Tuesday's Markets Update (December 10, 2024)

12 Dec 2024 by rate3

On Tuesday, equities continued to decline as traders de-risked due to geopolitical concerns. Market sentiment became volatile, as some investors were worried about the state of the economy despite promises from the upcoming White House administration. They were also awaiting the release of the consumer inflation report, which added to concerns about tech stocks like Oracle and Nvidia. However, positive news from Alphabet and Tesla helped offset some of the negative impact. The market remains near record highs. China's Politburo reaffirmed its loose monetary policy, leading to a slump in bond prices, while gold prices rose due to increased purchases by China. Cocoa is on a run again due to seasonal winds. Some OG crypto traders are taking profits, following stocks, which is leading to BTC and ETH fluctuating near their ATH levels.

Details

In November, the NFIB Small Business Optimism Index surged to 101.7, its highest since June 2021, up from 93.7 in October and exceeding predictions. This marks the first time in 34 months that the index has surpassed the 50-year average of 98, driven by presidential election outcomes. Business owners are optimistic about favorable tax policies and inflation relief, with a net 36% expecting economic improvement, the highest since June 2020. 1Y trend: "Up" (NFib)
Nonfarm business sector labor productivity increased by 2.2% in Q3, the highest level this year. Both output and productivity increased across the business and manufacturing sectors. (BLS)

Crypto

Argentina has approved crypto ETFs, allowing investors to trade Bitcoin, Ethereum, and other cryptocurrencies on the stock market. This move aligns with President Milei's libertarian policies and aims to modernize Argentina's financial system, attract foreign investment, and provide domestic investors with new investment opportunities.(source)

World Markets

China's 10-year government bond yield held steady at 1.89% as investors awaited the start of the annual Central Economic Work Conference, where leaders will review the economy and set priorities for the year. Recently, the Politburo reaffirmed its "moderately loose" monetary policy for 2025 and pledged proactive fiscal measures to boost consumption and stabilize markets. This approach echoes China’s response to the 2009 financial crisis, reflecting a commitment to address current economic challenges. 1Y trend: "Down"

Currencies

The dollar index rose to a two-week high as investors anticipate rate cuts from the Bank of Canada and ECB. Rising US inflation expectations and a strong jobs report have also supported the dollar. However, the market is still pricing in a potential Fed rate cut this month, creating uncertainty for the dollar's future direction. 1Y trend: "Side"

Commodities

Gold prices rose above $2,660 per ounce, driven by China's decision to loosen monetary policy and geopolitical tensions in the Middle East. Increased demand for safe-haven assets and China's gold purchases further supported the price increase. Investors are now looking towards inflation data for clues on future Fed policy. 1Y trend: "Up"
Silver prices rose to a one-month high, driven by China's announcement of increased economic stimulus. The expectation of a Fed rate cut also contributed to the rise in silver prices. 1Y trend: "Up"
Cocoa futures surged to a multi-month high (>$10,200) due to concerns over supply shortages in West Africa. Dry weather conditions and a larger-than-expected global deficit have contributed to the price increase. 1Y trend: "Up"

Comment: What's Up With France?

Is the current political disorder in France explained by the worsening economic situation?

The CAC 40 rose 1.3% to 7,427, marking its highest point in nearly a month, with a weekly gain of 2.8%. France's GDP grew by 1.2% year-on-year in Q3 2024, up from 0.9% previously, yet remains below the historical average of 3.04% and higher than the EU average. Unemployment edged up to 7.4%, still lower than the 10% highs of 2014, but reflective of a stagnant trend compared to previous declines. Inflation stood at 1.3% in November 2024, historically low when compared to the early 1980s highs of over 13%. The current account deficit widened to EUR 2.6 billion, while the government budget deficit was 5.50% of GDP in 2023, trending worse than the historical average but better than the 9% deficit recorded in 2020. Manufacturing indicators reflected continued contraction, with the PMI at 43.1, indicating a 22-month contraction period.

Despite the economic data suggesting stagnation, the political turmoil is attributed more to a generational shift and societal discontent rather than solely economic hardships, reflecting a broader narrative shaped by geopolitical tensions and issues surrounding immigration.