📈 Market Report.
📊 Post-Thanksgiving in Asia was expected to be quiet, but Tokyo’s CPI readings pushed investors to chase after the yen, which is on track for its best week in four months. The yen surged 1.1% to its strongest in six weeks, breaking below the 150-per-dollar threshold.
📉 The August BOJ rate hike, together with a sudden weakening of the dollar due to a weak US employment report, triggered a chain reaction, which made people take advantage of the yen’s strength to unwind and sell Japanese stocks at good levels, which produced a sharp fall with a domino effect on the rest of the stock markets for a few hours. We will see what happens now with the next BoJ rate hike.
📊 Today we will get the EU inflation rate, 2.3% headline inflation reading is expected, up from 2.0% in October. German inflation was subdued, and traders have priced in a 25-bps rate cut by the European Central Bank. A benign inflation reading could shift the dial to a 50-bps move.
📉 German monthly inflation fell yesterday -0.2% leaving annualised inflation at 2.2% versus 2.3% expected.
📢 Francois Villeroy de Galhau, ECB policymaker, said that the bank should keep options open for a bigger rate cut next month, and that interest rates should head towards a level where they are neither restricting nor stimulating growth, which he put at 2-2.5%. The ECB should not rule out possible cuts at following meetings.
⚡ French Prime Minister Michel Barnier has canceled plans to increase electricity taxes in his 2025 budget due to opposition from the Le Pen’s National Rally party. The government aimed to raise around 3 billion euros by increasing an electricity tax cut during the energy crisis. However, widespread opposition from the left and far-right has left Barnier’s government facing a lose-lose situation. The RN has declared this concession as a “victory” but warned of other “red lines” such as plans to delay indexing pensions to inflation. Barnier’s minority government may not survive beyond next week, when it will likely use a special constitutional power to push the social security budget through without a vote, triggering a no-confidence motion.
📉 For the first time ever, the yield on French national bonds equalled that of Greece.
💻 The German government is planning to invest €2 billion in new semiconductor production capacities after Intel cancelled plans for a €30 billion Magdeburg chip factory. The funds will be provided to chip companies to develop modern production capacities that exceed current state-of-the-art. The EU aims to double its global semiconductor market share to 20% by 2030. The new government’s budget may impact the final subsidy amounts.
🏠 China’s home prices are expected to fall at a slower pace in 2024 and 2025, stabilizing in 2026, according to a Reuters poll. The decline is due to policy changes, including reduced minimum down payments and relaxation of home purchase restrictions. The finance ministry has also introduced tax breaks to boost housing demand. Property sales are expected to shrink by 5.0% in 2025, while investment is expected to fall by 8.0%. The positive trend is driven by monetary, fiscal, and real estate policies, but further efforts are needed to stabilize the market.
📉 Market View:
📊 Mini S&P 500 futures are very close to all-time highs, less than 25 points away, currently looking for 6,028 points. The Nasdaq 100 is also close to 21,000 points and is currently pausing at 20,885 points.
💱 The dollar index has retreated gently in the last few hours, losing 106 points and falling to 105.70 points at the moment. The EUR/USD has taken advantage of the movement to regain its bullish tone and approach the 1.06 area, currently trading at 1.0590.
📈 The DAX 40, which only last week was struggling to hold the key 19,000 point level, is now trying to hold on to the 19,450 point area. For its part, the Eurostoxx 50 is sideways around 4,760 points. In general, we could expect bearish movements on the European stock markets in the coming hours, awaiting the inflation data.
🛢️ In the crude oil market, Brent crude oil prices approached $73 a barrel, but fell back and are currently trading at $72.30 a barrel. Gold has strengthened again and is approaching $2,700 per ounce, currently trading at $2,685.
💰 Finally, Bitcoin continues to trade above $96,000 and seems to be preparing for another bullish run to reach the expected $100,000 per bitcoin.
🌍 Geopolitics:
🛑 The ceasefire between Israel and Hezbollah in southern Lebanon is fragile, with both sides accusing each other of breaching the truce. Israel’s air force struck a Hezbollah rocket storage facility, the first since the ceasefire took effect. Hezbollah and the Lebanese army accused Israel of multiple ceasefire violations. Israeli troops remain stationed in Lebanese territory, and a curfew restricts movement.
🇷🇴 In Romania, the so-called far-right, pro-Russian patriotic party is being questioned for winning. The nation’s highest court, citing a cyber operation, ordered a recount of the first-round vote last weekend.
🇷🇺 Russia’s Defense Ministry is preparing to launch new ballistic missiles in Kyiv as retaliation for recent Ukrainian attacks on Russia using Western missiles. The Defense Ministry is selecting targets to hit on Ukrainian territory, including military facilities and defense industry enterprises. Russia has also launched an experimental intermediate-range ballistic missile capable of carrying a nuclear warhead.
⚔️ In the last 48 hours the rouble has strengthened by 5% against the dollar despite the sanctions on Gazprom Bank.
🔥 Syrian rebel forces, led by jihadist groups have launched their first major offensive in four years, pushing towards the city of Aleppo. The offensive has seen the rebels claim to have beaten government forces back several miles and captured around a dozen villages west of Aleppo. Factors contributing to the renewed fighting include wider regional instability involving Iran and Israel.
