Gold surge

Kitco and Yahoo Finance: Gold hits a new all-time high at $2,148.99. Wall Street anticipates interest rate cuts by May, potentially in March. However, this contradicts recent statements from most Federal Reserve officials. Fed Chair Jerome Powell mentioned last Friday that they are ready to tighten policy further if necessary. According to Gareth Soloway, Chief Market Strategist at InTheMoneyStocks.com, the surge results from a potent mix of rate cut expectations and technical levels. 

Canada economy

BNN Bloomberg and CBC: Canada's economy contracted by 0.3% in Q3, with stagnant household spending and a decline in exports. Doug Porter from the Bank of Montreal notes the numbers depict a non-expanding economy. Economists anticipate the Bank of Canada to maintain interest rates in this week's key policy announcement.

Global banking

The Australian Financial Review & Zacks: The global banking sector faces challenges in 2024, as per Moody’s Investors Service. With a "negative" outlook, tighter monetary policies from central banks are linked to lower GDP growth.

This may lead to reduced liquidity, strained repayment capacity, and increased asset risks. Profitability gains could diminish due to higher funding costs, lower loan growth, and reserve build-ups.

Analysts project an average price target of $34.63 for Bank of America, reflecting an 11.85% increase from the last closing price of $30.96. Monitoring the evolving dynamics in the banking landscape. 

UK election

The Straits Times: Rishi Sunak's popularity dips below that of predecessor Truss among crucial British voters, according to recent polls. The Tories have seen a net loss of 520,000 votes since the Prime Minister's speech at the Conservative Party conference in early October.

This adds pressure on Sunak as he struggles to narrow the gap with Labour leader Keir Starmer, prompting frustration in Downing Street and among senior Cabinet ministers. 

With a UK election scheduled for January 2025, the direction of the pound in the upcoming year merits consideration.

US jobs

Wall Street Journal: This Friday brings the release of the US non-farm payroll, with market estimates projecting a 19,000 job increase, as per WSJ. Despite a robust labour market supporting this year's strong economy, signs of cooling suggest potential growth easing in 2024. 

Open job numbers have declined in insurance, real estate, and retail over the past year. Economists note a decreasing quitting rate, indicating worker uncertainty about the labour market. Hiring has eased in most sectors this year, except healthcare, government, leisure, and hospitality. 

Monetary policies

Kitco and Reuters: Gold's recent record high might face short-term challenges amid uncertainty over the timing of U.S. monetary easing. Potential easing in March could be premature, and analysts caution that the gold market might not accurately predict a shift in monetary policy. 

While fundamentals favour the bulls, daily chart technicals appear bearish. Geopolitical tensions and crucial US economic data, like the NFP report, may bring more volatility this week. Some analysts suggest negative momentum could pull prices toward the $2000 level in the near term. 

European inflation

Reuters and Forexlive: Deutsche Bank foresees ECB's 150 basis points cut, while Morgan Stanley advocates EUR/USD sell-off to parity in 2024.

Deutsche Bank economists, led by Mark Wall, anticipate a 150 basis points interest rate cut by the European Central Bank in 2024, exceeding their previous forecast by 50 bps. 

This adjustment is attributed to cooling inflation and a shift toward a less hawkish stance among central bank officials. Meanwhile, Morgan Stanley analysts recommend selling EUR/USD at the current 1.10 level, targeting parity (1.00) by the end of the first quarter in 2024, among their top trades for the year.

Economic slowdown

The Wall Street Journal and the Bank of Canada: The Bank of Canada maintained the overnight rate at 5% today, with officials omitting concerns about slow progress towards the 2% inflation target. 

Economic growth in Canada stalled in mid-2023, with a 1.1% contraction in Q3. 

The broader slowdown in the economy is alleviating inflationary pressures across various goods and services. Coupled with declining gasoline prices, this led to a CPI inflation easing to 3.1% in October.

Bank of Japan

Nikkei Asia: The Japanese yen gained over 5 yen against the dollar yesterday following comments by BOJ Governor Ueda suggesting a potential move away from negative interest rates.

With the final BOJ policy meeting of 2023 approaching on Dec 18 and Dec 19, analysts expect further clarity on the bank's intentions. 

US rate hikes

The Wall Street Journal and The Daily Hodl: After 11 rate hikes, Fed & banks face rising unrealised losses.

• Bank of America: $131B+ unrealised loss on debt securities
• JP Morgan: 40B+ unrealised loss on debt securities
• Fed: $1.3T unrealised loss on securities

This means the Fed can no longer support the U.S. budget with profits. 

Here are the updates on crucial financial events for the week of December 4 2023:

• Interest rate decisions from the Reserve Bank of Australia and Bank of Canada
• US ADP National Employment Report
• Japan’s GDP figures for Q3
• US non-farm payrolls and consumer sentiment

Stay informed with our weekly market analysis on Market Radar.

Australia's retail sales dip (28 Nov):

• Unexpected turn: Retail sales in Australia fell by 0.2% in October, surprising analysts who expected a 0.1% rise.
• Forex impact: The AUD/USD remains robust, trading near 0.6625, buoyed partly by a weaker US dollar.

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Asian currency surge amid Fed rate hike pause speculation (29 Nov):

• Dollar weakness: Most Asian currencies advanced as the dollar hit a three-month low, driven by expectations that the Federal Reserve might pause interest rate hikes.
• Yen's climb: The Japanese yen rose 0.3%, with traders banking on the Bank of Japan shifting from its dovish stance by 2024. This is backed by recent sticky inflation data.
• Key data ahead: Industrial production and retail sales data from Japan are keenly awaited later in the week.
• Other regional gainers: The South Korean won, and the Australian dollar saw gains, with the latter rising 0.2%, influenced by stronger commodity prices and the retail sales data.

RBNZ meeting expected to hold rates (01:00 GMT, 29 Nov):

• Consensus view: Analysts anticipate the Reserve Bank of New Zealand to maintain the interest rate at 5.50%.
• NZD/USD reaction: The pair shows resilience, supported by a weaker US dollar.

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Eurozone inflation outlook (10:00 GMT, 30 Nov):

• ECB's observation: ECB President Christine Lagarde notes easing inflation but with persistent wage growth.
• Eurostat data: Suggests potential moderation in wage and inflation growth, impacting ECB's rate decisions.

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US PCE Index: A Key Inflation Measure (13:39 GMT, 30 Nov):

• September's rise: A 0.3% increase was observed.
• Projection: A drop to 3.5% is anticipated, signalling a cooling in inflation.

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OPEC+ meeting on production cuts (30 Nov):

Supply cut speculations: Amid quota disagreements, deeper cuts are anticipated to stabilise oil prices.

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US ISM manufacturing PMI indicators (15:00 GMT, 1 Dec):

Forecast: A slight rise to 47.6 points is expected, indicative of a gradual economic slowdown.

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RBA governor's caution on rate hikes:

Inflation tracking: Michele Bullock, Governor of the Reserve Bank of Australia, highlighted the need for caution in further interest rate hikes, noting that Australian inflation follows global trends.

This week's global financial landscape is shaped by significant events, from central bank decisions to crucial economic data. These developments will influence market dynamics across currencies, interest rates, inflation, and oil prices. Stay tuned for a dynamic and influential week in financial markets.

Eurozone

Financial Times and Twitter: European Central Bank's De Cos suggests a Euro-Area recession is possible, echoing concerns from ECB VP Luis de Guindos about lingering financial stability risks.

Lagarde emphasizes a "mild recession" may not be sufficient to curb inflation. While not the baseline scenario, the ECB remains vigilant.

The recent dip in European property markets has led to a rise in non performing loans, according to the ECB.

Net inflows reported in Q2 for commercial real estate loans and consumer loans after a prolonged decline.

Gold market

Kitco: Chinese traders persist in increasing their gold holdings despite the yuan's halted appreciation, notes Daniel Ghali, senior commodity strategist at TD Securities.

Ghali anticipates Western investors may overlook the gold market until a potential U.S. recession in the first half of next year prompts the Federal Reserve to implement significant interest rate cuts.

In a recent note, Nicky Shiels, head of metals strategy at MKS PAMP, highlights that gold has historically seen average gains of 2.7% between Thanksgiving and Dec. 31 over the last five years.

Economic indicators

Reuters and Kitco: Traders anticipate the U.S. central bank maintaining rates in December, with a 50-50 chance of easing in May 2024, per CME's FedWatch Tool.

Lower rates diminish the opportunity cost of holding non-interest-bearing assets, potentially boosting gold prices. Attention turns to U.S.

Q3 GDP figures on Wednesday, 29 Nov, and the PCE price index on Thursday, 30 Nov, the Fed's preferred inflation gauge.

Despite this, China's net gold imports via Hong Kong saw a second consecutive monthly decline in October.

Senior strategist Nick Cawley notes a potential gold rally, with a close above $2,009 opening the door to $2,049.

Black Friday

The Wall Street Journal and Reuters: U.S. Black Friday retail sales climbed 2.5% YoY, reported by Mastercard SpendingPulse, with increased in-person traffic according to Sensormatic Solutions and RetailNext.

Despite this, all major U.S. stock indexes are set for their strongest monthly performances in over a year after four consecutive weeks of gains.

Monday’s market action saw a slight decline, with the S&P 500 down 0.2%, Dow Jones Industrial Average retreating 0.2%, and Nasdaq Composite dipping less than 0.1%.

Interest rates

RBNZ: RBNZ holds steady and maintains Official Cash Rate at 5.50%.

With eased demand growth in New Zealand, the decision to keep rates restrictive aims to subdue demand and guide inflation back to the 1-3% target range.

US yields

The Wall Street Journal, Kitco and CNBC: US Yields dropped as Fed officials, including Governor Christopher Waller, hint at a rate 'pause.'

The 10-year Treasury yield settled at 4.335%, down 0.05% from Monday. Stocks surged, continuing November's rally, fueled by hopes the Fed may not raise rates.

Nicky Shiels of MKS PAMP notes gold's momentum; all-time highs possible in ten days.

Recession

The Guardian and Financial Times: The OECD predicts Germany to be the worst-performing developed country this year, with a 0.1% contraction. Recovery is anticipated with a 0.6% growth in 2024.

The eurozone, comprising 20 nations, is expected to expand by 0.6% compared to the US's 2.4%.

Clare Lombardelli, the OECD's chief economist, underscores the uncertainty, stating a soft landing for advanced economies isn't guaranteed.

ECB's Lagarde notes a 'mild recession' in the eurozone might not suffice to curb inflation, emphasizing the complexity of economic scenarios.

Inflation

The Wall Street Journal and NBC News: Despite rising interest rates impacting affordability, September saw US home prices reaching a new record amid a shortage of available homes for sale.

The persistently high prices are attributed to existing homeowners being reluctant to move due to lower mortgage rates, leading to a constrained housing supply.

Home sales have declined this year due to elevated prices, increased borrowing costs, and limited housing inventory, deterring potential buyers and price elevated the inflation data.

Business trends

Federal Reserve: The latest Fed Beige Book reveals a slight decline or flat trend across all districts.

Retail sales, especially for discretionary items and durable goods, faced declines due to heightened price sensitivity among consumers.

Travel and tourism remained healthy, but demand for transportation services was sluggish. Manufacturing activity and outlooks were mixed. 

Business loan demand decreased, notably for real estate loans. Commercial real estate activity slowed, with a weak office segment. Labor demand eased, and applicants increased in most districts.

Price increases moderated, though remaining elevated, and freight and shipping costs decreased for many.

Oil market

Reuters: Oil prices dropped over 2% on Thursday, 30 Nov, as OPEC+ agreed to voluntary output cuts for Q1 2024, falling short of market expectations.

The proposed cuts, around 2 million barrels per day, included 1.3 million bpd from extending existing Saudi Arabia and Russia curbs. Earlier talks suggested up to 2 million bpd in additional cuts.

Meanwhile, the U.S., the world's leading producer, saw crude output rise 1.7% in September to a record 13.24 million bpd, according to the Energy Information Administration.

Salesforce is currently the market leader in the customer relationship management (CRM) space. Their upcoming earnings report, scheduled for release at 4:00 pm New York time on Wednesday, 29 November, is anticipated to offer crucial insights into both the company's performance and the overall direction of the CRM software-as-a-service technology sector. 

What to expect?

According to Bloomberg, Salesforce’s third-quarter revenue is expected to rise to 8.71 billion USD from 8.6 billion USD last quarter, while earnings per share (EPS) is expected to fall from 2.12 USD in the last quarter to 2.07 USD.

This year, Salesforce has committed to optimising its operational efficiency through cost-cutting measures aimed at enhancing profit margins. This initiative involved a 10% decrease in its workforce, impacting over 7,000 employees, coupled with a reduction in office space. Investors will be closely monitoring the ongoing effectiveness of this restructuring plan on the company’s operating margins. 

Simultaneously, as artificial intelligence gains prominence in the technology sector, investors are keenly assessing the impact of Salesforce's AI integrations on performance and profits while eagerly anticipating any forward guidance provided.

Second quarter results

In the second quarter of this year, Salesforce announced results and guidance that surpassed Wall Street’s expectations. Earnings came in at 2.12 USD per share, beating the anticipated 1.90 USD by Bloomberg, while revenue was reported at 8.60 USD billion, which exceeded Bloomberg’s 8.53 USD billion expectation. 

Following the Q2 report, CEO Marc Benioff highlighted the company's position as the leading AI CRM, integrating industry-leading clouds such as Einstein, Data Cloud, MuleSoft, Slack, and Tableau on a “trusted, unified platform”. 

Shares jumped 6% in extended trading after the release.

Share price dynamics

Despite Salesforce's impressive 62% year-to-date stock growth, the shares, currently trading around 224 USD at the time of writing (Monday, 27 Nov), have been constrained within a 50 USD range over the last six months. This is significantly lower than their November 2021 high of over 309 USD. 

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However, with a relatively high price-to-earnings ratio of 67.67, coupled with the absence of shareholder dividend payments and heightened competition in the CRM industry from major players like Microsoft, Oracle, SAP, and Zendesk, investors are urged to carefully consider the various factors influencing the stock's performance.  

Salesforce’s third-quarter earnings report will likely offer insights into the company’s trajectory and the broader CRM sector. Traders should keep an eye on key indicators including whether Salesforce exceeds market expectations in EPS and revenue and the guidance provided for future growth, particularly in the AI space. 

Core inflation in Japan rose to 2.9% on the year, slightly below forecasts, but higher than previous 2.8%. 

Although inflation has consistently exceeded the central bank's 2% target for 20 straight months, the Bank of Japan maintains that the elevated cost pressures primarily stem from increased global commodity prices and a depreciation of the yen. These factors are attributed to external forces rather than indicative of sustained price gains driven by robust domestic demand and wage growth.

Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, anticipates that the central bank will cease negative interest rates and eliminate yield control, possibly as early as April next year. This decision is expected to align with the outcomes of labour-management wage negotiations and the current trend among companies to transfer cost increases. 

Many analysts view the yield control policy as losing relevance, especially as the Bank of Japan has progressively made the 10-year yield target more flexible, pushing the Japanese Government Bond (JGB) yield closer to the 1% mark.

The International Monetary Fund's (IMF) global financial stability report indicates that the Bank of Japan is expected to implement a rate hike in 2024, in contrast to the Federal Reserve and other central banks that are projected to undergo rate cuts. This shift is anticipated to narrow the interest rate differentials, contributing to the strengthening of the Japanese yen. 

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Japan’s Nikkei 225 gained 0.52% to hit its highest level since July 3, while the Topix advanced 0.54% to end at 2,390.94.

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As the US dollar's slide deepens, experts are linking the trend to a growing consensus that the Federal Reserve may have reached the end of its rate-hiking cycle. The dollar's descent has been notably marked by the DXY dollar index dropping below its 200-day moving average—a traditionally important technical benchmark.

Analysts, including ING's Chris Turner, have pointed out that the DXY's approximate 3.5% fall from its October peak is a sign that the markets are adjusting to the possibility of a pause in the Fed's tightening regime. This has prompted investors to shift their focus back to various asset classes, including bonds, equities, and emerging markets.

The dollar index edged down 0.1% overnight against its rivals, not far from a more than two-month low level touched last week, making gold less expensive for other currency holders. 

Concurrently, the British Pound has climbed to a 12-week high against the dollar, emphasizing the currency's weakening stance. This weakening dollar is also providing a backdrop for gold's impressive performance, pushing the precious metal to a six-month high. 

New York gold futures have climbed 0.4% to $2,012 per troy ounce, a level not seen since May. The impact on other commodities has been mixed, with copper prices declining slightly while aluminium has seen modest gains.

With a 12-month target set at $2,050 an ounce, experts highlight that the trajectory of gold prices is likely to be influenced by U.S. real rates and the dollar's movements. Silver prices also saw an uptick of 1.4%, reaching $24.65 an ounce, while platinum experienced a modest increase of 0.2% to $932.81. Additionally, palladium prices edged up by 0.6%, trading at $1,075.01 an ounce.

Lower interest rates diminish the opportunity cost of holding non-interest-bearing gold. Traders widely expect the Fed to leave rates unchanged in December while pricing in about a 60% chance of a rate cut in May next year, according to CME’s FedWatch Tool.

Join us for a comprehensive analysis of this week's pivotal economic events as we delve into:

• Australia's retail sales
• European economic health
• The influence of US Conference Board's data
• RBNZ interest rate decision
• Eurozone inflation figures
• OPEC+ meeting and its impact on 2024 oil quotas
• US Core PCE Price Index
• Insights from ISM PMI data

Stay informed with our weekly market analysis on Market Radar.

The European Central Bank (ECB) alerts about increasing signs of stress in eurozone banks, marked by a rise in loan defaults. Despite this, the ECB acknowledges the sector's resilience, urging banks to provision for potential loan losses.

Key takeaways:

• Interest rate impact: The ECB's 4.5 percentage point rate hike over the past year could burden banks with higher provisions, impacting profitability.
• Bank resilience: Despite challenges, eurozone banks remain robust, buoyed by strong capital and liquidity levels.
• Rising defaults: An uptick in corporate and retail loan defaults signals potential future non-performing loans (NPLs), currently at a low 2%. There has also been an increase in NPLs in both loans to commercial real estate companies and on residential mortgages.
  

OPEC+ meeting postponement shakes oil market:

The Organisation of the Petroleum Exporting Countries (OPEC+) delays its crucial meeting, sparking speculations of lesser-than-expected output cuts. OPEC+, a grouping of OPEC and non-OPEC oil producers, has been implementing production cuts since 2017 in an attempt to prop up prices. 

The markets reacted with: 

• Oil prices dropped: Brent futures and West Texas Intermediate crude both experienced over 1% decrease.
• Market volatility increased: Internal disagreements among OPEC+ members, particularly African countries, further added to market volatility.
  

If the group decides to cut production, prices could rise, which would benefit oil producers. However, if OPEC+ decides to keep production levels flat or increase them, prices could fall, which would hurt oil producers but benefit consumers. The decision by OPEC+ is also likely to have a ripple effect on the global economy.

UK Autumn statement focuses on economic revival:

UK Finance Minister Jeremy Hunt unveiled the Autumn statement, targeting tax cuts and economic stimulation.

Key takeaways:

• Tax strategy: National insurance and business tax cuts are central, despite concerns over sustainability.
• Pension and welfare adjustments: Significant increases in state pension and universal credit reflect inflation adjustments.
• Inflation outlook: The office for budget responsibility projects a fall in inflation to 2.8% by next year.

GBP/USD and FTSE 100 impact:

• Mixed responses with GBP/USD experiencing a slide, while FTSE 100 (UK 100) remains steady.

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Wall Street's steady climb: 3rd consecutive winning week:

Wall Street marks its third straight winning week, with minimal gains but maintaining momentum.

Key performers:

• Retail sector: Companies like Gap and Ross Stores see stock surge after strong quarterly results.
• Market outlook: Positive sentiment prevails as inflation cools, fueling hopes for a pause in the Federal Reserve's rate hikes.

Investor focus:

• Oil prices: Recent declines in oil prices due to supply-demand mismatches influence market dynamics.
• Treasury yields: The 10-year treasury yield's dip reflects a cautious market, balancing gains in stocks.

Upcoming global economic events:

• Japan’s inflation data: Japan’s Consumer Price Index (CPI) data set to release on Thursday, 23 November at 11:30 PM GMT, is critical for its monetary policies and global economy.
• Eurozone S&P Global Manufacturing & Services PMI: Thursday, 23 November, at 9:00 AM GMT.
• Thanksgiving Holiday: US markets closed, Thursday, 23 November.
• US S&P Global Manufacturing PMI: Friday, 24 November, 2:45 PM GMT.
• ECB’s Christine Lagarde Speaks: Friday, 24 November, 9:00 AM GMT.