Asian markets experienced a downturn on Monday, anticipating crucial inflation data releases from the United States and Europe later this week, coupled with an impending meeting of oil producers that could impact the recent slide in oil prices.
One notable development was the rise in gold prices, reaching $2,009.87 per ounce and briefly hitting a six-month peak at $2,017.82.
As the month-end approaches, investors are treading cautiously amid substantial gains. Japan’s Nikkei dipped by 0.5%, yet remains 8.4% higher for November. MSCI’s broadest index of Asia-Pacific shares outside Japan saw a 0.4% decline, contributing to a monthly gain of 6.3%.
Chinese blue chips fell by 0.8%, marking a 1.8% decline for the market in November. In an effort to support private companies, China’s central bank announced measures encouraging financial institutions, including tolerance for non-performing loans.
Looking at futures, EUROSTOXX 50 and FTSE futures both eased by 0.3%. S&P 500 futures and Nasdaq futures witnessed a 0.2% and 0.4% decline, respectively. The S&P 500 cash index has rallied for four consecutive weeks, showing an 8.7% increase for the month, its best performance since mid-2022.
The Federal Reserve’s core inflation measure is expected on Thursday, likely indicating a slowdown to its lowest point since mid-2021, reinforcing market expectations of a future rate cut. Fed Chair Jerome Powell is set to address these concerns in a Fireside Chat on Friday, joined by at least seven other Fed speakers throughout the week.
Bruce Kasman, Head of Global Economics at JPMorgan, emphasizes the view that central banks are unlikely to implement easing in the first half of 2024 unless there is a threat to economic expansion or financial stability.
Oil Markets in Limbo as OPEC+ Meeting Looms
European Central Bank President Christine Lagarde has expressed no urgency for easing, and this sentiment is expected to be reiterated at the EU parliament on Monday. Data on EU consumer prices for November, due on Thursday, is anticipated to reveal a cooling in both headline and core rates, aligning with market expectations for cuts.
Market indicators suggest an 80-basis-point easing in U.S. borrowing costs next year and approximately 82 basis points for the ECB. This anticipation has fueled a significant rally in bonds, with 10-year Treasury yields down 36 basis points this month at 4.50%.
This trend has weighed on the dollar, which has experienced a 3% decline against a basket of major counterparts this month. The euro traded at $1.0952 on Monday, approaching its recent four-month high of $1.0965, while the dollar softened against a broadly firmer yen to 148.97.
The oil market faces heightened uncertainty ahead of the OPEC+ meeting scheduled for Nov. 30, originally slated for Sunday but postponed due to difficulties in reaching a unanimous position. Reports suggest African oil producers seek higher caps for 2024, while Saudi Arabia contemplates extending its additional 1 million bpd voluntary production cut, set to expire at the end of December.
CBA commodity analysts noted, “Saudi Arabia and OPEC+ face a challenge in convincing markets that it can help keep oil markets tight in 2024.” The uncertainty erased early gains, with Brent dropping 55 cents to $80.03 a barrel, and U.S. crude losing 60 cents to $74.94 per barrel.
