The Chinese mainland and Hong Kong markets have seen strong gains, and government bonds rose following a change in the politburo’s language regarding monetary policy, indicating that additional easing measures may be implemented to support the struggling economy. The benchmark 10-year yields declined by about 2bps to a record low of 1.935%. The Hang Seng index increased by 2.5%, with technology shares rising by 3.8%. Japan’s Nikkei share average experienced a rise on Monday, bolstered by gains from Wall Street at the end of the previous week. However, profit-taking in major semiconductor-related stocks limited the overall increase. After a day of fluctuating between gains and losses, the Nikkei ultimately closed up by 0.2%.Despite ongoing volatility, gold oil prices have risen by about 0.4%, reflecting a modest response to the ousting of Syria’s Assad, with no clear rush to safety among traders. The situation in the Middle East appears too complex for a decisive reaction. Russian President Putin faces significant challenges as he risks losing control of his only naval base in the Mediterranean, a consequence of supporting the Assad regime. Although Moscow claimed to have secured a deal to retain the base and associated facilities, it remains unclear if the rebels have accepted the agreement, as the potential loss would diminish Russia’s influence in the region.This week, the US will release the inflation report, evaluating the durability of the record-breaking stock market rally and providing crucial information that could impact the Federal Reserve’s interest rate cut decisions. On Friday, the S&P 500 was on track for its third consecutive weekly gain, bringing its year-to-date increase to over 27%. Expectations of additional Fed interest rate cuts bolster the positive environment for stocks, even as the economy remains robust. Friday’s employment report, which showed that monthly job growth exceeded expectations, has historically led to significant equity gains. However, this data is unlikely to indicate a significant change in labor market conditions that would prompt the Fed to alter its rate plans at the upcoming Dec 17-18 meeting. Nevertheless, the consumer price data scheduled for release on Wednesday could disrupt the optimistic outlook if inflation rates exceed expectations, presenting a challenge for soaring stocks.Expectations for a rate cut by the Federal Reserve at its upcoming meeting increased following the November payrolls report. The report showed an increase of 227,000 jobs, although the unemployment rate edged up to 4.2%. By midday on Friday, trading in Fed fund futures indicated almost a 90% chance that the Fed would lower rates by 25 basis points, based on CME FedWatch data. Given the jobs numbers, the upcoming consumer price report now faces a “higher bar” to potentially prevent the anticipated rate cut at the Federal Reserve’s next meeting. Reuters polling projects a 2.7% rise in the consumer price index for the year ending in November. Instead of halting rate cuts, if the CPI exceeds forecasts, the central bank might execute a “hawkish cut” by moderating expectations for cuts in 2025. Fed Jerome Powell has indicated that the Federal Reserve plans to integrate actual policies into their framework for They can shape monetary policy once they have a clear understanding of what those policies entail. At the same time, stocks keep climbing, which is causing worries that investor sentiment may be excessively optimistic. LSEG Datastream reported that the S&P 500 valued at 22.6 times projected earnings for the upcoming year, marking its highest price-to-earnings ratio in over three years.
Overnight Newswire Updates of Note
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
CFTC Data As Of 6/12/24
Technical & Trade ViewsSP500 Bullish Above Bearish Below 6000
EURUSD Bullish Above Bearish Below 1.0450
GBPUSD Bullish Above Bearish Below 1.26
USDJPY Bullish Above Bearish Below 154
XAUUSD Bullish Above Bearish Below 2600
BTCUSD Bullish Above Bearish Below 92000
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