In the Stock Market:
European Stocks Weaken, US Rebounds: European stock appetite waned while US counterparts recovered Wednesday losses, closing over 1% higher. US growth data revised slightly lower to 4.9%, real consumer spending and corporate profits saw downward revisions. Despite signals of a certain economic slowdown, markets found optimism in the prospect of a more lenient Fed monetary policy.
Fed Puzzle’s Last Piece: Today’s PCE inflation print holds significance. A soft print could extend the Santa rally, with expectations of a record for S&P500. Market optimism is high on dovish Fed expectations, with swaps indicating expectations of a 150bp cut in US rates over the next year.
Inflation Insights:
Japan’s Inflation Falls: Japan’s inflation data confirmed an expected fall to 2.5% from the previous month’s 2.9%. Japanese policymakers may delay actions, given low rates’ benefits for growth. The USDJPY may not dip below 140, and Japanese stocks remain attractive with BoJ support.
EURUSD Bulls Await US Inflation: European bulls await US inflation data, anticipating a boost for Fed doves, USD depreciation, and EURUSD potentially crossing the 1.10 mark by year-end. Gold could see further gains above $2000 in this scenario.
Crude Oil Dynamics:
American Crude Testing Resistance: American crude tests the top of a downtrending channel since September. Despite $74/75 resistance, positive breakout potential remains, with indicators suggesting a move toward the 200-DMA near $78pb.
OPEC Tensions:
Angola’s OPEC Exit: Angola’s decision to leave OPEC reflects rejection of imposed production quotas. While not significantly altering OPEC dynamics due to Angola’s decreased production, it underscores tensions within OPEC. The cartel’s unity is crucial for impactful influence on oil prices, especially as it faces historically low market share.
Conclusion:
Markets at Crossroads: Global markets stand at a crossroads, interpreting economic signals and geopolitical tensions. The outcome of the Fed puzzle, OPEC dynamics, and ongoing economic data will shape market sentiments as they navigate the final days of the year.
