Market Report:
🌍 Today, the G20 diplomats are facing significant challenges in reaching consensus on critical issues ahead of the leaders’ summit in Rio de Janeiro. Disputes over climate change financing, addressing the Ukraine war, and taxing the super-rich have created deep divides between developed and developing nations. The return of Donald Trump to the U.S. presidency is seen as a further complicating factor, potentially undermining efforts to send a strong political message to support the ongoing COP29 climate negotiations.
🇯🇵 The Governor of the Bank of Japan announced on Friday an extraordinary meeting. BoJ Governor Kazuo Ueda said the economy is making progress in achieving sustained wages-driven inflation, but gave few clear signals on whether the BOJ will raise interest rates again in December. The lack of clear guidance from Ueda nudged up the dollar against the yen.
🇺🇸 President-elect Donald Trump has added several new names to the list of candidates for Treasury Secretary: Former Federal Reserve Governor Kevin Warsh and billionaire Marc Rowan, co-founder of Apollo Global Management, have been added to the list of potential nominees. Trump had previously been considering Howard Lutnick, CEO of Cantor Fitzgerald, and investor Scott Bessent as top candidates. Billionaire Elon Musk and Robert F. Kennedy Jr. have publicly voiced support for Lutnick.
🇩🇪 Support for Chancellor Olaf Scholz to lead the Social Democrats (SPD) into an early election in Germany is starting to crumble within his own party. Some SPD members would rather see Defense Minister Boris Pistorius spearhead the party’s campaign instead of Scholz. A recent poll showing 66% of voters think he should be the SPD’s lead candidate, compared to only 18% for Scholz.
🇦🇹 Austria’s OMV has reduced Gazprom’s gas supplies to zero, following a €230 million arbitration award dispute. However, Russian gas flows into the European gas market remain normal. Austria’s gas regulator confirmed Russian gas is still arriving at Baumgarten hub. The end of OMV’s contract signifies the severance of long-term commercial ties with Gazprom. Gas prices in Austria could rise by 20% or more in the short term, potentially causing a new inflation round.
📈 Nvidia’s upcoming Wednesday earnings report could be a crucial guide for the U.S. stock market’s next direction: Nvidia’s nearly 800% stock surge over the past two years, driven by its dominant position in AI, has made it a heavyweight in major market indexes like the S&P 500 and Nasdaq 100. Nvidia’s results will cap a mixed Q3 earnings season for U.S. companies, with the so-called “Magnificent 7” tech giants like Apple and Microsoft carrying the load. Nvidia’s performance could be crucial in supporting the S&P 500’s lofty valuation, with the index trading above 22x forward P/E, near its highest level in over 3 years.
🇫🇷 French President Emmanuel Macron faces a political challenge as French farmers protest against the EU-Mercosur trade deal due to environmental and health concerns. Germany, Italy, Spain, and European Commission President Ursula von der Leyen are pushing to finalize the deal, capitalizing on Macron’s diminished political capital. If Macron continues to oppose the deal, von der Leyen may bypass him, and passing the deal could fuel Euroscepticism. However, not doing so could allow China to expand its economic presence in the region.
📊 Market View:
🇺🇸 US futures are trying to establish a base after Jerome Powell’s strong statements last week. Mini S&P 500 futures appear to be bouncing higher from the 5,900 point area. Meanwhile, Nasdaq 100 futures, which suffered a severe correction of almost 1,000 points last week, managed to bounce higher at 20,400 support and are now up to 20,645 points.
💵 The dollar remains strong, with the DXY index having managed to conquer 106.50 points and is currently holding above these levels. This has kept EUR/USD trading below 1.06 at 1.0540 at the moment. US bond yields remain strong with the 10 year bond trading at 4.43%.
🇪🇺 In Europe, the DAX 40 is still struggling to survive after almost losing 19,000 points last week. A rebound to the upside took it towards the 19,325 point area, but it has failed to break above it since then, becoming resistance. The EuroStoxx 50 is trading at 4,815 points, showing a clear downward trend since mid-October.
🛢️ Oil prices remain low. There is a shy divergence between WTI and Brent, with WTI losing support and trading relatively discounted. Gold is rebounding higher after losing $2.550 an ounce last week; it is now approaching the $2.600 an ounce area. An extremely strong Bitcoin is knocking on the door of the highs, currently trading near 92,000 and approaching the highs reached at 93,400 last Wednesday.
🌍 Geopolitics:
🇺🇦🇷🇺 The Biden administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russia. Ukraine plans to conduct its first long-range attacks in the coming days, likely using ATACMS rockets with a range of up to 190 miles. The move could help Ukraine at a moment when Russian forces are making gains, potentially putting Kyiv in a better negotiating position if ceasefire talks happen. There are concerns the decision could escalate the conflict, with a Russian lawmaker warning it could lead to “World War Three.” It’s unclear if President-elect Trump will reverse this decision when he takes office, as he has criticized the scale of U.S. aid to Ukraine in the past.
