Asian markets declined on Friday as some traders expressed frustration over the limited information from a Chinese economic conference, leading to a reduced risk appetite ahead of next week’s Federal Reserve meeting. The S&P 500 dropped by 0.5% as traders weighed higher-than-expected unemployment claims against stronger PPI data. Breaking a four-session winning streak, the Japanese stock market is notably down on Friday, reacting to the generally negative signals from Wall Street overnight. The benchmark Nikkei 225 has dropped below the 39,500 level, with declines across most sectors, particularly among major players in technology and finance. Shares in China and Hong Kong also fell after the Central Economic Work Conference in China provided a readout that lacked specific policy details regarding fiscal stimulus, despite officials’ commitments to boost consumption. However, their intention to reduce policy rates and bank reserve ratios resulted in Chinese 10-year government bonds falling below 1.8% for the first time ever. Investors will now have to wait until March for more clarity. Recent rate cuts, including significant 50 basis point reductions in Switzerland and Canada, along with a 25 basis point decrease by the European Central Bank, have significantly boosted the U.S. dollar. It surged by 1% against the euro, 1.6% against the Swiss franc, and 1.8% against the Japanese yen. The dollar also gained momentum from rising Treasury yields as investors lowered their expectations for aggressive U.S. policy easing in the coming year. While the markets still anticipate a rate cut from the Federal Reserve next week, the likelihood of a move in January has dropped to just 20%. A major factor influencing the market outlook is U.S. President-elect Donald Trump, who will be back in the Oval Office by the next Fed meeting and may have issued numerous executive orders with significant trade and policy consequences. The dollar’s persistent strength is putting pressure on emerging market currencies, restricting their ability to ease monetary policy. The yen has weakened due to expectations that the Bank of Japan will not raise interest rates soon, influenced by small firms’ wage issues. U.S. PPI data showed an upward bias from egg prices, leading analysts to lower core PCE index expectations. Long-term Treasury bonds faced significant losses, with 10-year yields up 17 bps and 30-year yields up 22 bps, the largest weekly increase in over a year. A disappointing 30-year bond auction contributed to this, reflecting an upward adjustment of terminal rates, with U.S. rates projected to decline slowly to 3.8% by the end of 2025, compared to 1.75% in Europe and 2.7% in Canada.The UK economy contracted by 0.1% m/m in October, contrary to expectations of 0.1% growth. Industrial production fell by 0.6% m/m, and the services sector was flat, with only seven of fourteen sub-sectors expanding. Construction output also declined, indicating broader weakness. The unrounded headline figure was -0.13% m/m, with services contributing -3bps and industrial production -8bps. This disappointing start to Q4 contrasts with the BoE’s November MPR projection of 0.3% q/q growth. Monthly increases of +0.4% m/m in November and December are now needed to meet this projection, which seems unlikely. The upcoming MPC minutes may reflect these lower activity levels.
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 6100
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EURUSD Bullish Above Bearish Below 1.0450
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GBPUSD Bullish Above Bearish Below 1.26
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USDJPY Bullish Above Bearish Below 154
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XAUUSD Bullish Above Bearish Below 2600
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BTCUSD Bullish Above Bearish Below 92000
Primary objective is 100,000 TARGET HIT NEW PATTERN EMERGING(Click on image to enlarge)
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