“Risk On” Theme Intact as Fed Seen Slowing Pace of Hikes

Macroeconomic/ geopolitical developments

• Wednesday saw the Minutes released from the Fed’s early November meeting, highlighting a “substantial majority of participants” look to slowing the pace of rate hikes, though the rates may end up higher than previously anticipated.

• S&P Global’s flash composite new order index for the US fell to its lowest level in more than two years.
• Chinese stocks were positive for the week despite new coronavirus restrictions, as authorities signaled more supportive measures to stimulate the economy.

Global financial market developments

• Another solid, high-level consolidation for the week by the major US stock averages after the earlier November surge in the wake of the US CPI release.
• European equity indices were solid last week, rising fir a sixth straight week, Asian averages were also higher.
• US 10yr yields pushed lower towards recent, multi-week yield lows.
• The 2yr-10yr curve segment of the US Treasury yield curve inverted even further (historically, a typical indicator of a recession) to its most inverted level in over 40 years
• The US Dollar pushed lower close to multi-month lows, unable to recover since the November plunge, that saw DXY post its worst day since during the 2009 Great Financial Crisis.
• Gold dipped and bounced staying solid after the earlier November surge from a multi-month low to a multi-week high.
• Oil prices dropped further for a still more negative.
• Copper staged a modest bounce after the prior weekly plunge reversed much of the previous weekly surge.

Key this week

• Central Bank Watch: No significant Central Bank activity, though we do get Fed Chairman Powell speaking on Wednesday.

• Macroeconomic data: A busy data week, we get global PMI data from S&P Global and US ISM PMI, the US GDP, PCE and Employment reports, plus German and EU CPI.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued