In the holiday-shortened week, the US stock markets managed to climb higher after the FOMC meeting confirmed a slower pace on rate hikes ahead. With China’s Covid resurgence, the rebound in Chinese shares came to a pause, darkening the global economic outlook. While all the indicators pointed to a subdued Black Friday shopping season, this week’s US job data will provide more clues for how the labour market react to such an aggressive Fed’s tightening policy. But it might be positive news for investors if the employment data starts showing signs of a slowdown, as this may continue to strengthen the odds for central banks to be less aggressive in their rate hikes.
What are we watching?
- The bond yield inversion deepens further: The spread between the US 10-year and 2-year bond yields widened further, which is the steepest since 1981. This indicates a gloomier US economic outlook, which is usually a sign of a hard recession ahead.
- China returns to Covid lockdowns: Following relaxing rules on health restrictions, China’s daily Covid cases reached the highest since the pandemic. With major cities, such as Beijing, and Shanghai, facing the threat of being in lockdowns again, the impact on the already sluggish global economy could be big, especially on commodity prices.
- The US dollar declines: The king dollar is on a fast pace of declining since the US printed light CPI data in October as investors believe that the Fed has reached its peak of hawkishness. It is expected the trend in the FX world will continue till the next inflation data offers more clues to the economic front.
- Crude oil prices sink: The recent fall in oil future prices implied a drop in inflation expectations as crude and inflation have been positively correlated. From the macro perspective, weakened demand is the main bearish factor pressuring the oil markets.
- Gold is on the rebounding trend: The precious metal is on a steady pace of its rebound due to a weakened USD and chaos in the crypto markets. Gold may return to investors’ portfolios being a haven asset.
Economic Calendar (28 Nov – 02 Dec). All time is in Australia AEST
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