Markets:
- S&P 500 up 27 factors, or 0.6%, to 4603
- Gold up $35 to $2071
- WTI crude oil down $1.70 to $74.26
- US 10-year yields down 13.3 bps to 4.56%
- AUD leads, EUR lags
Welcome to the brand new month, similar because the outdated month.
The temper was to purchase the whole lot and promote oil, similar because it was for all of November. It began out as a quiet one and a great Canadian jobs report moved the loonie into the ballot place with it solely up 30 pips on the day. From there although, a softer US ISM manufacturing report helped to kick off a wave of USD promoting, notably in USD/JPY.
As well as, shares started to tear. Powell spoke equally to Daly and Williams yesterday, which was mildly hawkish however in time the market ignored it and priced in much more fee cuts subsequent yr. Fed funds futures at the moment are at 133 bps subsequent yr and 70% for the primary one in March. That is aggressive to say the least.
However the greater image theme is that we’re going again to the world of low charges and low inflation, not some form of sticky, Nineteen Seventies redux. That is a significant change and it is what’s driving the whole lot.
Including to that was one other hunch in oil, most of which got here after Baker Hughes knowledge confirmed the US including extra rigs. There is a creeping feeling that we’re headed for one more battle for market share as a result of OPEC is not going to chop manufacturing once more. That could possibly be an enormous deflationary impulse, not less than initially.
The euro did not profit from the USD promoting as a result of inflation numbers in Europe are cratering, together with yields. The euro was notably mushy into the London repair, which factors to flows and it staged a 50 pips restoration later to complete nearly flat however nonetheless on the backside of the pile beside the US greenback.
AUD goes to be one to look at within the yr forward. It was tops in the present day and the housing market there simply hasn’t cracked. That would maintain the speed mountain climbing cycle going longer however observe that Chinese language ETF FXI additionally hit at 52-week low in the present day so possibly that is an upside threat? Sentiment about China absolutely could not get a lot worse.
Have an incredible weekend.
