Crude flat

WTI crude opened flat around $71.70 after weeks of declines that saw it go below $70. Pessimism over demand dampened price, despite OPEC+ production cuts.

Major currencies lack trend

EUR/USD, GBP/USD both opened flat this week as Fed’s immediate rate cuts hopes diminish over the weekend. The GBP/USD and the EUR/USD will face a crucial test next week due to key data releases and forthcoming interest rate decisions from the Fed and the BoE. USD/JPY opened little over $145, it needs to cross $150 to resume its uptrend. DXY appears to be holding $104 while arresting its downtrend. Previous support of $105.5 is now its resistance.

Metals lacklustre

Political uncertainty has waned, Israel-Hamas hasn’t drawn in new entrants. Therefore gold below psychological $2000 is showing investors lack of interest in using gold as a hedge. WTI crude has tumbled ever since $90 hit during initial stages of the middle-east conflict. Lower crude oil prices also means lower inflation. However markets are not expecting Fed rate cuts as yet. Copper too opened flat about 0.2% down to $3.82.

Central Banks in focus

Investor focus will also remain on the Federal Reserve’s meeting and its stance on interest rates, with broader Asian markets showing cautious gains. Investors’ focus will be key consumer inflation data following the Reserve Bank of India’s warnings of a potential uptick in inflation through November. Various expectations of rate decisions from various central banks, including the BOE and ECB, add to the interest rate sensitive market’s uncertainty.

Benchmark bonds

The yield on US 2 year opened about 4.73 and the US 10 year opened about 4.23. Both appear to be in a consolidation phase. Key inflation numbers will determine their future trend.

Asian markets mixed

Asian markets displayed mixed performance as investors awaited central bank meetings. Japan’s Nikkei 225 bounced back by 1.6%, recuperating from prior losses impacted by hawkish signals from the Bank of Japan. However, concerns lingered over Chinese disinflation, leading to a plunge in Chinese shares. Australia’s ASX and Korean Kospi are largely flat. Indian stocks, which recently hit record highs, are anticipated to retreat slightly. Profit-taking in Nifty50 is anticipated despite optimism from the country’s economic growth and political victories.

Chinese stocks tumble

Chinese stock markets opened with declines. Shanghai Shenzhen CSI 300 index hitting its lowest point since early 2019, accompanied by similar drops in the Shanghai Composite and Hong Kong’s Hang Seng. Recent data revealed a concerning trend. Consumer inflation in China experienced its sharpest fall in three years in November, while producer inflation continued its downward spiral for the 14th consecutive month.

China’s economic woes persist

Despite Beijing’s ongoing liquidity measures, spending in China remained stagnant, indicating a prolonged period of disinflation that forecasts sluggish economic growth ahead. These figures, combined with various mixed economic indicators for November, amplified calls from investors for increased stimulus efforts from the Chinese government. Persistent economic concerns have rendered Chinese stocks the worst performers in the Asian region this year.

All time highs in sight

The market is poised to resume Friday’s trend, but caution is advised for potential ‘bull traps’. Currently, the overall market sentiment is bullish, notably with the S&P 500 closing above 4,600. Technical analysis highlights the need to breach this level and aim for the all-time high of 4,795 – 4,800 to support the bullish case. While economic indicators indicate a gradual slowdown, potential issues in 2024 might revolve more around interest rates rather than earnings.

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