Market recap: Week of 20–24 Nov 2023

Japan’s economy

Forexlive: Bloomberg reports Pimco's strategic move, buying the yen and projecting Bank of Japan's potential monetary policy tightening amid quickening inflation. Pimco initiated a long yen position above 140 months ago. 

Emmanuel Sharef, Pimco fund manager, notes the possibility of changes in yield-curve control policies and a potential hike. With US inflation decreasing and Japan's still elevated, Pimco sees a natural inclination for a yen long.

Gold economics

Kitco News: Gold's recent ascent, marked by steadier price movements post last month's volatility, draws attention. Kitco's weekly gold survey reveals retail investors' strong bullish stance, contrasting with market analysts who shift to a neutral outlook. 

Darin Newsom of Barchart.com suggests this phase aligns with Wave 2 of a short-term uptrend, anticipating an eventual breach of Wave 1's high. 

Tech stocks 

Yahoo Finance and Reuters: Hedge funds globally swiftly reduced exposure to tech stocks, selling long positions and closing short bets at the fastest pace in seven months, per Goldman Sachs.

In the week from Nov. 10 to Nov. 16, traders shed positions in semiconductor and communications equipment makers, along with exiting long positions on software companies.

Concurrently, S&P 500 stock valuations reached a two-month high above the long-term average. Hedge funds also recorded the fastest selling pace of U.S. consumer staples since April 2020, as highlighted in Goldman Sachs' note. On Monday, 20 Nov, The S&P 500 closed up 0.7%.

Rate hikes update

FX Empire and the RBA: During the Australian Central Bank (RBA) meeting on Nov 7, 2023, chaired by Michele Bullock, the cash rate target was raised by 25 basis points to 4.35%. Minutes reveal concerns over high inflation in advanced economies, with increases in fuel prices impacting headline inflation. Output growth slowed due to monetary policy and cost-of-living pressures, but labor markets remained tight. Housing rent inflation was at 10%, driven by low vacancy rates and population growth.

The economic outlook in China remained uncertain, and in Australia, GDP per capita was expected to decline. RBA forecasts show inflation reaching the top of the target range in late 2025. The AUD/USD gained 0.65% on Monday, 20 Nov. Following a 0.71% rally on Friday, 17 Nov.

Earnings

CNBC, Tom’s Hardware and The Register: Nvidia shares dip 1% despite Q3 earnings beat due to export restrictions affecting sales to China and other countries.

Revenue grew 206% YoY, driven by strong demand for H100 GPUs and ChatGPT-related AI capabilities. Despite stockpiling by Chinese tech giants, export restrictions pose a significant challenge for Nvidia in the near term.

Inflation

Reuters: Fed minutes signal cautious approach to future rate hikes, leaving room for policy pause in the first half of 2024. Officials remain committed to controlling inflation but will proceed carefully to avoid overtightening.

Economists expect the Fed to hold rates steady through most of the first half of next year. U.S. stocks retreated on Tuesday, with the S&P 500 and Nasdaq snapping five-session winning streaks.

Hedge funds

Morning Star: According to Goldman Sachs Group's latest hedge-fund trend report, Tesla (TSLA) continues to be a favored short position for hedge funds, despite the broader popularity of the ‘Magnificent Seven’.

This remains true as of Oct. 31, even though Tesla's stock has seen a significant 90% year-to-date increase.

Economic analysis

Currency News, the Standard and IFS: Post-Autumn Statement analysis Public finances show limited improvement, a weakened growth outlook, and persistently high inflation. Chancellor opts for tax cuts, raising concerns about fiscal challenges. 

Key moves include an immediate National Insurance cut, permanent full expensing for corporation tax, and a business rates freeze.

Concerns linger on sustainability and long-term planning. Work Capability Assessment reforms aim to save £1 billion/year.

FTSE100 remains steady; pub stocks rise, banks fall. GBP/USD slides on dollar revival and UK growth forecast disappointment.

Economic outlook

The Guardian: Leading economists caution that Rishi Sunak's government is steering towards a potentially more stringent austerity drive post the next general election than the past decade.

The Institute for Fiscal Studies notes tax cuts may be funded by significant public spending reductions from 2025. Despite national insurance cuts, overall taxation is anticipated to hit a 75-year high.

The Resolution Foundation predicts economic challenges, persistent inflation, and higher taxes could leave the average household £1,900 poorer by January 2025.

Energy news

The Wall Street Journal and Reuters: The latest EIA data reveals a notable increase in U.S. crude oil and gasoline inventories last week, exceeding expectations.

Refinery capacity use also rose to 87%. Commercial crude oil stockpiles, excluding the Strategic Petroleum Reserve, climbed by 8.7 million barrels.

Additionally, oil stored at Cushing, Okla., increased by 900,000 barrels.

Meanwhile, OPEC+ postponed the policy meeting to Nov 30, indicating differing views within the group, says UBS analyst Giovanni Staunovo.