As November draws to a close, global markets are reflecting a positive trend, with various indices showcasing notable gains and key economic indicators influencing investor sentiment.
In the United States (US), stock indices finished the month with a largely positive session, with the S&P 500 gaining 0.4% and the Dow Jones 1.5%. The Nasdaq was down 0.23% for the day. The three major US averages have recorded their best performance since late 2022, signalling a positive turn as the US Federal Reserve’s (Fed’s) tightening campaign is likely concluding. The S&P 500 is up 7.8%, the Nasdaq has surged about 9%, and the Dow is up 8.0%.
In the United Kingdom (UK), the FTSE 100 remained stable after three consecutive sessions of losses. While oil and gas stocks saw marginal gains, the mining sector fell, with industrial miners and precious metals trading 0.3% and 0.9% lower, respectively. Notable stock movements included major retail and commercial bank NatWest Group rising by 0.7% following a J.P. Morgan upgrade, while footwear and clothing brand Dr Martens faced a 21.4% drop due to a higher-than-expected decline in annual revenue and profits. The overall FTSE 100 index was up 1.5% in November, partially recovering from a 3.8% slump in October.
Frankfurt’s DAX 40 saw a 0.2% rise above the 16,200 mark for the first time since 1 August. Preliminary data from the eurozone indicated that inflation pressures in November cooled more than anticipated, heightening expectations that the European Central Bank (ECB) might cut interest rates as early as April 2024. German retail sales exceeded expectations, rising by 1.1% in October compared to the previous month. Despite this positive economic news, Germany’s jobless rate rose to 5.9% in November, its highest level since May 2021. Over the course of November, the DAX surged by over 9%, marking its best month since October 2022.
OIL PRICES SURGE AS OPEC+ MEETING TAKES CENTRE STAGE
Brent Crude futures soared above $83.50/barrel on Thursday, marking the third consecutive session of gains in anticipation of the crucial OPEC+ meeting later in the day. The focal point of expectations was Saudi Arabia’s potential extension of voluntary supply cuts until at least the first quarter of 2024. Speculation also lingers on the prospect of OPEC+ collectively extending or intensifying supply cuts into 2024 to reinforce market stability. While Saudi Arabia has advocated for production quota reductions among members to bring equilibrium to markets, a conclusive resolution remains elusive. Initially scheduled for November 26, the meeting faced a delay to November 30 due to a disagreement involving African producers, Nigeria and Angola, over output quotas. The uncertainty surrounding the OPEC+ decision has kept the oil market on edge, with traders closely monitoring developments that could sway global oil prices. The outcome of the meeting will likely influence not only the immediate trajectory of oil prices but also the broader energy landscape. Simultaneously, official data revealed an unexpected increase in US crude inventories last week, adding an additional layer of complexity to global oil market dynamics.
In the realm of precious metals, gold maintained its strong position above $2,040/ounce on Thursday, poised for a second consecutive month of gains. This upward momentum is attributed to a weakening dollar due to the prevailing sentiment that the Fed has concluded its interest rate hikes and may be considering easing measures in the coming year. Earlier this week, Fed officials hinted at the possibility of a rate cut in the coming months, citing cooling inflationary pressures. However, cautionary voices within the Fed warned against premature discussions on such matters. Market indicators now suggest an 80% likelihood of a rate cut at the central bank’s meeting in May next year. As investors await fresh remarks from the Fed Chair, Jerome Powell, today, the precious metal market remains sensitive to shifts in monetary policy expectations. The interplay between OPEC+ decisions and central bank actions will likely dictate the near-term trajectories of both oil and gold markets.
CURRENCY MARKET DYNAMICS
The US Dollar Index strengthened to 103.2 on the final day of November, benefiting from a weakening euro. The EU currency faced headwinds as inflation figures for the euro area fell below forecasts. Despite this short-term gain for the greenback, it is set to conclude November about 3% lower, marking its most significant monthly loss in a year. The dollar remains close to levels not seen since mid-August lows, reflecting increasing speculation that the Fed’s tightening campaign is concluding, potentially paving the way for interest rate cuts in the coming year. Traders closely analysed personal consumption expenditures (PCE) inflation readings, which stood at 3% in alignment with market expectations.
The euro depreciated to below $1.092/€, driven by rising expectations that major central banks, including the ECB, may transition from tightening to implementing rate cuts in the upcoming year. Flash consumer price index data revealed a more substantial-than-expected deceleration in inflation across the euro area, including key economies such as Germany, Italy, and Spain. The eurozone’s core inflation rate gauge dipped to 3.6%, marking its lowest point since April 2022, and falling below the projected 3.9%. Despite these challenges, the euro posted a monthly gain of more than 3%, marking its most significant increase since November 2022.
Meanwhile, the British pound consolidated its gains above the $1.26/£ mark, reaching its highest level since late August. Investors digested hawkish statements from Bank of England (BoE) policymakers, including Deputy Governor Dave Ramsden, who emphasised the need for a “restrictive” monetary policy to combat inflation. BoE Chief Economist Huw Pill reinforced the importance of maintaining a tight monetary stance. Recent data indicated a stabilisation in the UK’s private sector activity in November, surpassing market predictions, which further supported the pound. Additionally, the GFK Consumer Confidence Barometer improved more than expected in November.
The pound started the day trading at 1.2621/$ and 1.1592/€.
Written by Citadel Global Director, Bianca Botes.
Sources: Bloomberg, Trading Economics, Refinitiv, Investing.com
The last edition of the Weekly Wrap for 2023 will be published next week, 8 December. Publication of the Weekly Wrap will resume on 19 January 2024.
Written by Citadel Global Director, Bianca Botes
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