Stock markets closed the week strongly after encouraging inflation data for the month of October in the United States, added to lower liquidity on Friday due to the holiday in the bond market, which also supported the extension of the hikes. However, Waller’s comments, reaffirming that the path of rate hikes will continue, cast doubt on whether this drop in inflation will translate into an immediate pause by the Fed. In view of these statements, the bond market resumes its activity today with generalized falls across all maturities and stock market futures show moderate declines in the United States. Meanwhile, after last week’s move in longer rates, the 10 – 3 month curve remains clearly inverted reaching a spread of 30 b.p., its lowest point since 2019. Finally, tomorrow we will have the US producer price data for the month of October, something that can accelerate or dampen the enthusiasm in equities.
U.S. stock markets advances (S&P 0.9%; Nasdaq +1.8%), following Wall Street’s biggest rise in two years seen on Thursday after the inflation data was released. Friday’s session also went from strength to strength, closing near the highs of the day. In the case of the S&P, the session’s advances were led by energy (+3.1%), with a weekly accumulated gain of close to 6% that leaves annual losses at -16%. S&P futures are down 0.2% this morning, reflecting statements from Fed member Christopher Waller that the Fed still has a long way to go before the rate hike process is complete.
The European stock markets were mixed at the close on Friday (EuroStoxx 50 +0.5%; Ibex -0.4%), which did not prevent a fourth consecutive week of rises in the case of the Spanish selective index (+2%), with Grifols leading the way (+15.6%). In Friday’s session, however, Iberdrola (-1.5%), Inditex (-1%) and the banks, which continues to be affected by the tax package, were the main fallers, in contrast to the upward reaction of the rest of the sectors, such as those linked to tourism and pharmaceuticals. In the rest of the European stock markets, we highlight the sixth consecutive week of rises for indices such as the EuroStoxx 50 or the German Dax, in both cases above 5% and with a clear boost for technology (+13.5%) compared to energy (-2.7%). Europe opens this morning with timid advances.
Asian stock markets mixed. China rises after the announcement of a plan to support the real estate sector. In Japan, the start of the week closed with losses of around 1% in the main indexes (Nikkei; Topix). This was influenced by profit-taking, after a positive previous week, and the sharp fall of companies such as Softbank (-12.7%), after presenting losses in its half-yearly result – although it returned to profit in the second quarter – and did not give details of its plan to buy back its own shares. The tone in the Chinese stock market was more positive, especially in Hong Kong’s Hang Seng (+1.8%), following news of a government support plan for the real estate sector. This plan is broken down into 16 points and ranges from the extension of debt relief to distressed real estate groups to the relaxation of regulations on the payment of deposits to homebuyers.
In the currency market, again positive data at the close of Friday for European currencies. This time, the euro strengthened by +1.35% against the dollar in the session, while this morning it opens without relevant changes for the time being. With this, the cross stands this morning at 1.0349 EUR/USD. Regarding the pound, on Friday we saw corrections against the euro worth -0.36%, repeating this morning with additional declines of -0.13%. The cross moves around 0.8757 EUR/GBP.
In commodities, we had a green session for oil on Friday. The Brent benchmark appreciated +2.48% on the day, opening this morning with some additional gains of +0.65%. The price of a barrel stands at 96.61 dollars. Dollar corrections of late, coupled with increased optimism on the Chinese confinement issue, give oil some respite. With regard to gold, on Friday it also closed with gains of +0.9%, opening this morning with some corrections of -0.44%, placing the price at 1,763 dollars/oz.
Political – economic outlook
Biden and Xi Jinping will meet for the first time in person at the G20. The leaders of the world’s major economies will meet tomorrow and the day after in Bali, where they will focus the debate on issues such as debt restructuring, the hegemony of the dollar and, of course, the war in Ukraine. The highlight of the summit will be the meeting between Biden and Xi Jinping, who will speak in person for the first time and where Xi’s stance on his “red lines” on territorial issues will be very significant, especially after his recent victory monopolizing power within the Chinese Communist Party.
U.S. Democrats maintain control of the Senate. Democrats have managed to maintain control of the Senate for two more years after narrow victories in the states of Nevada and Arizona, winning 50 seats in the upper chamber. The results of the Georgia runoff, to be held in early December, remain to be known, where a Democratic victory would allow them to avoid having to use Vice President Harris to break Senate tiebreakers. In addition, final recounts continue in the House of Representatives, where Republicans are expected to win control of the chamber by a razor-thin margin.
Further deterioration in consumer confidence in the United States. The index conducted by the University of Michigan fell more than expected in November, falling to 54.7 from 59.9 previously and well below the 59.5 expected. This decline was due to both the current situation (57.8 vs. 65.6 previously) and the decline in expectations (52.7 vs. 56.2 previously). In addition, it should also be noted that inflation expectations rebounded both in the short and long term: specifically, 12-month expectations rose by one tenth of a percent to +5.1% and long-term expectations (5-10 years) also rose by one tenth of a percent to +3%. Negative data point to a deterioration in consumption in the coming months and also continue to put pressure on the Fed to raise interest rates as consumer inflation expectations rebounded.