S&P triumph, Oil resilience, China's signals

Traders closely monitor pivotal events, including US inflation, the Federal Reserve decision, and retail sales

By Ahmed Azzam | @3zzamous | 11 December 2023

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  • Traders eye key events: US inflation, Fed decision, and retail sales

  • S&P 500 marks longest streak since Nov. 2019, driven by positive payroll data

  • Global economy set for 2.7% growth in 2024, Down From 3.1% in 2023

  • China sees three-year low in consumer prices

In the wake of the S&P 500's remarkable six-week winning streak, Asian markets displayed a mixed performance today, with Japan notably on the rise. US futures indicated an upward trajectory, while Treasuries experienced a modest decline. Concurrently, WTI prices enjoyed an upswing. The yen, having recently achieved its most significant four-week gain since January, appears poised to extend its rally into the year 2024.

Market movements across the rest of the region exhibited a diverse pattern as traders anticipated a week filled with significant events. Notable highlights include US inflation data scheduled for release on Tuesday, a Federal Reserve policy decision on Wednesday, and retail sales numbers on Thursday.

The S&P 500 capped its sixth consecutive week of gains on Friday, marking its lengthiest winning streak since November 2019. The solid payroll data bolstered speculation that the largest global economy is well-positioned to sidestep a recession. Swap contracts now reflect a 40% probability of a Fed rate cut in March, down from the previously anticipated 50% prior to the release of economic data.

Despite softer US inflation and employment figures in the past month, investor sentiment swayed towards the belief that the Federal Reserve has concluded its rate-hiking cycle. This shift in perception sparked expectations of rate cuts totaling at least 125 basis points over the next 12 months. However, following the nonfarm payrolls data, traders adjusted these expectations to approximately 110 basis points of easing.

Oil prices experienced an extension of gains from the end of previous week, fueled by the positive US jobs report and plans to replenish the Strategic Petroleum Reserve. Nevertheless, this upward momentum was insufficient to offset the longest weekly losing streak since late 2018, driven by concerns that supply is outpacing demand.

Global GDP set for slowest non-crisis year since Dotcom Bubble

Amid these market dynamics, the global economy is poised for its slowest growth since the dotcom bubble burst, excluding the crisis years of 2009 and 2020. Projections indicate that the world's GDP is expected to grow by 2.7% in 2024, down from the 3.1% recorded this year.

China consumer prices drop the most in 3 years

China's economic landscape is underscored by a noteworthy development as consumer prices experienced the most significant decline in three years, dropping by 0.5% year-on-year. Simultaneously, producer costs recorded their 14th consecutive drop, decreasing by 3%. Both figures surpassed expectations, raising concerns about the persistence of deflationary risks into 2024. Looking ahead, the consensus is that new lending likely rebounded in November, providing a potential counterbalance to the broader economic trends in the region.