Our thoughts and prays remain with all the innocent in all conflicted regions.

The Federal Reserve changes the goal posts, US equity markets rally to record highs, amid more dovish tones from the Central Bank and expectations of perhaps 75bpds worth of easing’s in 2024. Momentum in the oil market picks up as Houthi rebels attack an Israeli bound container ship in the Red Sea. Either opportunistic or supportive of Palestinians in the Gaza only time will tell. A sign that the conflict may be spreading into other regions which presents a concern for the stability of the Oil market and a potential shift in energy inflation globally. Gold looks to be consolidating its recent falls and with inflation coming into check around the world is there more weakness to come and finally base metals, the technicals are showing signs of a low and a positive economic spin on the global outlook will only encourage the bulls. Is this an opportunity to be looked at in 2024 and locally what CFDS should we be looking at investing in.

But first a change in interest rate policy in the US. It’s been a long time coming but it is official. The US Fed Reserve has adopted a dovish tone and said interest rates are on the turn. The recent equity record highs could just be a euphoric move with many investors looking forward to 75bps easing in 2024.  It is certainly a nice way to end the year if you have been on the ride all this time. We have been looking for cracks to appear and remain a little sceptical about the bullishness of the move. It’s wrong to stand in front of this current positiveness either go with it or stand aside as the fundamentals and data points from here are all coming around. To this point, Goldmans’ Kostin, lifted its forecast for the S+P to 5100 for the year. It is currently trading at 4700. Although, Fed Williams calmed these expectations a little noting that the economy needs to earn the cuts the Dow hit a record high last week with the S+P and NASDAQ looking to follow suit. The US economy seems to be witnessing a “purple patch” and data seems to be all one way at the moment.  Traders are looking for US data points to potentially drag the global economy higher. Demand which hopefully will translate to a lift in the commodity markets. However, oil seems to have already found a low bouncing off US70.00.

As Oil trades at US72.50, up a few dollars from the support at US68.50, it seems to be trading under its own steam. Iranian backed Houthi Rebels attacked an Israeli bound container vessel and Maersk, a global shipping company, said it would suspend all services through the Suez Canal, a key strait to the Red Sea. A Houthi spokesman said the attack was in retaliation for the “oppression of the Palestinian people in Gaza”. The ramifications of the attack could have wider implications across the region as other Palestinian supporters in the region become involved. As mentioned before, apart from the current and potential escalation of humanitarian concerns an increase in interest from regional players to become involved could propel oil back to US90.00 and see an escalation of the hard-won reduction on the energy inflation front and a flight to safe-haven assets such as gold.

Gold has been under pressure coming off from a record high as the Israeli/Hamas conflict took shape. A rise in tensions will support the metal as it bounced off a low of US1968.  Taking, the conflict out of the discussion, we can still see that inflation remains a concern for other major economies. The ECB and the BOE maintained their policy rates and pledged to keep them at elevated levels to address ongoing inflation concerns. Although data due out this week may change sentiment. The precious metals markets are looking supportive, but the base metals markets seem to be cheap.

Base metals are primary inputs so demand for them picks up when economic activity picks up. If there is belief in the dovish Fed calls and easing of monetary policy in 2024 then it makes sense that a confident US economy should see an increase in interest in the sector whether direct or in equities/cfds that are involved in mining or are stakeholders in the process. As an example, Copper (current US3.84, record high US4.80), Zinc (current US2400, record high US4625), Aluminium (current US 2280, record high US3500), Nickle (current US16111, record high US50,000). So, if there is belief in the current rally in US equities, then this must filter down to some upside in the base metals. As a result, have a look at CFDs that have some exposure to the metals BHP, RIO, Capral, and Azure as a few.

On the economic front this week’s focus will be on the ECB and UK inflation data due out on Tuesday and Wednesday. It will give the market an opportunity to chance up the odds for a dovish outlook. Although, hints suggest otherwise, and interest rates look to remain high for the foreseeable future the market will be expecting a change of policy soon. In the US we have some good data points, starting Tuesday with GDP growth estimates and corporate profits. Then on Friday, durable goods, personnel spending and Michigan, inflation, and consumer expectations, will hopefully all help to consolidate the Feds view.

On our positions, we continue to hold the ...

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