Our thoughts and prays remain will all the innocent in all conflicted regions.
The wars in the Middle East and the Ukraine are taking and interesting turn. The US vetos immediate cease fire in Gaza at the UN and funding for the Ukraine becomes more difficult as home-grown problems illegal immigrants and debt financing will all require special consideration especially as we head into the 2024 Presidential election year. The US economy remains strong whilst inflation is slowing and Chinese CPI and producer prices fell more than forecast, as the market looks for more stimulus. Gold had a spectacular few days’ trading, a record high then fall and iron ore approached an 18-month high amid signs of stronger demand among the world’s top consumers.
But first to the US. Disappointingly the US vetoes and the UK abstained from voting for a resolution for a humanitarian ceasefire in the Gaza. According to the US Spokesman they want a two-state solution, however an immediate ceasefire will only “plant the seeds for the next war—because Hamas has no desire to see a durable peace, to see a two-state solution.” Israel did not vote at the UN as it is not a member. Naturally, there has been some rebuff from the Arab world who initiated the ceasefire. If nothing is done to help the Palestinians on the ground, then this could leave to a greater concern of other players entering the space and an escalation of the conflict. So far, the war has been contained but an escalation based humanitarian grounds could force a few others into the conflict. This will have ramifications towards the USD, the price of oil and ultimately extend to rise in global economic issues.
On the economic front, according to US Michigan State University, year ahead inflation data dropped to 3.1% from 4.5%, the lowest level since March 2021 and consumer confidence surged to 69.4 in December from the previous months print of 61.3. Wage growth grew by 0.4% following on from 0.2% the month earlier and the Unemployment rate fell to 3.7% in November from 3.9% in October. Although Non-Farm Payrolls came in under the average monthly increase of 240k the economy added 199,000 jobs, slightly more than the month before but helping to consolidate the trend. The US equity market remains mixed at the top end trying to either push through to a record high or consolidate. We continue to look for a more consolidation however the numbers coming out of the US are supportive the market.
Elsewhere in China, inflation is certainly contained however the issues are the complete opposite to the US. Consumer Prices dropped the most in 3 years falling by 0.5% yoy which was the steepest drop since November 2020. Producer Prices dropped by 3.0% in Nov, faster that the 2,6% fall in October. This was the 14th month in a row of producer price deflation. The Chinese economy continues to suffer from mounting local debt, property woes, and weak demand from home and abroad. Although demand for commodities continues to remain robust as expectations of continued government support requires the use of primary inputs to help propagate the stimulus.
Iron Ore continues to defy most analyst expectations trading at US136.00 close to 18th month high of US137.50. Although, it is on the back of stimulus expectations and could fall over like a house of cards it is well supported. Iron ore imports from China rose by 3.4% from the previous month in November pointing to a pickup in demand from key steel manufacturers. The same report also showed that China’s steel exports grew by nearly 1% in the period, sustaining global steel demand. So, as it stands and with more potential Government support the price of iron looks ironically well bid even as we head into the winter months.
Not so for Gold, in our last comments on Gold and trade focus we mentioned from both a technical and fundamental basis that gold was expensive “from technical perspective this looks like a “blow off” triggering all short stops …. momentum indicators are extremely toppy and expect this blip this morning to be short lived. A close today below US2075 is bearish”. This is precisely what happened to the gold market. Last Monday’s morning record high of USD2132 although at the time the feeling was that it was “trade induced” it did cement a record high from which to work with. We are currently …
This week’s focus will be on US inflation, industry/manufacturing production data and interest rate projections plus FOMC decision. Expectations are for softer inflation data whilst production data is tipped to be slightly weaker as the economy softens under the weight of the current tight monetary policy. However, the market will view this as temporary as projections are for rates to go lower next year. Expect the FOMC meeting Thursday to deliver no change albeit say that the likely hood is for rates to come done. In China we have we have House Prices, Industrial Production and Retail Sales. Closer to home we have Employment data in Australia.
On our positions, we … the AUD/USD and also the AUD/CHF. On the AUD we have had a good bout of profit taking. We see the trend is .... On US equities we did … on the NASDAQ at … and the Dow at …. Stopped out of the Dow but holding onto the NASDAQ. We have taken a … Gold …
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Gold: ...
Technical Analysis:
From a technical perspective this was a “blow off” momentum indicators on a weekly basis are extremely weak and the fact that the market could not …
Support …
Resistance …
Momentum …
