Market Report:
🇺🇸 Yesterday, The U.S. Commerce Department reported Wednesday that the October personal consumption expenditures price index, PCE, increased by 0.2% for the month and 2.3% for the 12-month period. Core inflation increased by 0.3% for the month and was 2.8% for the year, higher than 2.7% in September. Every figure was based on consensus estimates.
📉 Jobless claims came in slightly lower than expected, possibly indicating a strengthening US economy, and the revised US GDP growth rate for Q3 remained at 2.8%, much better than the European data.
🇫🇷 French Prime Minister Michel Barnier’s government faces a potential fall before Christmas or next week if far-right and leftist opponents force a no-confidence motion. The 2025 budget bill, which aims to reduce France’s deficit through tax hikes and spending cuts, is a political crossroads for Barnier’s administration. Marine Le Pen’s far-right National Rally party is pushing for pressure to protect households, small businesses, and pensioners. Over half of French people believe a no-confidence vote should be avoided, and 63% would prefer President Macron’s resignation.
🇩🇪 Germany’s inflation rate is set to be published, and the consumer sentiment index has fallen significantly, reaching -23.3 points. This decline is attributed to job cuts by major companies like Bayer, Volkswagen, and Thyssenkrupp. The government predicts a 0.2% economic contraction in 2024, marking a second year of decline and a laggard among eurozone peers. The collapse of the ruling coalition and upcoming snap elections further increase uncertainty and could bring more economic pain in the coming months.
🚗 A coalition of 7 EU member states (Italy, Poland, Austria, Bulgaria, Czech Republic, Romania, Slovakia) is calling for actions to preserve the competitiveness of the EU’s automotive industry. The coalition wants the EU to find a solution to avoid fines for car producers exceeding new emissions targets due to take effect in 2025. They say that the penalties for exceeding emissions targets could severely limit the industry’s ability to reinvest in innovation and development, harming Europe’s global competitiveness.
🏦 The ECB’s Executive Board member, Schnabel, advises caution in cutting interest rates too far due to rising borrowing costs. She estimates a neutral interest rate between 2-3%, higher than some dovish officials suggest. Schnabel warns against moving rates beyond the neutral level, as it could waste policy space. She believes the ECB will reach its 2% inflation target next year, but warns it may be bumpy in 2025. Schnabel plays down the recent drop in private-sector activity.
💰 Central banks in Eastern Europe, including the Czech Republic, Poland, Hungary, and Serbia, are increasing their gold reserves to diversify investments and hedge against external shocks. The Czech National Bank governor, Ales Michl, aims to double gold reserves to 100 metric tons in three years. Poland, the largest gold buyer globally, increased its gold holdings to around 420 tons, half that of India or Japan. Hungary’s central bank has increased its gold reserves by over 10% to 110 tons this year, while Serbia tripled its reserves to 48 tons since 2012.
Market View:
📊 S&P 500 futures remain strong. Although they have retreated from Tuesday, they are still in an uptrend and are currently above 6,020 points. The Nasdaq 100, meanwhile, seems to be a little more laggardly, but has not lost its bullish tone either and remains at 20,860 points, approaching 21,000 points.
💵 The dollar index (DXY) lost 106.50 points during yesterday’s session. As a result, the EUR/USD has regained the 1.05 level, and during yesterday’s session it was close to 1.06, but has now retreated to 1.0550.
📈 In Europe, the DAX 40 has another bullish rally, approaching the 19,400 level, currently trading at 19,365. The EuroStoxx 50 follows suit at 4,770 points. From a chart pattern point of view, both indices continue to show a bearish tone in general terms.
🛢️ In commodities, crude oil continues to cool after breaking above 75 dollars per barrel last week. Today it is down to 72 dollars per barrel. Gold, which yesterday was again close to 2,700 dollars per ounce, has retreated and now stands at 2,160 dollars per ounce.
💻 Finally, Bitcoin has pushed higher again, momentarily surpassing the $97,000 level. It has now fallen back slightly and is trading at $95,745.
Geopolitics:
🌍 Over the past seven months, US intelligence assessments suggest nuclear escalation is unlikely due to President Biden’s decision to ease US weapon restrictions on Ukraine. Despite Russia’s new ballistic missile warning, US officials believe Moscow won’t escalate nuclear forces. And if they are wrong, what could happen?
⚠️ Lavrov, the Russian foreign secretary, said that US officials are so ‘stupid’ that they believe that if there is an attack, it will only be on Europe, but ‘they are wrong’.
🌊 Poland’s Prime Minister, Donald Tusk, has proposed a maritime police program in the Baltic Sea following a second underwater infrastructure damage. As war likelihood increases, Nordic and Baltic governments, central banks, and businesses are establishing standards for emergency food and medical supplies storage.
