León said Kazakhstan is pushing for a higher "baseline," or a country's basic crude production capacity, against which actual agreed cuts are measured. "The problem is ... once one country asks for a higher baseline, all countries will ask for a higher baseline," he added. "I don't think Kazakhstan will budge, and there may be some small tension in OPEC on this topic."
A Saudi news agency report on the three-nation meeting said Kazakhstan's energy minister reiterated its intention to stick to its already agreed quotas, and that the meeting in Baghdad produced similar assurances that Iraq was prepared to stick to future quotas.
At the postponed meeting, OPEC+ was widely expected to broadly agree to current production cut quotas and additional voluntary cuts for at least a few more months.
Analysts at Commerzbank Research said they expect OPEC+ to further postpone its production increase plan by at least three months, providing support for oil prices. Barbara Lambrecht, an analyst at the bank, said, "Schedule conflicts are considered one of the reasons, but there is also speculation as to whether there are difficulties in developing a joint production strategy, as has often happened in the past. However, we suspect that this is more about disagreements over quotas for individual member countries than an overall strategy."
Commerzbank expects the alliance to choose to postpone production cuts again, otherwise the market risks facing a large oversupply next year.
Company financial reports: Market sentiment is “extremely high”, is a correction in US stocks on the way?
The earnings season is coming to an end, with Meituan (03690.HK), Zoom (ZM.O), Dell (DELL.N) and others set to release their results next week.
Stocks have been boosted by the belief that President-elect Trump's policies, such as tax cuts and deregulation, could spur inflation, even as they help fuel the economy.
In recent days, U.S. stocks have largely shrugged off Trump’s promises to impose steep tariffs on Canada, Mexico and China, the United States’ three largest trading partners. More optimism was reflected in a survey released Tuesday by the Conference Board, which showed 56.4% of consumers expect stock prices to rise next year, a record high.
Meanwhile, the S&P 500 is trading at more than 22 times expected earnings for the next 12 months, the highest multiple in more than three years, according to LSEG Datastream.
For strategists at Yardeni Research, though, the growing optimism could be a worrying sign.
“A more immediate risk to the stock market rally than tariffs is that investors become overly optimistic, which from a contrarian perspective suggests a pullback could be in the offing,” Yardeni Research said in a note Thursday.
Article forwarded from: Jinshi Data