Market Analytics and Technical Considerations
Key Points
As the November payrolls report fanned expectations the Federal Reserve will maintain its path of hikes in interest rates to manage inflation, December S&P 500 futures (ESZ22) closed neutral on Friday, heading down -0.30% this morning. While the Dow closed in the black mostly due to advances in the Basic Materials, Consumer Goods, and Industrials sectors, the S&P 500 and the NASDAQ Composite indexes were dragged down by losses in the Oil & Gas, Technology, and Utilities segments.
According to the U.S. Labor Department’s report, nonfarm payrolls increased by 263,000 jobs in the past month, more than the 200,000 jobs predicted by experts. Additionally, average hourly earnings rose more than anticipated to 0.6% m/m from 0.5% m/m in October, which fueled concerns about inflation. The unemployment rate in the United States held stable at 3.7% at the same time.
U.S. rate futures has factored in such an 81.8% probability of a 50 basis point rate hike and an 18.2% chance of a 75 basis percent rise at the monetary and fiscal policy meeting in December as a result of the payrolls report.
The U.S. PPI data for November will be the main focus of the upcoming week as traders search for additional hints about just how aggressive the central bank may be following four consecutive big rate rises. Market investors will also be keeping a watch on a slew of economic reports, such as the initial Nonfarm Productivity, Crude Oil Inventories, Initial Jobless Claims, Core PPI, Michigan Consumer Expectations, and Exports, Imports, and Nonfarm Productivity (preparatory)
All sights are on the U.S. ISM Non-Manufacturing PMI data that will be released in a few hours. On aggregate, economists predict that the November ISM Non-Manufacturing PMI will be 53.3, down from the previous reading of 54.4.
Investors will also likely pay attention to September’s U.S. Factory Orders data, which was up 0.3% month over month. According to economists, the new value will be +0.7% m/m.
Data for the U.S. S&P Global Composite PMI will be released today. Compared to the previous month’s 48.2 figure, economists anticipate November’s result to be 46.3.
Data from the U.S. Services PMI will also be released today. According to economists, this number will be 46.1 in November as opposed to 47.8 in October.
United States 10-Year rates are currently 3.515%, higher 0.35 percent, in the bond markets.
This morning, investors absorbed some softening of China’s anti-COVID regulations as well as a flurry of significant regional economic data, which caused the Euro Stoxx 50 futures to fall -0.20%. This week, ECB President Christine Lagarde will appear in two events. Markets will be watching for any indications of a rate increase of 50 basis points after statistics revealed that Eurozone inflation declined more than anticipated in November. Nonetheless, since inflation is far higher than its 2percentage target, the ECB is generally anticipated to announce additional 75-basis point interest rate increase at its policy meeting on December 15.
Today’s data included the S&P Global Composite PMI for the Eurozone, the Eurozone services PMI, the U.K. composite PMI, the U.K. services PMI, Germany’s Services PMI, Spain’s services PMI, Italy’s services PMI, France’s services PMI, and Eurozone retail sales data.
The services PMI for November in Spain was 51.2, exceeding expectations of 50.5.
The Italian services PMI for November came in at 49.5, exceeding expectations of 48.3.
The French services PMI for November was 49.3, below expectations of 49.4.
The German services PMI for November came in at 46.1, which was lower than the expected 46.4.
The Eurozone November S&P Worldwide Composite PMI has been accounted for at 47.8, in accordance with assumptions.
The November Services PMI for the Eurozone was 48.5, lower than the 48.6 that was anticipated.
The U.K.’s November composite PMI was 48.2, which was lower than the 48.3 that was anticipated.
The U.K. services PMI for November came in at 48.8, which was in line with expectations.
Retail sales in the Eurozone in October were reported at -1.8% m/m and -2.7% y/y, below expectations of -1.7% m/m and -2.6% y/y.
Today, Asian stock markets ended in the black. The Shanghai Composite Index (SHCOMP) in China and the Nikkei 225 Stock Index (NIK) in Japan both ended the day in positive territory.
After the government eased COVID restrictions in more cities, the Shanghai Composite closed higher today. As public dissatisfaction with China’s strict “zero COVID” strategy grew, a number of Chinese cities, including Beijing and Shanghai, relaxed some movement restrictions and testing requirements over the weekend. Additionally, reports suggest that China intends to relax additional COVID protections. However, according to analysts, the number of COVID cases is likely to continue rising, putting pressure on the economy.
Financial markets appear to be firmly focused on the longer-term outlook rather than the near-term hit to activity as virus cases appear to be set to continue. However, the easing of some restrictions does not yet equate to a wholesale shift away from the dynamic COVID zero strategy. Rather, it is additional evidence of a shifting approach.
The Nikkei 225 Stock Index in Japan closed slightly higher at the same time after data revealed that the country’s business activity decreased significantly in November. Gains in the Finance & Investment, Food, and Gas & Water sectors fueled the index’s upward momentum. The implied volatility of Nikkei 225 options is taken into account by the Nikkei Volatility, which ended the day at 19.89, up 5.57 percent.
