WEEKLY MARKET RECAP
Your weekly global financial market newsletter
04 December 2023
- Israel has communicated its intention to create a buffer zone on the Palestinian side of Gaza’s border to neighbouring Arab states, including Egypt, Jordan, the UAE, and Saudi Arabia. The buffer zone is intended to prevent future attacks. While not indicating an immediate end to the offensive, Israel is reaching out beyond traditional mediators to shape post-war Gaza. The proposed buffer zone is part of Israel’s border security plans for Gaza, which include the destruction of Hamas, demilitarization, and de-radicalization. The plan faces opposition amid concerns about the displacement of Palestinians and reducing Gaza’s size. Israel’s defence establishment is examining the depth of the proposed buffer zone. The focus on a buffer zone reflects efforts to address security concerns along the Gaza-Israel border.
- Russian forces have reportedly eased their attacks on the town of Avdiivka in eastern Ukraine, with unofficial reports suggesting they failed to capture Maryinka to the southwest. Moscow’s military has targeted Avdiivka and its coking plant since mid-October. While Russian reports indicated control over Maryinka, unofficial Ukrainian sources suggest they are holding some districts under their control. Avdiivka is reportedly heavily damaged, with the coking plant still under Ukrainian control, despite Russian attempts to breach it. The situation in Maryinka remains unclear, with conflicting reports on control and ongoing intense fighting. Ukrainian forces are countering Russian advances in the east and south.
- North Korea has warned that it would consider any interference with its satellite operations as a declaration of war, vowing to mobilize its war deterrence in response to any imminent attack on its strategic assets. In the statement, the spokesman for North Korea’s Ministry of Defense threatened to eliminate the viability of U.S. spy satellites if the U.S. tried to weaponize the latest technologies and violate North Korea’s sovereign territory. This came after North Korea claimed to have successfully launched its first military spy satellite on November 21, transmitting photos of military facilities in the U.S. mainland, Japan, and Guam. The U.S. Space Command noted that the U.S. could deny an adversary’s space capabilities using various means. In response to the new sanctions imposed by the U.S. after the satellite launch, North Korea’s Foreign Ministry announced countermeasures against individuals and organizations involved in sanctions against the country, arguing that such sanctions violate international law. The situation adds to tensions in the region.
Indices
For the week, most major indices posted gains, with the S&P 500 Index and Nasdaq Composite achieving their best monthly performance since July 2020 (8.9% and 10.7%, respectively). In local currency terms, the pan-European STOXX Europe 600 Index closed 1.35% higher, boosted by a significant drop in inflation and falling bond yields, positively impacting investor sentiment. Major stock indices also experienced increases, with Germany’s DAX rising by 2.30%, and the UK’s FTSE 100 Index gaining 0.55%.
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US30 +2.42% |
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US100 +0.10% |
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US500 +0.77% |
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GER40 +2.30% |
Commodities
Gold prices reached a record high in Asian trade, driven by market speculation that the Federal Reserve could cut interest rates as early as March 2024. The surge was fueled by easing inflation, weak labour market data, and less hawkish signals from the Fed. Concerns over the Israel-Hamas war and an attack on the Red Sea also contributed to the demand for gold. While Fed Chair Jerome Powell maintained his commitment to keeping rates higher for longer, changes in his signalling suggested a potential delay in rate hikes, reinforcing expectations of a rate cut by March 2024. Spot gold hit $2,148.78 an ounce, and February gold futures rose to $2,151.20 an ounce. Market indicators show a 97% chance of maintaining rates in December, with a 60% chance of a rate cut in March 2024. Economic signals, including nonfarm payrolls and inflation data, will continue to influence market expectations ahead of the Fed’s mid-December meeting.
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Gold +3.50% |
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Silver +4.84% |
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BRENT -1.60% |
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NATGAS -7.34% |
Forex
On Friday, the Dollar Index gave up its early gains, settling at 103.5 as investors assessed Fed Chair Jerome Powell’s hawkish stance in contrast to recent data indicating a manufacturing and inflation slowdown. Powell reiterated the cautious sentiment shared by fellow policymakers, emphasizing it was premature to declare victory in the Fed’s battle against inflation due to sustained high core inflation and wage growth, coupled with a resilient labour market despite signs of easing. At the same time, the latest ISM survey revealed a significant contraction in the US manufacturing sector throughout November, falling short of market expectations for a more moderate decline. Additionally, the US PCE Price Index showed a 3% increase in October compared to the previous year, signalling a deceleration from the 3.4% growth observed in the preceding three months. Personal spending showed a slowdown while continuing jobless claims reached a two-year high.
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EUR/USD -0.56% |
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USD/JPY -1.78% |
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GBP/USD +0.85% |
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USD/CAD -1.05% |
Crypto
The price of Bitcoin surged to its highest level of the year, reaching $39,000 on the Coinbase exchange, following remarks by Federal Reserve Chair Jerome Powell suggesting that interest rates would remain unchanged. Bitcoin’s recent rally takes it to its highest level since May 2022. As 2023 nears its end, speculators are eyeing the possibility of Bitcoin reaching $40,000, having more than doubled in value this year. The anticipation of a potential approval for the first Bitcoin-linked exchange-traded fund by the U.S. Securities and Exchange Commission is contributing to the positive momentum. The focus on Bitcoin over altcoins is seen as a factor driving prices higher. At the time of writing, Bitcoin was trading at $38,782, up 0.78% in the last 24 hours.
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BTC +5.20% |
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ETH +4.53% |
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LTCUSD +2.32% |
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XMRUSD +3.02% |
Macro
In the UK, Bank of England Governor Andrew Bailey maintained his stance against anticipated interest rate cuts, emphasizing the commitment to reduce inflation to the 2% target. He made it clear that discussions on cutting interest rates were not currently on the table.
In the Eurozone, the annual consumer price growth for November decelerated more than expected, falling to 2.4% from 2.9% in October. Core inflation, excluding food and energy costs, also eased to 3.6% from 4.2%. The unemployment rate remained at a record low of 6.5%. Ahead of the release, policymakers reiterated a hawkish stance, emphasizing the need to keep rates higher to address inflation concerns.
In Germany, the Federal Labour Office reported an increase in the jobless rate to 5.9% in November, the highest level since 2021. Seasonally adjusted employment remained unchanged compared to September but increased by 0.6% year over year. Despite a decline in job vacancies, retail sales in October beat expectations, growing by 1.1% sequentially, potentially boosted by decreasing inflation and enhanced consumer confidence.
In the United States, positive developments regarding inflation emerged during the week. Thursday’s Commerce Department report highlighted that the Federal Reserve’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index (excluding food and energy), rose 0.2% in October, representing a slowdown from September. The year-over-year rise was 3.5%, still exceeding the Fed’s 2% target but marking the lowest level since April 2021. Over the past six months, the core PCE showed an even slower annual rate of 2.5%.
The week potentially indicated progress toward the policymakers’ objective of achieving a “soft landing” for the economy. September witnessed a modest 0.2% increase in personal spending, the smallest in six months, while personal income rose at a similar pace. Housing permits exceeded expectations, but actual starts fell below projections. Weekly jobless claims decreased, but continuing claims surged beyond expectations to 1.93 million, reaching their highest level since November 2021.
The release of the Fed’s Beige Book on Thursday, a survey of economic activity in its 12 districts, revealed a balanced picture, with half reporting growth and the other half experiencing declines. Federal Reserve Chair Jerome Powell’s comments contributed to pushing the yield on the 10-year Treasury note down to nearly a three-month low of 4.21% on Friday. Additionally, tax-exempt municipal bonds received a boost from favourable technical conditions, including strong demand and manageable new supply, according to traders.
What to watch out for this week
- In the United States, the focus will be on key economic indicators such as the US jobs report, JOLTs job openings, ISM Services PMI survey, and the preliminary estimate of Michigan consumer sentiment. Forecasts indicate an increase of 170,000 in nonfarm payrolls for November, a slight acceleration from the previous month. The jobless rate is expected to remain unchanged at 3.9%, and wage growth is expected to slow to 4%. The ISM survey is expected to reveal a slight acceleration in growth in the services sector in November. Other data to monitor include ADP employment change, foreign trade, factory orders, the Economic Optimism Index, final readings for third-quarter productivity, and the November S&P Global Services PMI.
- In Europe, Germany is in the spotlight with expected trade data for October indicating declines in both exports and imports. Industrial production is projected to marginally rebound, while factory orders are expected to show no growth. In the Euro Area, retail sales are anticipated to rise in October after four months of stagnation, and GDP data is expected to confirm a slight decline in Q3. France will release industrial output and trade balance figures, and Italy will unveil industrial output, retail sales, and services PMI. Spain’s agenda includes unemployment data and services PMI, while Switzerland will present CPI and unemployment figures.
- In the UK, the economic calendar is lighter, featuring the Halifax House Price Index, BRC retail sales monitor, new car sales, and S&P’s PMI updates.
Day:
Impact:
Restrictions:
Description
Instrument
Dates
UTC+01:00
Forecast
Previous
Core Machinery Orders m/m
JPY19 Feb 2024
00:50
Expired2.7
-4.9
Rightmove HPI m/m
GBP19 Feb 2024
01:01
ExpiredNo forecast
1.3
German Buba Monthly Report
EUR19 Feb 2024
12:00
ExpiredNo forecast
No previous value
Bank Holiday
CAD19 Feb 2024
14:00
ExpiredNo forecast
No previous value
Bank Holiday
USD19 Feb 2024
14:00
ExpiredNo forecast
No previous value
IPPI m/m
CAD19 Feb 2024
14:30
Expired-0.1
-1.5
RMPI m/m
CAD19 Feb 2024
14:30
Expired0.7
-4.9
Disclaimer
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