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Week in Review: 28 November - 2 December 2022

Summary:

    Well...the markets continue confused and the economy continues to slowly slow. In a conference this week, J. Powell said that the FED funds rate rises are going to slow, in order to evaluate the effects of recent rate hikes on the system. Thus, a 0.5% increase in December is to be expected. The stock market rallied like crazy. The jobs report on Friday came a bit stronger than expected, increasing confusion. In the meanwhile, main US stock market indices are approaching resistance levels and may go in either direction. The market participants will be awaiting the next FED decision and company earnings over the coming quarters.

    The Chicago PMI in the United States tumbled to 37.2 points in November of 2022 from 45.20 points in the previous month, marking the third consecutive month of contractions. It is the lowest reading since May of 2020, well below market forecasts of 47. Among the main five indicators, a decline was seen for production (down 9.2 points to 35.9), new orders (-8.5 points to 30.7) and orders backlogs (-11.2 points to 36.1). At the same time, inventories went up 2.9 points to 59.8. On the other hand, employment rose 1.5 points to 47.1 and supplier deliveries declined by 9.4 points to 49.9 while prices paid moderated by 8.6 points to 66.2.


    The number of job openings in the United States dropped by 353,000 to 10.3 million in October of 2022, roughly in line with market expectations, and suggesting demand for workers started moderating amid a softer economic outlook and higher interest rates. Job openings decreased in state and local government, excluding education (-101,000); non-durable goods manufacturing (-95,000); and federal government (-61,000). The number of job openings increased in other services (+76,000) and in finance and insurance (+70,000). Over the month the number of hires and total separations changed little at 6.0 million and 5.7 million, respectively. Within separations, quits (4.0 million) and layoffs and discharges (1.4 million) changed little.

    Despite less job openings, the US economy still added jobs: 263K jobs in November of 2022, beating market forecasts of 200K, and following an upwardly revised 284K in October. It is the lowest job gain since April last year, as the labour market is normalizing after the pandemic shock. Still, it continues to signal a healthy and tight market, above the pre-pandemic average of 150K-200K jobs created per month.

    NEXT WEEK: In the US, the spotlight will be taken by ISM Non-Manufacturing PMI, the University of Michigan's consumer sentiment, and PPI data. Investors will also follow interest rate decisions in Australia, Canada, Brazil, and India and inflation rates from China, Brazil, Turkey, Russia, Philippines, Netherlands and Mexico. Finally, German factory orders and trade data from China, Canada, and the US should provide some insides into the state of global demand.

Economic data source: Trading Economics




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A Walk Around the Markets

 
OIL
 
 
WTI crude futures fell to $80 per barrel on Friday, as investors await the OPEC+ meeting on Sunday. Despite some speculation that major oil producers could cut output further, the cartel is expected to stick to its latest target of reducing oil production by 2 million barrels per day. Meanwhile, the latest data from Baker Hughes showed US oil rig count, an indicator of future production remained unchanged this week. Poland agreed to the EU's deal for a $60 per barrel price cap on Russian seaborne oil, allowing the bloc to move forward with formally approving the deal over the weekend. For the week, oil rose about 5%, the first weekly gain since early November, benefiting mainly from China’s softening stance on Covid that sparked hopes for a rebound in demand from the world’s top crude importer. On the supply side, the latest data showed that US crude inventories fell by nearly 13 million barrels last week, the most since June 2019.




Natural Gas
 

US natural gas futures extended losses to over 5% to $6.3/MMBtu on Friday, the lowest since November 14th and were set for an over 13% weekly fall, after Freeport delayed the restart of its LNG export plant to the end of the year from mid-December, leaving more gas in the domestic market. Natural gas futures were already lower on forecasts for less cold weather and lower demand which should allow utilities to leave more gas into storage. Also, average gas output in the US Lower 48 states rose to a record 99.5 bcfd in November, up from 99.4 bcfd in October. At the same time, the US government is stepping up efforts to reduce the risk of a railroad worker strike that could disrupt coal deliveries and force power generators to burn more gas.
 


 
US Stock Markets
 

Sell-off driven by stronger-than-expected jobs reports faded in the afternoon trading on Friday, with the Dow Jones crossing into the positive territory and the S&P 500 and the Nasdaq closing down only 0.2% and 0.1% respectively. On one hand, the Labor Department's closely watched employment report showed that the economy added 263,000 jobs last month while average hourly earnings unexpectedly rose more than expected cooling expectations that the Federal Reserve will soon slow its tightening campaign. On the other hand, investors took a respite from Fed Chair Jerome Powell's remarks that confirmed rate hikes would slow starting as early as December. On the corporate side, Marvell Technology tumbled as much as 5% after the semiconductor company missed quarterly revenue and earnings estimates. For the week, the Dow ended 0.1% higher, while Nasdaq rose 2.1% and the S&P was up 1%.




 
Bitcoin
 

Bitcoin US Dollar traded at 16959 this Sunday December 4th, decreasing 58 or 0.34 percent since the previous trading session. Looking back, over the last four weeks, Bitcoin lost 20.59 percent. Over the last 12 months, its price fell by 65.70 percent. Looking ahead, we forecast Bitcoin US Dollar to be priced at 15379 by the end of this quarter and at 11372 in one year, according to Trading Economics global macro models projections and analysts expectations.


 
Gold
 
 
Gold prices sank 1% to below $1800 an ounce on Friday, after a hotter-than-expected jobs report for the US poured cold water on expectations of a big slowdown in Fed's tightening, sending the dollar higher. Nonfarm payrolls came way above forecasts and wage growth unexpectedly picked up. On the week however, the bullion is set to gain nearly 1.5%, benefiting from a dollar fall during the week after comments from Fed Chair signalling the central bank will deliver a smaller rate hike in December.





 
Silver
 

Silver futures rose to above $22.6 per ounce at the start of December, hovering at levels not seen since May amid expectations for a slowdown in monetary tightening by the Federal Reserve. Fed Chairman Powell stated that it is likely that the US central bank will slow the aggressiveness of rate hikes this month, easing demand for the dollar and driving investors toward bullion. Besides bullion, softer rate hikes in the US and a cut in the reserve ratio by the PBoC supported expectations of higher demand for industrial silver usage as electricity conductors, tracking the rebound for copper. Signs of low supply also supported prices, as New York’s COMEX inventories fell 70% in the last 18 months to just over 1 million tonnes. Also, the London Bullion Market Association stockpiles fell for the 10th straight month to a record-low 27.1 thousand tonnes in November.



 
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