Financial Markets’ Weekly Recap, November 13-17

The US dollar has experienced its worst week since July 2023, with negative momentum dominating the market. Next week will be shorter in the US due to Thanksgiving.

US – China Talks

US President Joe Biden and Chinese counterpart Xi Jinping had a positive conversation about climate change and improving communication during their meeting in San Francisco. It is desirable for the US to support China’s struggling economy, but not at the expense of US intellectual property, according to Biden. Both sides decided to start up military communications again. Biden also brought up China’s attempts to curb the production of opioids and fentanyl, but Biden disagreed on Xi’s criticism of US export controls on advanced technology. It is worth noting that the Communist Party faces its biggest challenge in decades, with economic hardships potentially deepening.

Gold

The precious metal rebounded sharply after falling for two weeks, boosted by lower US yields to eventually trade around $1980.65 per ounce. Silver had its best week in months, surging from $22.40 to $24.15, but pulled back below $24.00 late on Friday.

Oil Price

US and international oil prices jumped by more than 4% after a week-long slump. Saudi Arabia is considering prolonging production cuts into 2024, while WTI crude is trading at $76.02 per barrel. OPEC+ is set to convene in Vienna on November 26 to discuss any adjustments to output.

Eurozone, EC

The European Commission (EC) lowered its GDP growth forecasts for both the eurozone and the European Union as a whole on November 15. The EC autumn forecast expects the economy to expand by 0.6% in the single currency union and the entire EU.

Germany’s budget was a major topic across forex markets during recent trading sessions. A German court decision on Friday, removing billions from the federal budget, could hinder growth in the largest economy in Europe. The coalition is frantically trying to plug a significant hole in its finances. However, some specific expenditure allocations will be discussed in detail next Thursday, after a special meeting on Tuesday to discuss the impact of the Constitutional Court decision.

US Government Shutdown Avoided

The US Senate passed a bill to prevent a potential federal crisis by avoiding a funding gap that could have led to a government shutdown. Consensus between the GOP-led House and Democratic Senate is expected before the next fiscal deadlines, focusing on speaker Mike Johnson’s leadership ability. The bill includes extending the finance of government priorities until January 19, including military construction activities, financing the spending on veterans’ affairs, financing the transportation sector, and financing the ministries of housing and energy.

US Data Front

US inflation, as measured by the change in the Consumer Price Index (CPI), fell to 3.2% year-on-year in October, below market expectations of 3.2% and below the inflation rate in September, which reached 3.7%. The core CPI rose by 4% in the same period compared to analyst estimates of 4.1%.

The US Dollar Index fell to the 103.815 lows, and the US 10-year Treasury yields were down at 4.379%, its lowest level since September 20 before bouncing back to trade around 4.44%. The 2-year Treasury yield also hit its lowest level since September 1, but was last up more than 6 basis points at 4.9%.

Earnings

As corporate earnings season draws to a close, notable reports are expected from companies such as Agilent, Zoom, Nvidia, Lowe’s, Analog, Dell, Autodesk, HP, Dollar Tree, Best Buy, and Deere & Company.

The Week Ahead

Fed will release the minutes of its latest meeting on Wednesday but it could easily be a non-event considering the latest economic reports and Fed Chair Jerome Powell’s comments.

Wednesday will be a busy day with many important reports, ahead of the Thanksgiving holiday: the weekly Jobless Claims, Durable Goods Orders, and the University of Michigan Consumer Sentiment (final reading).

The preliminary flash PMI figures (both Services and Manufacturing) on Friday Nov. 24, will be the important economic report to keep an eye on.