Marketmind: November bids adieu with inflation data, OPEC
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[November 30, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
The best month of the year for U.S. stocks and bonds draws to a close on
Thursday with investors bulled up by warm feelings about disinflation,
even with one wary eye on the latest OPEC+ meet.
World stocks captured by MSCI's all-country index are doing even better,
with November gains of almost 9% marking their best month in three
years. Total returns for the month on global sovereign and corporate
bonds were flirting with their best four weeks since the crash of 2008.
U.S. Treasury yields alone held near lowest in around two months, with
10-year borrowing rates also heading for their biggest one-month fall
since 2008's banking bust - when the Fed floored rates to near zero and
first launched its quantitative easing round of bond buying.
With signs of turn emerging in Federal Reserve policy guidance and
October PCE inflation readings set to encourage that later in the day,
rate cut fever was in full flow across the Atlantic too.
Money markets now expect the European Central Bank to cut interest rates
as soon as April - which would make it the first of the G3 central banks
to budge - as November euro zone inflation figures came in much lower
than forecast.
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Headline annual inflation in the bloc fell as low as 2.4% - within arm's
length of the ECB's 2% target. 'Core' inflation readings favored were
higher at 3.6% - but also well below expectations.
Bank of Italy chief and ECB policymaker Fabio Panetta captured the mood
on the end of the 20-month rate hike cycle by warning against 'useless
damage' to the economy and financial stability from any temptation to
overtighten.
And while the U.S. dollar had been weakening of late on the back of
falling U.S. yields - and futures pricing for as much as two
quarter-point Fed rate cuts by June - the prospect of the ECB jumping
the gun has dragged the euro back and buoyed the greenback again.
Later on Thursday, U.S. PCE inflation for the prior month is pencilled
to fall 3.0% from 3.4% - with a core also ebbing to 3.5%.
Although slowing again the final quarter of the year, the startling
performance of the U.S. economy during Q3 was underlined on Wednesday
was an upward revision of GDP growth to more than 5% - while quarterly
core rates of PCE inflation excluding food, energy and housing were as
low as 1.6%.
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Traders work on the floor of the New York Stock Exchange (NYSE) in
New York City, U.S., September 26, 2023. REUTERS/Brendan McDermid/File
Photo
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For a growing number of Fed policymakers, the hiking cycle at least
is done and dusted.
"Monetary policy is in a good place," Cleveland Fed President
Loretta Mester said on Wednesday, echoing comments from previously
hawkish Fed governor Christopher Waller the previous day.
And the Fed's 'Beige Book' on economic conditions showed activity
slowed from early October through mid-November "with four districts
reporting modest growth, two indicating conditions were flat to
slightly down, and six noting slight declines in activity."
Concerns about overseas demand also mounted in China.
China's manufacturing activity shrank for a second straight month in
November and at a quicker pace that surprised economists, suggesting
more stimulus will be needed to restore confidence in the
spluttering economy.
For Thursday alone, stocks were generally higher across the board -
with Wall St futures marginally positive too.
Oil prices nudged higher awaiting OPEC+'s decision.
Key developments that should provide more direction to U.S. markets
later on Thursday:
* U.S. Oct personal income and consumption and PCE inflation gauge,
Dallas Fed Oct PCE cut, U.S. weekly jobless claims, Chicago Nov PMI
business survey; Canada Q3 GDP
* New York Federal Reserve President John Williams speaks. European
Central Bank President Christine Lagarde speaks. Bank of England
policymaker Megan Greene speaks
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* OPEC+ ministerial meeting in Vienna
* U.S. corporate earnings: Kroger, Ulta Beauty, Kirkland's, REE
Automotive, Duluth, BOS, Academy Sports and Outdoors, 111, Burning
Rock Biotech, Domo, Titan Machinery etc
* U.S. Treasury auctions 4-week bills
(By Mike Dolan, Editing by Bernadette Baum; mike.dolan@thomsonreuters.com)
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