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Markets:
S&P 500 up 27 factors, or 0.6%, to 4603Gold up $35 to $2071WTI crude oil down $1.70 to $74.26US 10-year yields down 13.3 bps to 4.56percentAUD leads, EUR lags
Welcome to the brand new month, similar because the previous month.
The temper was to purchase all the pieces and promote oil, similar because it was for all of November. It began out as a quiet one and an excellent Canadian jobs report moved the loonie into the ballot place with it solely up 30 pips on the day. From there although, a softer US ISM manufacturing report helped to kick off a wave of USD promoting, significantly in USD/JPY.
As well as, shares started to tear. Powell spoke equally to Daly and Williams yesterday, which was mildly hawkish however in time the market ignored it and priced in much more charge cuts subsequent 12 months. Fed funds futures are actually at 133 bps subsequent 12 months and 70% for the primary one in March. That is aggressive to say the least.
However the greater image theme is that we’re going again to the world of low charges and low inflation, not some sort of sticky, Seventies redux. That is a significant change and it is what’s driving all the pieces.
Including to that was one other droop in oil, most of which got here after Baker Hughes knowledge confirmed the US including extra rigs. There is a creeping feeling that we’re headed for one more battle for market share as a result of OPEC is not going to chop manufacturing once more. That could possibly be a giant deflationary impulse, at the least initially.
The euro did not profit from the USD promoting as a result of inflation numbers in Europe are cratering, together with yields. The euro was significantly gentle into the London repair, which factors to flows and it staged a 50 pips restoration later to complete nearly flat however nonetheless on the backside of the pile beside the US greenback.
AUD goes to be one to look at within the 12 months forward. It was tops at the moment and the housing market there simply hasn’t cracked. That would preserve the speed mountain climbing cycle going longer however word that Chinese language ETF FXI additionally hit at 52-week low at the moment so perhaps that is an upside threat? Sentiment about China certainly could not get a lot worse.
Have an amazing weekend.
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