US Jobs Data Eyed Ahead of Next Week's Fed Rate Decision

The next couple of weeks could be massive for financial markets going into 2024, with a range of data from the US in the coming days setting us up nicely for the Fed meeting on the 13th.

December Flashlight for the FOMC Blackout Period

We look for the FOMC to keep rates on hold at its December 13 meeting, an expectation that is universally shared. If realized, the third consecutive hold would suggest that, rather than the FOMC merely hiking at a slower pace, the fed funds rate probably has reached its terminal level of this cycle.

Sunset Market Commentary

Gold grabbed most headlines today. The price of bullion spiked to an all-time high in illiquid Asian dealings of $2130/ounce. The spike didn’t last with gold prices falling back towards Friday’s closing levels near $2060/ounce. The move smells like an exhaustion move after the October/November core bond rally pushed gold prices up by around 15%. A quick look at the bitcoin graph (+5% today; +60% since early October; highest since April 2022) also suggests that the air is becoming thin.

Financial Markets Were Feeling Hangover From November Rally

Financial markets were feeling the hangover from the November rally yesterday. The week kicked off with a downside correction in many stock and bond markets, whereas the bigger than expected slump in US factory orders, soft growth in British retail sales amid the Black Friday discounts failed to boost sales, and an unexpected fall in Australian company profits last quarter could’ve further boosted the central bank doves and the rate cut bets around the globe. But they didn’t’.

ECB's Influential Hawk Takes Further Rate Hikes Off the Table

For Europe, we retain ECB’s Schnabel interview by Reuters published this morning. The influential hawk took further rate hikes off the table in a dovish shift compared to just one month ago. Three unexpectedly benign inflation readings in a row changed Schnabel’s mind. She noted last month’s “remarkable” drop in the core gauge. Schnabel also warned against guiding markets to far ahead given how inflation is surprising.

Japanese Yen Steady, Tokyo CPI Falls

Tokyo Core CPI, a leading indicator for nationwide inflation, climbed 2.3% y/y in November. This was down from 2.7% in October and below the consensus estimate of 2.4%. This marked the 18th consecutive month that Tokyo Core CPI has hovered above the 2% target, indicating persistent inflationary pressures. Tokyo’s headline inflation also slowed in November to 2.6%, down from 3.3%.

Australian Dollar Slides as RBA Holds Rates

The Australian dollar is down sharply for a second straight day. In the European session, AUD/USD is trading at 0.6561, down 0.88%. The Australian dollar has taken a tumble this week, falling 1.70%.

Sunset Market Commentary

US JOLTS job openings and the services ISM (both still to be published at CET 16:00) and to a lesser extent the ECB consumer expectations survey were supposed to provide some guidance as to whether recent decline in yields could finally slow down. Markets had frontloaded expectations on a first Fed and ECB rate hike as early as the March meetings (>70% discounted).

Nasdaq – How Sustainable is the Stock Market Rally? PMIs a Positive Surprise

Equity markets in Europe and the US continued to edge higher on Tuesday despite many now questioning whether investors are getting too carried away. The rally appears to be based on the view that central banks from the Fed to the ECB and BoC will start cutting interest rates in March and then do so another three times over the rest of 2024. That’s quite the difference from what policymakers have insisted on for many months but there has undoubtedly been a change in tone recently.

First Impressions: Australian National Accounts, September Quarter

Australia’s economy hit the wall in the September quarter. Output growth was a very weak 0.2%, or a sharp contraction in per capita terms of -0.5%qtr. Strikingly, consumer spending stalled, with a flat result and a decline in per capita terms of -0.6%qtr, as real disposable income collapsed, contracting -1.3%qtr, -4.3%yr.