Weekly market recap 28 November 2022 - FTMO®

Slide WEEKLY MARKET RECAP Your weekly global financial markets newsletter Market weekly Recap

28 November 2022

  • The whole world seems to have forgotten about Covid-19, only the country of origin is still fighting an unequal battle with it, which it is clearly losing. It may not have the same impact on world events today as it did at the turn of 2019 and 2020, but the current unrest is once again starting to make investors around the world nervous.
  • Beijing’s zero-tolerance policy is clearly not working and the country has reported record increases in new cases of disease in recent days despite a growing number of quarantine facilities and makeshift hospitals across the country. According to Nomura, up to a fifth of the country is under some kind of movement restriction. But people are beginning to riot and there is growing unrest in the country.
  • A video from a Foxconn factory, a subcontractor to Apple, showing disgruntled workers at the company has gone viral and the company has had to respond by allowing workers to go home. So over the course of the weekend we saw riots calling for the resignation of the government spread virtually across the country, which is very unusual in China.
  • The problem is that the leaders are unwilling to do anything about it and want to show the world that they are capable of fighting the disease. So the only change should be that officials will be more specific and targeted in their pandemic inspections, but that there will be no fundamental change in the overall attitude to the zero tolerance policy.

Indices

US equity markets were affected by Thursday’s Thanksgiving day, which resulted in weaker volumes. However, good results from companies in the retail and technology sectors and Wednesday’s FOMC Minutes, which suggested that the possibility of a slowdown in rate hikes by the Fed was growing, helped stocks to rise on the week. The S&P 500 index broke the 4,000-point mark for the first time in two months.

Stocks in Europe also strengthened, for the sixth week in a row. Here too, investors reacted positively to news of a possible slowdown in interest rate hikes by the ECB. The pan-European STOXX Europe 600 Index 1.66% higher, Germany’s DAX advanced 0.62%, France’s CAC 40 added 0.88%, and the UK’s FTSE 100 climbed 1.16%.

US30
+1.78%
US100
+0.68%
US500
+1.73%
GER40
+0.76%

Commodities

The commodity markets are still influenced by events in China. Record numbers of new Covid-19 infections are having a negative impact on the price of oil as further restrictive measures will have a significant impact on transport. The situation is not helped by the growing unrest in the most populous country. Another factor acting downwards is the setting of a ceiling price by the G7 countries, which should be set at between USD 65 and USD 70.

Gold
+0.36%
Silver
+2.56%
BRENT
-4.23%
NATGAS
+7.93%

Forex

The US dollar fell again last week, helped by rhetoric from central bankers suggesting that the era of rapidly rising interest rates may be over. Wednesday’s FOMC Minutes then suggested that most officials are considering slowing the pace of rate hikes. However, widening protests in China may also affect the greenback in the coming days, which may bring a risk-off mood to the markets that may help the dollar to rise again.

EUR/USD
+0.68%
USD/JPY
-0.92%
GBP/USD
+1.66%
USD/CAD
-0.05%

Macro

The week affected by the US holidays did not bring much important macro data. Durable Goods Orders in the US surprised by rising by one percent (0.4% growth was expected) and New Home Sales also unexpectedly recovered, rising 7.5% in October to 632,000 (decline to 570,000 was expected) after falling 11% in September.

Preliminary US PMI data disappointed, both in the services and manufacturing sectors. In the service sector, PMI readings have been below 50 for several months, but in the manufacturing sector, the PMI fell below 50 for the first time since 2020, when the markets were paralyzed by the Covid-19 pandemic.

In the Euro Area, Germany and the UK, on the other hand, PMIs have seen unexpected growth after several months, both in the services and manufacturing sectors, but they are still below 50 for several months, marking a contraction and may be a sign that countries in Europe are heading into recession.

What to watch out for this week

  • The most attention this week will be drawn to the labour market reports for November. First, on Wednesday, ADP reports on the state of the private sector labour market and we will also learn the number of new jobs. Then on Friday, the Nonfarm Payrolls number arrives, which could have a big impact on the Fed’s decision on the pace of interest rate hikes. The 200,000 job growth is expected to be the smallest since December 2020, while unemployment is expected to remain at 3.7%.
  • Thursday will also see the release of the PCE Price Index, which is a favorite inflation gauge for central bankers, so its expected decline may reassure investors that the Fed will indeed slow down. We’ll also get the final manufacturing PMI numbers from S&P, and the PMI from ISM.
  • The direction of monetary policy in the US may also be illuminated by statements from Fed officials themselves, which will include Fed chief Jerome Powell who will speak on Wednesday and St. Louis Fed President James Bullard and New York Fed President John Williams which are both due to make appearances on Monday.
  • Preliminary inflation data is expected in the Eurozone, which, unlike in the US where we are apparently past the peak, is still not letting up. Year-on-year price growth is expected to be around 10.4%, still five times the ECB’s inflation target.
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