MARKET WRAPS
Watch For:
EU Construction output, EU-African Union ministerial meeting, European Economic Area Council meeting; U.K. Aluminium Production report, Bank of England Governor Andrew Bailey delivers the NFU Henry Plumb Lecture, SPE Annual Dinner with Bank of England Deputy Governor David Ramsden and Banque de France Governor FranÃois Villeroy de Galhau; Germany PPI, German Chancellor Olaf Scholz hosts 'G20 Compact with Africa' conference, Bundesbank monthly report; trading updates from Julius Baer Group, Compass Group
Opening Call:
European stock futures were broadly higher; Asian stock markets and Treasury yields were mixed; the dollar weakened; while oil futures and gold gained.
Equities:
European stock futures were tracking broadly higher early Monday amid mixed cues.
While expectations are rising for the prospect of interest-rate cuts arriving during the first half of 2024, some Fed officials have cautioned that uncertainty remains around the pathway forward and there could be further tightening if the economic data merits it.
"Now may be time to seek exposure to quality stocks," UBS said noting that quality stocks have historically outperformed in the late stages of the business cycle, including in periods of economic contraction.
David Kostin, Goldman's chief U.S. equity strategist said quality stocks may be defined as having larger market capitalizations and more stable revenue and sales growth, which should help them fare better if economic growth forecasts fail to pan out.
The highlight for markets this week will be the Fed's last policy meeting minutes for any comments that might give credence to new hopes that the Fed might cut interest rates as soon as the May meeting.
Forex:
The dollar weakened on prospects that the Fed will ease monetary policy in 2024, which would undermine the appeal of U.S. fixed-income assets and demand for the greenback.
So far, there seems to have been limited pushback by Fed officials against the 100bps of rate cuts which the market has priced for 2024, Chris Weston, head of research at Pepperstone, said.
The risk appears biased toward further USD downside, Weston added.
Bonds:
Treasury yields were mixed as investors brace for a shortened Thanksgiving holiday week which is also light in relevant data.
Weekly jobless claims and October durable goods are due Wednesday. The Fed's preferred inflation gauge, the PCE, is due the following week.
Kent Engelke, chief economic strategist at Capitol Securities Management said there currently looks to be more "risk than reward" in the bond market, given that already thin liquidity in the Treasury market could become even worse in a shortened holiday week ahead for Thanksgiving.
Energy:
Oil futures gained in Asia following a media report that said that OPEC+, may decide on additional production cuts when they meet on Nov. 26.
Any deeper group cut combined with Saudi Arabia and Russia rolling over their voluntary cut would be more than sufficient to ensure the surplus expected in 1Q 2024 disappears, ING commodities strategists said.
"Anyone who has been trading oil for 10 years or more will remember the Thanksgiving shock OPEC delivered markets in 2014 as they abandoned production quotas and effectively 'opened the spigots,'" which crushed prices from near $80 to the mid-$40s in a matter of weeks, Tyler Richey, co-editor at Sevens Report Research said.
"This time around, the risk seems to be tilted in favor of the bulls as a deeper cut to the total output target for OPEC+ could send futures back towards $100."
Metals:
Gold was higher after tracking lower early Monday in a likely technical correction.
The precious metal's rebound reached the $1,985/oz target, but there was a small 'gravestone doji' pattern on the technical charts Friday, said Matt Simpson, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!DR0Ucltfs4Gc1ZXPDBEYf8n7HlBw7suV7wJ0wOgnKOA3s_IwxcJ92CU3h6BD7Ln9oMSFdUB-Tto5D9a_oxIbFk0Ge0YJ8YmxBWXfKhq-rKI$ .
This pattern signals a possible swing high on the daily chart beneath the $2,000/oz level, Simpson added.
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Copper edged higher in Asia on rising expectations of an end to the U.S. Fed's interest rate hikes.
In addition to the easing concerns of copper demand being weighed by tighter monetary policies, a weaker U.S. dollar makes non-dollar purchases of the base metal cheaper, ANZ analysts said.
Meanwhile, Chinese copper refinery Jinchuan's agreement with a Chilean miner for lower processing charges for the next year indicated a tighter supply in the copper concentrate market, Nanhua Futures analysts said.
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Iron ore prices rose amid optimism that support measures from Beijing were boosting Chinese demand.
Major Chinese producers increased crude steel output by 2.4% to 1.97 million tons a day in early November from late October, ANZ analysts said, citing data from the China Iron & Steel Association.
However, the analysts reckoned there were still signs of broad weakness in the iron-ore market, as China's official data showed October steel output was down 9% on the year.
TODAY'S TOP HEADLINES
Stock market surges toward 2023 high. Will holiday shoppers put it over the top?
U.S. stocks have jumped back near to their summertime highs, a big rebound as investors enter the holiday season with Black Friday just days away.
The shopping frenzy expected on Friday, the day after Thanksgiving, kicks off a spending spree for the holidays that could help buoy stocks after their surge this month.
China Keeps Benchmark Lending Rates Steady
China kept its benchmark lending rates steady after the country's central bank kept its key policy rates unchanged earlier this month.
The one-year loan prime rate was maintained at 3.45% while the five-year LPR was retained at 4.2%, the People's Bank of China said in a statement Monday.
Some experts balk at talk that Fed must cut rates soon if inflation keeps coming down
Over the summer months, as reporters and the markets were pondering how many more times the Federal Reserve would hike interest rates this year, New York Fed President John Williams mentioned one reason the central bank might actually start cutting rates in 2024.
In an interview, Williams explained that, assuming inflation comes down, if the Fed doesn't cut interest rates at some point, then real - or adjusted-for-inflation - interest rates will go up and up and up.
U.S. Subsidies Fuel Boom in Global Auto Trade
SINGAPORE-Auto exports from Europe and Asia are surging as the U.S. and other countries lavish subsidies on electric vehicles and dealers replenish inventories that even now aren't back to prepandemic levels.
The boom in autos contrasts with broader weakness in exports as the global economy slows. The trend offers a glimpse of how the West's embrace of industrial policies aimed at stimulating domestic manufacturing and reducing the use of fossil fuels is causing wrinkles in patterns of world trade.
This Coal Giant Now Wants to Get Out of Coal
Glencore Chief Executive Gary Nagle made his name running the commodity giant's sprawling coal operations. Now he's leading an effort to get the company out of coal altogether.
Glencore this past Tuesday agreed to a multibillion-dollar deal that will eventually rid it of its coal mines, a move that represents the company's biggest strategic shift in years. That leaves it to focus on bolstering its position as a major supplier of the metals needed for electric-vehicle batteries and other green technologies.
Bayer Told to Pay $1.56 Billion After Losing Roundup Case
Bayer faces a payout of $1.56 billion after a Missouri jury found in favor of the plaintiffs who blamed its Roundup weedkiller for causing their cancers.
The decision is the fourth in a row to go against Bayer during a roller-coaster five-year legal battle over Roundup, the world's most popular weedkiller, which included nine straight victories for the company, as well as earlier losses. The cases represent tens of thousands of claims from farmers and gardeners.
Israel, Hamas Close In on Hostage Deal Amid Mounting Scrutiny of Gaza Death Toll
Israel and Hamas are closing in on an internationally brokered deal to pause fighting and free some of the roughly 240 hostages taken by the militant group, officials close to the talks said, amid heightened scrutiny of the civilian toll of Israel's invasion of Gaza.
The hostage talks, brokered by Egypt, Qatar, and the U.S., have moved in fits and starts for weeks and could break down again. But they represent the most active channel of diplomacy since Hamas's Oct. 7 attacks and the launch of an Israeli military campaign that has claimed more than 13,000 lives, more than half of them women and children, according to health authorities in the Hamas-run Gaza Strip.
Israel's War in Gaza Tests Limits of Biden's Support
WASHINGTON-President Biden is struggling to persuade Israeli Prime Minister Benjamin Netanyahu to take steps U.S. officials believe could help prevent the conflict in Gaza from further escalating, straining the relationship between the two longtime allies, according to U.S. and European officials.
Over the past two weeks, Biden has pushed Netanyahu on issues ranging from limiting civilian casualties to agreeing to a pause in fighting to free hostages. While there has been agreement in some areas, such as when Israeli commanders accepted American advice not to rush into Gaza immediately, U.S. officials are still concerned about Israel's ultimate plans for Gaza, including any sort of extended occupation, and are alarmed by the number of Palestinian casualties.
Sam Altman's Counter-Rebellion Leaves OpenAI Leadership Hanging in the Balance
SAN FRANCISCO-Two days after Sam Altman was ousted from OpenAI, he was back at the company's office, trying to negotiate his return.
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11-20-23 0015ET
