Last week, the international market was volatile, with gold hitting a historic high and experiencing a huge shock. The central banks of Australia and Canada remained calm, causing international oil prices to fluctuate and fall.
In terms of the market, the US stock market rose for the sixth consecutive week, with the Dow Jones up 0.01% for the week. The S&P 500 index rose 0.21%, while the Nasdaq rose 0.69%. The three major European stock indexes performed well, with the FTSE 100 index in the UK rising 0.33%, the DAX 30 index in Germany rising 2.21%, and the CAC 40 index in France rising 2.46%.
There are many highlights this week, with the Federal Reserve, the European Central Bank, the Bank of England, and others expected to hold interest rate meetings. The market is paying attention to statements about the prospects of policy paths. The Purchasing Managers Index (PMI) for December in Europe and America will be released, raising concerns about the recovery process. The US Treasury Department will conduct a $37 billion 10-year auction and a $13 billion 20-year bond auction.
Federal Reserve Resolution Coming
US President Biden will face an impeachment vote this week, and Republicans in the US House of Representatives plan to hold a comprehensive vote in the House this week to officially launch an investigation into Biden. In an investigation into Biden's son Hunter Biden's overseas transactions, Republicans have found that Biden's actions may be suspected of "abuse of power, obstruction of justice, and corruption.".
US Treasury Secretary Yellen stated last week that if the outside world considers interpreting upcoming data with "careful consideration," the bond market's expectations of the Federal Reserve's actions can serve as a beneficial supplement to monetary policy. When asked if it was too early for the bond market to predict a Fed rate cut, Yellen declined to comment.
The last interest rate meeting of this year was held this week, and although Federal Reserve Chairman Powell has repeatedly hinted that there is still a possibility of further interest rate hikes in the future, the market has basically ruled out this possibility, and the first rate cut is expected to start in the summer. For Powell, the next daunting task will be to convince the outside world that short-term interest rate cuts are not within consideration, especially if inflation data continues to decline. Investors will search for internal thoughts on the future interest rate path within the Federal Reserve from the latest quarterly economic outlook and chart.
In terms of data, the Consumer Price Index (CPI) for November will be released before the Federal Reserve's decision. Affected by factors such as the fall in energy prices, it is expected that the overall CPI will decrease from 3.2% to 3.1%, remaining unchanged on a month on month basis. Whether inflation can fall beyond expectations or have an impact on potential interest rate cut node expectations. In addition, the United States will also release key data such as November retail sales rate, manufacturing output, December manufacturing, and service PMI index, which may continue to show signs of economic slowdown.
In terms of corporate financial reports, companies worth paying attention to this week include Oracle, Adobe, Kaike, Johnson Controls, and Jabil.
Crude oil and gold
Crude oil futures have fallen for the seventh consecutive week, setting a record for the longest decline since 2018. The WTI crude oil near month contract fell 3.83% to $71.23 per barrel, while the Brent crude oil near month contract fell 3.85% to $75.84 per barrel.
Since last month's OPEC+meeting proposed further voluntary production cuts in the first quarter of 2024, oil prices have been facing additional pressure, with the market questioning whether all participating countries will comply with quota regulations. Russian President Putin went to Saudi Arabia last week. The statement released by the Kremlin stated, "In the energy sector, both sides praise the close cooperation between the two countries and the successful efforts of OPEC+countries in strengthening global oil market stability. The two countries emphasize the importance of continuing this cooperation and the need for all participating countries to abide by the OPEC+agreement to serve the interests of producers and consumers and support global economic growth."
Ole Hansen, Head of Commodity Strategy at Shengbao Bank, said in a report, "Crude oil prices are expected to stabilize, but due to sufficient global supply, there are doubts about whether some producers will fulfill their promised production cuts. Further drops to $70 may increase the risk of OPEC+calling an emergency meeting."
The international gold price surged and fell, marking the first decline in nearly four weeks. The COMEX gold futures contract for December delivery on the New York Mercantile Exchange fell 3.51% on the week to $1998.30 per ounce.
Gold broke through a historic high of $2150 in the Asian market early last Monday, but factors such as profit taking and a rebound in the US dollar subsequently weighed on gold prices. Kitco Senior Analyst Jim Wyckoff stated in market reviews that US data indicates that the economy is currently in a fairly good position. The employment report seems to have fallen into the hawkish camp of US monetary policy, hoping that the Federal Reserve will continue its interest rate hike cycle.
UBS reports that gold once again demonstrates its effective role in diversifying portfolio returns and hedging risks. Nevertheless, do not "chase" the rise of gold now. "Considering the rebound in the past few weeks and the aggressive interest rate cut expectations of the Federal Reserve, we will not chase up prices in the short term."
The Bank of England and the European Union are expected to remain silent
The data released last week showed that Germany's inflation rate in November fell for the fifth consecutive month due to the impact of energy prices. The German Bureau of Statistics stated, "In the past two months, many energy products have been cheaper than a year ago, and the price situation has clearly eased. The annual inflation of food has also continued to weaken, but it is still much higher than overall inflation."
European Central Bank President Lagarde stated at the October meeting that the risk of economic growth is tilting downwards, but inflation remains too high and has not given a clear signal on whether to further raise interest rates. However, from recent official speeches, the end of the tightening cycle has been largely confirmed, and the hawkish European Central Bank regulator Schnabel admitted last week that he has abandoned his stance on interest rate hikes. Considering the trend of the Producer Price Index (PPI) of industrial products over the past 12 months, some other members of the board, including Villeroy in France, have also acknowledged that the next interest rate change in 2024 may be a downward adjustment.
At present, the market expects the European Central Bank to start cutting interest rates in April next year, and we are paying attention to whether Lagarde will send a similar signal at the press conference. This week, Europe will release its December PMI report, and it is expected that manufacturing and service industry activities will slightly rebound, but they will still be below the boom bust line.
The Bank of England warned in its Financial Stability Report last week that high-risk corporate lending, such as private credit and leveraged loans, is easily affected due to high interest rates. "Although there have been almost no signs of pressure in these markets so far, a deteriorating macroeconomic outlook may lead to a significant reassessment of credit risk. The overall risk environment remains challenging, reflecting weak economic activity, further risks to global growth and inflation prospects, and increased geopolitical tensions." The bank stated that the full impact of interest rate hikes has not yet been apparent.
The Bank of England may also remain stagnant this week. In November, the CPI dropped to 4.6%, far below the peak of 11.1% last year, but salary growth and service industry inflation remain high. Bank of England Governor Bailey has recently attempted multiple times to curb speculation about early interest rate cuts.
Highlights of this week