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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 previous month.
The temper was to purchase every thing and promote oil, similar because it was for all of November. It began out as a quiet one and an excellent 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 charge cuts subsequent yr. Fed funds futures are actually 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, Seventies redux. That is a serious change and it is what’s driving every thing.
Including to that was one other hunch in oil, most of which got here after Baker Hughes information confirmed the US including extra rigs. There is a creeping feeling that we’re headed for an additional battle for market share as a result of OPEC is not going to chop manufacturing once more. That could possibly be a giant deflationary impulse, at the very least 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 smooth 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 at present and the housing market there simply hasn’t cracked. That would hold the speed mountaineering cycle going longer however word that Chinese language ETF FXI additionally hit at 52-week low at present so possibly that is an upside danger? Sentiment about China certainly could not get a lot worse.
Have an important weekend.
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