- Harry Bennett
- November 29, 2022
- 4:37 pm
- 10 min read
Chinese national continue protests as COVID-19 lockdowns continue !
Indices
Futures
Forex
– The Federal Reserve’s minutes took centre stage as comments became more dovish (conservative) implying the Fed would slow down the pace of rate hikes. This was supported by most of the members. It is now increasingly likely we will see a 50 basis points hike for December according to a recent Reuters poll (pie chart below).
– Stocks rallied from this dovish sentiment whilst the U.S. Dollar and U.S. treasury yield continued to back off. This was all linked to recessionary fears which were continuing to recede. Last week the U.S. Dollar basket (index) traded within a narrow 236 pt range between 105.63 and 107.99.
– S&P looks to be targeting 4,000 which is a key psychological level of resistance. The S&P 500 and Nasdaq were up 1.74% and 1.01% respectively last week.
– Christine Lagarde has stated the European Central Bank must continue rate hikes even as the economy weakens. Recessionary fears remain but this might not be enough to tame inflation, if the recession is shallow the ECB may normalise rates. For now a 50 or 75 basis point hike is expected in December.
– The Euro posted modest gains against the Dollar and has since moved above $1.04 (EUR/USD). This is close to levels not seen in over five months as a result of the weaker dollar and falling US Treasury yields.
– European yields see little change with the German and Italian 10 year yields moving to 1.986% and 3.921% respectively. UK gilts follow a similar pattern with the 10yr yield closing at 3.108% despite dipping to just above 3% on Thursday.
– According to the OECD (Organisation for Economic Cooperation and Development) the UK economy is set to be the worst hit of all G7 Nations. GDP which measures economic output is set to fall 0.4% next year and 0.2% in 2024.
– Protests have broken out in China because of the lockdowns and the controversial zero COVID strategy that is underway. Many protestors held up blank pieces of paper to express their discontent and acknowledge their censorship.
– This is weighing heavy on grain prices in conjunction with the extension of the Black Sea grain initiative. Corn and Wheat finished the week at 668.00 and 775.40 respectively basis March’23.
– National Bureau of Statistics data showed Chinese Industrial profits fell 3.0% in the first 10-months of 2022 from a year earlier. The downbeat data for the worlds second-largest economy also reflect the sharp slowdown in consumer spending.
– Last week, Gold continues to hover around 1750 but looks set to poise higher. The market is currently range bound between the 38.2% & 61.8% retrace of the June’22 high and recent low (chart below). The 100 day offering support at 1722 and the 1793 an area of resistance.
Conclusion
The global macroeconomic outlook still looks muddled as the reality of a global recession begins to set in. The question now becomes how deep will this recession be? With a more promising outlook in the U.S suggesting a Dovish policy moving forward, things are starting to look more positive but concerns around the second largest economy, China, mount. Consumer’s purchasing power continues its spiral downwards, adding more pressure to an overall economic slowdown.
Written by:
Harry Bennett
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