Markets Week Ahead: Dow Jones, US Dollar, Crude Oil, NZD/USD, RBNZ, Fed Nomination
Global market sentiment ended on a fairly mixed note this past week. Taking a look at Wall Street, the tech-heavy Nasdaq 100 climbed about 2.3%, outperforming the cyclically-sensitive Dow Jones, which sank roughly 1.3%. The S&P 500 was caught in the middle, rising 0.42%. In Europe, the FTSE 100 declined 1.69% as the DAX 40 gained 0.41%. In the Asia-Pacific region, Japan’s Nikkei 225 gained 0.46% as Australia’s ASX 200 fell 0.62%.
Covid lockdown woes resurfaced towards the end of last week in Europe. Austria announced a nationwide lockdown with Germany leaving the door open to one amid a resurgence in Covid cases. A combination of European coronavirus woes and inflationary concerns in the United States helped push the US Dollar higher. This might have explained the rotation trade into tech stocks. Growth-linked crude oil prices dipped, with WTI falling to its lowest since early October.
The United States is heading for the Thanksgiving holiday, where stock and bond markets will be closed on the 25th. This will create illiquid trading conditions, opening the door to volatility given sudden news or economic data releases. President Joe Biden is also expected to announce the next Fed Chair before Thanksgiving. While Jerome Powell is expected to keep his role, odds of a Lael Brainard nomination have been rising.
The markets are estimating her nomination to be relatively more dovish. Still, the next chair will have to face rising uncertainty about where inflation is going in the world’s largest economy. Core PCE, which is the central bank’s preferred inflationary metric, will cross the wires. This is on top of GDP, durable goods and University of Michigan sentiment data. FOMC minutes are also on tap. All things considered, it is shaping up to be a busy week in the US.
Markets will continue watching coronavirus cases in Europe to see if further lockdowns and restrictions could unfold, threatening growth outlook estimates. Meanwhile, NZD/USD will be closely eyeing the Reserve Bank of New Zealand, which is expected to deliver a rate hike this week. While that is priced in, markets will be gauging prospects of further tightening from the RBNZ in 2022. What else is in store for markets in the week ahead?
The US Dollar may remain on the offense with the Fed’s preferred gauge of inflation - core PCE - expected at the highest since 1991. Will Joe Biden’s Fed Chair nomination have lasting US Dollar impact?
The end of November and beginning of December is typically one of the best times of the year for US stocks. The Santa Claus rally nears.
The update to the Personal Consumption Expenditure (PCE) Price Index may prop up the price of gold if the Fed’s preferred gauge for inflation rises for 11 straight months.
This week’s sell-off has called into question the multi-month crypto rally. A period of rebuilding can help get the market back on track.
Oil fell last week after the United States and China appeared to be coordinating efforts to fight high prices. Will potential SPR releases between the two superpowers put OPEC on the defense?
Despite positive retail sales data, Sterling contends with a stronger dollar, post-Brexit headaches and apparent change in sentiment
With inflation and employment data much better than the RBNZ expected, risks are geared towards a possible 50bps hike
The S&P 500 appears vulnerable to a pullback amid waning buying momentum, price’s inability to break above the 4,700 level decisively and weakening market breadth.
Gold is holding onto its breakout gains created early this month; this should bode well for higher prices soon.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.