Market Report.
📉 Pending Friday’s employment report, yesterday, the latest Job Openings and Labor Turnover Survey (JOLTS) report from the U.S. Labor Department indicates the labor market continued to slow in an orderly fashion in October. Job openings increased solidly, rising by 372,000 to 7.744 million, though this was lower than the 7.475 million forecast. There is no clear weakness in the labour market, but the expectation is that a rate cut will nevertheless occur later this month.
🇯🇵 Japan’s service sector experienced a rebound in November, according to the final Jibun Bank Services Purchasing Managers’ Index (PMI). The PMI rose to 50.5, indicating expansion. Employment increased at the fastest pace in four months, and outstanding business experienced the strongest growth in eight months. However, inflationary pressures remained strong, with companies passing on higher costs to clients.
🇨🇳 China’s services activity grew slower in November due to easing new business growth, including exports, and the anticipation of more U.S. tariffs under a second Trump administration. The Caixin/S&P Global services PMI fell to 51.5, but remained above the 50-mark. New business inflows slowed, but companies hired more staff and business confidence rose to a 7-month high. The composite PMI, combining manufacturing and services, rose to 52.3. Beijing has responded with policy support, but the threat of further Trump’s tariffs adds uncertainty.
🇦🇺 Australia’s economy experienced its slowest annual growth since the pandemic, with GDP rising 0.3% in Q3, missing market forecasts of 0.4%. Annual growth slowed to 0.8%, down from 1.0% in Q3. This has led to investors anticipating a rate cut by the Reserve Bank of Australia (RBA) as early as April 2024, with a 35 basis point easing expected by May. Consumers remained cautious despite tax cuts and slowing inflation.
⚠️ Four Chinese industry associations have warned Chinese companies against buying US chips due to concerns about their safety. The warning comes after the US has imposed export controls on 140 Chinese companies, including a major chip equipment maker. The US Semiconductor Industry Association has defended the warnings, stating they are “unhelpful” and “inaccurate,” indicating a significant escalation in the US-China tech and trade war.
💶 ECB policymaker Fabio Panetta has proposed a “productivity compact” to fund strategic investments and boost productivity in the European Union. The plan would involve a common EU debt issuance of 800 billion euros per year, equivalent to 6% of the EU’s GDP, by 2030. Panetta argues this would limit member states’ investment expenditure needs, reduce public debt, and create a more liquid secondary market for EU bonds. The proposal follows a similar call by former ECB President Mario Draghi.
🇫🇷 On Saturday, President-elect Trump will visit Paris to witness the reopening of the Notre Dame Cathedral, which was destroyed by fire in 2019. Since Trump won the US election in November, Macron will be the first European leader to meet with him. Regarding Notre Dame, some tourists might be pleasantly pleased even if it won’t seem exactly the same.
Market View:
📊 US equities continue to rally. Mini S&P 500 futures are currently at all-time highs, reaching 6,070 points. The Nasdaq 100 is also at an all-time high of 21,350 points.
💵 The dollar index is down to 106.30 and appears to be forming a bearish pattern which could indicate that the loss of the 105.50 level would trigger a more pronounced correction in the dollar. This move could be driven by expectations of interest rate cuts and a weak employment report due on Friday. The EUR/USD is back above 1.05, trading tentatively at 1.0520 at the moment.
🇪🇺 In Europe, despite the political earthquake shaking the region, the DAX 40 is at a new all-time high of 20,060 points. It is worth recalling that the optimism in German business confidence surveys could be underpinned by the possibility of a collapse of the German government, perceived by some analysts as a potential relief from the negative impact of its current policies. The EuroStoxx 50, during yesterday’s trading, momentarily managed to break above 4,900 points, although it is currently trading at 4,885 points.
🛢️ In the commodities market, Brent crude oil has rebounded towards the $74 per barrel level and is currently trading above $73.85. Meanwhile, gold continues to hold above 2,650 dollars per ounce. However, its movements have narrowed, graphically leaving a wedge formation that could anticipate increased volatility in the coming days, with a possible breakout to the upside that would project it towards new all-time highs.
🪙 Finally, Bitcoin continues to consolidate in the $97,000 area, although it seems to be struggling to reach the long-awaited $100,000 level. It is currently trading at $96,500.
Geopolitics:
🇫🇷 After French Prime Minister Michel Barnier used article 49.3, a special clause in the French Constitution, to push the budget bill through the National Assembly without a vote by lawmakers, French lawmakers will vote on today on no-confidence motions that are expected to oust Prime Minister Michel Barnier’s fragile coalition government, deepening the political crisis in the eurozone’s second-largest economy. The collapse of Barnier’s government would leave a “hole at the heart of Europe” with Germany also in election mode and the U.S. about to see the return of President Trump.
🇰🇷 South Korean lawmakers are calling for President Yoon Suk Yeol to resign or face impeachment after he declared martial law late on Tuesday. Six opposition parties are expected to submit an impeachment bill against Yoon, with a vote expected on Friday or Saturday. The ruling party leader also called for the defense minister to be fired and the entire cabinet to resign. The political crisis has impacted Korean assets, which are already laggards in the region. The Kospi Index is down nearly 2%, and the South Korean won has dropped 9% against the dollar this year.
🇺🇦 German Foreign Minister Annalena Baerbock stated Tuesday that Ukraine’s NATO membership may be a condition for a possible peace agreement with Russia. However, Russia’s motivations for invading Ukraine and its offer in May 2022 to withdraw from the territory were based on Ukraine’s commitment not to join the Western military alliance and not to deploy NATO missiles on Russia’s border. So, given the Russian advance, real negotiations do not appear to be on the cards. The 20 points raised by China continue to be ignored by the West, which continues to send weapons to Ukraine.
📉 France’s manufacturing sector experienced its steepest decline in new orders since the COVID-19 pandemic, with the HCOB France Manufacturing Purchasing Managers’ Index (PMI) falling to 43.1 in November. This is the twenty-second consecutive month below the 50.0 threshold, indicating contraction. The sector remains in crisis mode, with firms discounting prices despite rising input costs, leading to margin erosion. Employment in the sector continues to fall, with pessimistic expectations for output over the next 12 months.
🇩🇪 Germany’s manufacturing sector remains in contraction territory, with a steady PMI of 43.0, below the 50-point threshold for growth. The decline in output and new orders eased slightly, but employment, output prices, and export sales continued to fall. Big companies planning massive job cuts. Sadly, Business confidence slightly improved, possibly due to the collapse of the ruling coalition and hopes for a new government’s economic turnaround.
📈 Meanwhile, the German Stock Exchange DAX40 reached record highs yesterday.
🇬🇧 British retailers reported lackluster sales in November. The decline was primarily due to the fact that this year’s data did not include Black Friday sales in late November, which will be reflected in the December numbers. Overall, consumer spending on Barclays’ debit and credit cards fell by 0.5% in November, the first decline since July, as factors like easing consumer confidence and expectations of higher inflation and interest rates weighed on spending. However, Barclays said retail and overall transactions on Black Friday increased 9.5% compared to Black Friday 2023, reaching the highest level so far this year.
📊 On CME’s FedWatch Tool, the odds of a quarter-point rate drop by the Fed on December 18 have increased, rising from 66% the day before and 52% the week before to 75% presently.
Market View:
🌍 The US reaches record highs once again. Mini S&P 500 futures have reached new highs in recent hours, touching 6,070 points. Meanwhile, the Nasdaq experienced a strong rally during yesterday’s session, rising decisively above 21,000 points and now standing at 21,230 points.
💵 The dollar index climbed back above 106.50 points, where it is now. The EUR/USD, meanwhile, lost the 1.05 level and is now trading at 1.0488.
📉 European markets followed in the footsteps of the US stock markets, although Europe is experiencing a severe economic situation. PMI data released yesterday showed a contraction in the manufacturing sector in Europe’s two largest economies, Germany and France.
📊 However, the DAX 40 reached new all-time highs yesterday, approaching 20,000 points. It is currently trading at 19,955 points. The EuroStoxx 50 also rose sharply, although it has yet to reach the 5,000-point mark and is currently trading at around 4,875 points.
🛢️ Crude oil prices remain unchanged, with Brent crude oil trading around 72 dollars. Gold continues to consolidate above $2,650, currently trading at $2,670 per ounce.
💻 As for Bitcoin, it remains at high levels, but without significant movements in recent days. The cryptocurrency has not managed to break through the $97,500-98,000 barrier and is currently trading at $95,500.
Geopolitics:
🌐 AfD plans to campaign for Germany to leave the European Union, the Paris Climate Agreement, and abandon the euro before early elections in February. They also advocate for tightening abortion laws, ending economic sanctions against Russia, and repairing the Nord Stream pipelines. The draft program suggests ending permanent bailouts and establishing a new European community.
🤖 Skynet is coming. The German company Helsing, which is well-known for creating AI software for fighter jets and unmanned aerial vehicles, is now creating its own attack drones that are capable of carrying ammunition and navigating without the need for a GPS or human guidance. The business is promoting them to NATO allies and Ukraine, claiming that its technology can address the issue of Russian electromagnetic jamming.
💶 EU: A deal on a new €1.5 billion fund to support Ukraine and the bloc’s defence sector for the next three years is almost finalised. The fund’s negotiations, which are expected to be completed by the end of the year, would permit the purchase of military hardware with up to 35% of its components coming from outside the EU.
