VIX Drop: Stocks Collapse or Boring Growth Ahead?

Financial market volatility has plunged to its lowest level in almost four years, according to the VIX index. This so-called “fear index” fell to 12.45 on Friday, the lowest level since January 2020. Such low levels could be both a sign of the market entering a smooth bullish trend or a lull before a sharp decline.

Will Deeper OPEC+ Output Cuts Matter for Oil Prices?

Oil prices tumbled after OPEC and other major oil producing nations, known as the OPEC+ group, decided to delay a meeting scheduled for Sunday, November 26, to Thursday, November 30. Investors may have sold black gold on concerns that the group was unable to reach consensus on further production cuts amid a weakening global growth outlook, as it was anticipated heading into the meeting.

NZ First Impressions: RBNZ Monetary Policy Statement

Our overall first impression is that the RBNZ is concerned that further increases in interest rates may be required towards the middle of 2024. Key will be migration and housing market indicators over the next few months and the next couple of CPI outturns. The new government’s fiscal projections in the HYEFU before Christmas will also be a key focus. OCR cuts certainly do not seem to be on the radar for the RBNZ right now.

Australia October Monthly CPI Indicator

The Monthly CPI Indicator rose 4.9% in the year to October, down from 5.6%yr in September and the recent peak of 8.4%yr at December 2022. This was meaningfully less than Westpac’s forecast of 5.3%yr, and the market median forecast of 5.2%yr.

Focus on German and Spanish inflation

In the euro area, today's main focus will be on preliminary inflation data from Germany and Spain. The November figures will give markets the first sense of what to expect from the euro area HICP which is due for release tomorrow.

NZD/USD: RBNZ Fired a Hawkish Missile

Hawkish forward guidance by RBNZ where its latest projected terminal rate of the OCR has been revised upwards to 5.69% (Sep 2024) from 5.57% projected earlier in the August 2023 MPS.

US Yield Curve Impressively Bull Steepened

The US yield curve impressively bull steepened. The 2-y yield tumbled 15.4 bps. The 30-y yield eased 3.2 bps. The decline was fully due to a lower real yield (10-y -7.7 bps to 2.10%). The US 10-y yield dropped below 4.34 % support  (38% on the April October rise).

Weekly Economic & Financial Commentary: FOMC Proceeding Carefully on Policy

The minutes from the Fed's November meeting emphasized that policymakers are proceeding carefully in terms of setting policy. The FOMC is in the fine-tuning stage of its tightening cycle and will adjust policy as needed to guide inflation back to target. We still forecast the FOMC is done hiking rates, though it will be some time before it begins to outright ease policy.

Delay is No Good Sign

OPEC decided to delay this weekend’s meeting to next week because talks between Saudi and African members apparently ran into trouble. Saudi likely sensed in this week’s poor price action - ‘buy the fact that Saudi will double its production cuts’ action - that 1mbpd extra cut wouldn’t send the oil prices higher, sustainably. Hence, Saudis need other member to put their hand in the mud, and seemingly the negotiations aren’t easy.

Gold Corrects Slightly But Remains in Uptrend

XAUUSD was rising during the Asian and early European trading sessions. The U.S. market will be closed today and early on Friday due to Thanksgiving. Thus, volatility will be subsided, but the lack of liquidity may result in sharp moves of the instruments in case of unexpected events or data. 'Spot gold may revisit its 21 November high of $2,007.29 per ounce, as it may have completed a correction from this level,' said Reuters analyst Wang Tao.