Market recap: Week of 06–10 Nov 2023

Taming inflation 

Bloomberg: Former Treasury Secretary Lawrence Summers cautions against premature confidence in the Federal Reserve's success in taming inflation.

He notes that hasty declarations and recent market reactions suggest the battle may not be over.

Meanwhile, former Barclays CEO Bob Diamond prepares for further challenges in corporate debt, anticipating more credit issues ahead.

Gold and jobs

DoD and US Bureau of Labor Statistics and Reuters: Gold prices rose on Friday as the U.S. dollar and Treasury yields dipped following weak U.S. jobs data, reinforcing expectations that the Federal Reserve won't raise interest rates further.

Amid ongoing tension in the Israel-Hamas conflict, the U.S. Department of Defense confirmed the presence of special forces in Israel.

Nonfarm payroll employment increased by 150,000 in October, with some job gains in healthcare, government, and social assistance but a decline in manufacturing due to strikes.

The data strengthens the case for a Fed pause, supporting gold prices, according to Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

UK inflation

Bloomberg and Reuters: Bank of England Chief Economist Huw Pill anticipates UK inflation aligning with global lower rates due to reduced energy costs.

He expects a "sharp further fall" in October, bringing inflation below 5% and narrowing the gap between the US and the eurozone.

Interest rate cuts may wait until mid-next year from their 15-year high.

Investor sentiment

CNBC: To sustainably push above $2,000/oz, gold may await a clearer Fed signal on potential cuts and a resurgence of ETF investors, says Heraeus Metals.

Traders are indicating a 90% chance of unchanged rates in December, per CME FedWatch.

Speculators raised net long positions in COMEX gold futures by 15,661 contracts to 106,343 in the week ending Oct. 31, according to CFTC data.

Rate hikes

The Guardian: The RBA board's decision to raise its cash rate by 25 basis points to 4.35%, marking a 12-year high, was in line with economist expectations.

This marks the 13th rate hike since May 2022.

New governor Michele Bullock and the board had consistently signalled their intention to resume rate increases if inflation didn't align with their projections.

Notably, among the big four banks, only the National Australia Bank is forecasting another rate increase, projecting a 4.6% peak in February.

US credit card debt

CNBC and Bloomberg: Recent data from the Federal Reserve Bank of New York reveals that Americans' credit card debt has reached a staggering $1.08 trillion.

In addition, credit card delinquency rates have increased. 

Approximately one-tenth of credit card users are stuck in "persistent debt," where interest and fees surpass their principal payments.

The average annual percentage rate has also hit an all-time high, exceeding 20%.

Fed governor Michelle Bowman aims to use the federal funds rate to address inflation, but market sentiment suggests potential rate cuts next year.

EU recession

GBNews: The former president of the European Central Bank (ECB) has expressed concern, predicting a potential recession in the European Union (EU) by year-end. This warning comes amid the EU's challenges in recovering from the pandemic and Russia's ongoing conflict with Ukraine.

He emphasizes the need for a more unified and robust EU, encompassing foreign policy and defence capabilities alongside economic policies to ensure the union's survival. However, his prediction is more pessimistic than recent forecasts from the ECB or IMF.

Gold economics

Reuters: Gold prices retreated for a third consecutive session today, with investors closely monitoring cues from the U.S. central bank on interest rates.

According to Daniel Ghali, a commodity strategist at TD Securities, the direction of gold will be influenced by economic data and the U.S. central bank's actions. The risk premium associated with the Israel-Hamas conflict is also diminishing.

However, any escalation in the conflict could drive gold prices higher, as noted by Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Inflation

Reuters: Federal Reserve officials, including Chair Jerome Powell, expressed uncertainty about whether current interest rates are sufficient to combat inflation.

Powell noted the limited impact of supply improvements on curbing price increases.

Interim St. Louis Fed President Kathleen O’Neill Paese emphasized the ongoing economic uncertainty, stating, "It would be unwise to suggest that further rate hikes are off the table."

The stock market’s winning streak came to an end on 09 Nov 2023. 

Australian economy

Wall Street Journal: The Reserve Bank of Australia raises near-term core inflation forecasts, highlighting slower-than-expected cooling of inflation pressures.

Despite passing its peak, inflation remains persistently high, exceeding earlier expectations.

The economy's unexpected resilience prompts the RBA's upward revisions in GDP growth and unemployment projections.

While soft GDP growth is anticipated, a gradual strengthening is forecasted from mid-2024, reaching around 2.25% by end-2025.