Week of DECEMBER 4

Markets closed out a positive week. US indices returned to monthly gains despite a more hawkish bent seen in the Fed, while inflation fell faster than expected in Europe. In the coming week, all eyes will be on the release of the US NFP rate and decisions from the RBA and BOC.

Top Events in Review

The Fed trying to hold on to the higher-for-longer narrative was one of the week's major themes, as the PCE deflator came in as expected and supported a deflationary narrative. Key FOMC members insisted that rate hikes were still on the table but were dependent on the data. US weekly jobless claims hit the highest since the pandemic, though. 

US Q3 GDP was revised higher, but personal consumption was revised lower, with analysts pointing to large government spending propping up the economic figures. 

Flash CPI readings from the Eurozone saw inflation falling faster than anticipated, with markets moving to price in a quarter-point rate cut in April. Further disappointing data out of France as its final Q3 GDP was revised lower into negative. Swiss Q3 GDP beat estimates, allowing the country to avoid a technical recession. 

Chinese PMIs provided a mixed bag, with the official NBS manufacturing measure missing expectations but the private Caixin measure outperforming and returning to expansion. 

OPEC+ agreed to a further 1M production cut, but Angola vowed to not abide by its quota and produce 80K bbl/d more than the cartel agreed on. 

BOE governor Andrew Bailey echoed his other major central bank counterparts, insisting it was too early to discuss rate cuts. 

As expected, the RBNZ held rates unchanged, but the hawkish tone surprised markets. 

Canadian Q2 GDP was revised higher, allowing the country to avoid a technical recession when Q3 GDP came in negative. 

Biggest Market Movers

• The Dow Jones closed the week over 1.50%, recovering all the summer and autumn losses and nearing record highs.
• Gold hit a 6-month high above $2050 per ounce on the weakening dollar but lost some of the gains as the dollar recovered following more hawkish Fed speakers.
• WTI fluctuated as there were rumours of disagreements in OPEC+ before the meeting, which eventually agreed on a cut.
• The Kiwi dollar gained over 1.50% following a surprise hawkish tone out of the RBNZ after another rate pause.

Top Events in the Week Ahead

All Eyes on Non-Farm Confirmation 

Economists expect a decent increase in non-farm payrolls for November 2023, up 175K from 150K prior. However, the focus will be on whether there is a slowdown this time around, validating the dovish narrative markets have been betting on recently. A miss in employment change or wage growth could add the fuel needed to get this year's early Santa rally further off the ground. Nasdaq has next resistance at 16400 above the regional peak; if it manages to hold on to the 16K, that is. The US JOLTS job openings and ISM and ADP employment figures will likely provide early signs for investors. 

Euro Area GDP May Suprise

The Euro Area will also publish its third and final revision of its Q3 GDP, which is expected to be confirmed at -0.1%, though a surprise revision to the upside would take the shared economy out of a technical recession. Eurodollar received rejection at the 200-Day WMA, lost $1.10 and might be heading towards 1.08 next. But if the shared economy manages to get out of recession, the pair could reverse back up again.

China's Inflation After Uneven PMIs

Following mixed numbers from China's major Manufacturing PMIs, inflation data may be seen as aiding investors in gaining clarity around the uneven set of reports. China's CPI is expected to show a modest rise, with a miss in expectations increasing the likelihood of additional support from the PBOC. This would likely add to the challenges posed by the government's existing policies in controlling price levels.

Australian Policy and GDP in Focus

After an expected hike in November, the RBA is seen keeping its interest rate steady despite sounding a tad more hawkish since its last meeting. This comes as inflation fell more than expected year-over-year, easing to 4.9% compared with 5.2% expected. On the GDP front, also due during the week, Australia's economy is projected to have expanded 0.4% in Q3 2023 and 1.8% annually, reflecting a recovery from the contraction in Q2 2023 while recording the slowest pace of growth since Q4 2020. The Australian dollar appears to be recoiling after failing at 0.6650, bringing into focus 0.6575 and 50.

Other Events, Earnings

Monday has the German trade balance and exports and the US factory orders. An array of PMIs in the Euro Area and the US are due on Tuesday, along with the ISM Services and API's weekly stock report. Wednesday will see BOC's interest rate decision following a near technical recession. US exports/imports are out, too. The UK Halifax house price index and Euro Area GDP are on the docket for Thursday. US weekly jobless claims will come out too, with a tick higher seen as adding to labour slowdown expectations. Friday is expected to have German inflation confirmed at 3.2% and an overshadowed consumer sentiment report in the US.

Companies reporting earnings through the week include GitLab, AutoZone, Ferguson, Brown-Forman, Broadcom, Lululemon, and Dollar General.