Financial Market Review and Analysis for the Week: November 27th - December 1st

Market sentiment continues to be supported by hopes of further cooling of inflation, despite some strong macroeconomic data last week. The Eurozone and UK PMI showed a slight improvement, rebounding from low levels. The output price index for the main services sectors remains higher than the pre-pandemic average. After an unexpected rise in initial jobless claims in early November, the Eurozone's third-quarter negotiated wage index continues to point to sticky price pressures in the labor market.

With recent US data indicating a slowdown in the economy and inflationary pressures, the market has discounted the possibility of further Fed rate hikes. Expectations for a rate cut starting next year are increasing. The US dollar declined again last week, marking the second consecutive week of losses. Driven by the weak US dollar, the dollar index continues to trade below 104.00, maintaining a downward trend, likely to fall to 102.50-102.00. The Euro may rise above 1.0850 to 1.10, while the USD/JPY may rise to 150 or slightly higher, then fall again to 146/145. The Australian dollar and British pound may remain near 0.6650 and 1.2750, respectively. The USD/CNY is expected to decline to 7.05/7.00.

Gold had a strong rally last week, with spot gold prices rising over $20 after a surge of $42.30 the previous week, closing above the key $2000 per ounce level. Silver prices, on the other hand, continued to rise for the second consecutive week, reaching a three-month high of $24.34.

As tensions in the Middle East eased and political risk premiums decreased, oil prices continued to decline for the fifth consecutive week in over a month. Oil traders need to be prepared for the OPEC+ meeting, which is expected to be tense, held in conjunction with COP28. Brent crude and WTI crude need to stay above recent support levels to avoid the risk of further declines.

The three major US indices had mixed movements on Friday, but recorded their fourth consecutive weekly gain on a weekly basis. This week, the Dow Jones accumulated a 1.27% gain to 35,390.15 points, the S&P 500 rose 1% to 4559.34 points, and the Nasdaq increased 0.89% to 14,250.85 points.

Bond yields continued to slow, with US Treasury yields significantly declining over the past month. Long-term bond yields are now back to mid-September levels, with the 10-year US Treasury yield dropping 0.6 percentage points to 4.4% over the past month. Factors include October inflation and non-farm employment data coming in lower than expected, and the November Fed policy meeting emphasizing the Fed's current reluctance to raise rates.

Outlook for the Week:

The focus this week will once again turn to inflation. It is expected that the Eurozone's November HICP preliminary value will continue to slow, both in overall and core data, slightly below general expectations. Overall inflation is expected to remain near 3% by next summer. The US will also release October personal consumption expenditure (PCE) data, with the market generally expecting a slowdown in core PCE inflation, similar to the earlier released CPI index.

The market will also closely watch PMI data from China and the US. China's National Bureau of Statistics (NBS) will release the official PMI index on Thursday, and the private Caixin Manufacturing PMI will be released on Friday. The US Institute for Supply Management (ISM) Manufacturing Index will be released on Friday afternoon. The Reserve Bank of New Zealand is the only G10 central bank holding a monetary policy meeting this week, and it is expected to decide to keep rates unchanged. In addition, several Fed officials, including Fed Chair Powell, are expected to give speeches, which could trigger significant market movements this week.

Key Events for the Week (Beijing Time):

Important: Fed Chair Powell; Bank of England Governor Bailey will give speeches this week

Monday (November 20): UK November CBI Retail Sales Balance; US October Building Permits MoM revised (%) and Seasonally Adjusted Annualized New Home Sales for October (thousands of units)

Tuesday (November 14): Germany December GfK Consumer Confidence Index; US November Conference Board Consumer Confidence Index

Wednesday (November 15): US API Crude Oil Inventory Change for the week ending November 24 (thousands of barrels); Australia October ABS CPI YoY (seasonally adjusted and trend) and MoM (seasonally adjusted); Eurozone November Economic Sentiment Index and Industrial Sentiment Index; Eurozone November Consumer Confidence Index final value; US Q3 Real GDP Annualized QoQ revised (%), GDP Price Index QoQ revised (%), and Implicit Price Deflator QoQ seasonally adjusted revised (%); US October Wholesale Inventories MoM preliminary (%)

Thursday (November 16): China November official Manufacturing PMI; Germany October Retail Sales MoM (%), YoY (%), and Germany November Seasonally Adjusted Unemployment Rate (%); Eurozone November Core Harmonized CPI YoY not seasonally adjusted initial value (%); Eurozone October Unemployment Rate (%); US initial jobless claims for the week ending November 25 (thousands); US October PCE Price Index YoY (%), Core PCE Price Index YoY (%)

Friday (November 17): Japan October Unemployment Rate (%); China November Caixin Manufacturing PMI; Eurozone November Markit Manufacturing PMI final value; UK November Markit Manufacturing PMI final value; US November Markit Manufacturing PMI final value; US November ISM Manufacturing PMI

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