Daily Market Outlook, December 10, 2024
Munnelly’s Macro Minute...
"China Stimulus Stock Surge See’s Buyer Remorse Set In”
China's stock markets have opted to embrace the authorities' recent ambiguous commitment to support the struggling economy, resulting in a surge in stocks to their highest point in almost a month. A statement from China's Politburo on Monday indicated a transition from "prudent" to "moderately loose" monetary policy, along with an intention to enhance consumption. Similar to previous announcements in September, there were no concrete details provided, but equity investors were eager not to miss the opportunity, yet the ongoing lack of clarity has seen markets pare initial gains to trade lower on the session.Caution was apparent in China's foreign exchange market, which remained relatively stable, and in bonds, which saw a rally that drove yields to all-time lows, indicating scepticism about whether growth will genuinely accelerate. Under "prudent" circumstances, a substantial amount of debt has accrued without stimulating domestic demand. The challenge with Chinese monetary policy to date has not been that its strictness has resulted in slow growth and low inflation, but rather that its leniency, which is primarily directed at the supply side of the economy, has contributed to larger imbalances and deflation. Disinflationary forces are prominent throughout the Chinese economy, reflecting an ongoing imbalance between weak domestic demand and expanding capacity as authorities emphasise investment. The November CPI dip to +0.2% year-on-year from +0.3% in October may seem attributable to weaker food prices, which decreased from +2.7% to +1.0% year-on-year. However, stable service prices at 0.4% year-on-year further highlight this weak domestic demand scenario, while goods prices also saw another decline (0.0% compared to 0.2%). Although producer price deflation eased slightly to -2.5% year-on-year from -2.9%, this negative trend has now persisted for 26 months. Economy-wide prices, as indicated by the GDP deflator, have remained negative since the beginning of 2023. The current policy measures appear inadequate to tackle this issue. While hopes for stimulus may be sustaining economic activity, they also contribute to a growing surplus of goods. Without more aggressive fiscal stimulus to address increasing excess capacity, the likelihood of slipping into outright consumer price deflation is rising.
European stocks have already been bolstered by China's policy shift. The data calendar is comparatively empty in anticipation of a busy few days. The European Central Bank and the Swiss National Bank are anticipated to announce their rate decisions on Thursday, followed by a central bank meeting in Canada. The U.S. inflation figures are scheduled to be released on Wednesday. It is anticipated that the European Central Bank will decrease rates by 25 basis points, while the Bank of Canada may reduce them by 50 basis points. Additionally, Switzerland is anticipated to decrease rates by 50 basis points in light of the substantial sums it has allocated to stabilise the Swiss franc.
Overnight Newswire Updates of Note
ECB To Debate Extent Of Rate Cuts’ Economic Impact
France’s Macron Seeks Coalition Govt, Invites Compromise
BlackRock: Investors To Seek European Bonds; FY25 At Bargain
China’s Bond Yields Seen Dropping To 1.5% On Policy-Driven Rally
China’s Trade Balance Surplus Expands In November
Gold; Oil Steady, Supported By Hopes Of More China Stimulus
Top Academic Prof Yoshikawa: BoJ Risks Lagging Without Hike
Australia’s New Pacific Pact Deals Blow To China’s Ambitions
RBA Holds Rate At 13Y High, Sees Progress On Prices
Aussie Drops After RBA Softens Tone; US Dollar Steady Before CPI
Australia’s Business Confidence Slumps In Bad Omen
IMF: Asian Economies Resilient Enough To Endure Turbulence
Oracle Shares Slide On Earnings And Revenue Miss
Bitcoin Wavers, Smaller Tokens Sink As Frothy Crypto Rally Frays
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0465-75 (2.6BLN), 1.0500 (1.4BLN), 1.0505-15 (882M)
1.0525-30 (1.1BLN), 1.0550 (650M), 1.0600 (2.3BLN), 1.0620-30 (1BLN)
USD/CHF: 0.8775-80 (515M), 0.8850 (340M)
EUR/GBP: 0.8300 (200M), 0.8320 (350M). GBP/USD: 1.2780 (434M)
AUD/USD: 0.6380 (352M), 0.6500 (1.2BLN)
NZD/USD: 0.5745 (440M), 0.5950 (403M)
USD/CAD: 1.4120-25 (726M), 1.4150 (645M)
USD/JPY: 150.00 (450M), 151.00 (320M), 151.50 (250M), 151.90-152.00 (1.1BLN)
CFTC Data As Of 6/12/24
Equity fund managers cut S&P 500 CME net long position by 7,148 contracts to 1,096,911
Equity fund speculators increase S&P 500 CME net short position by 59,926 contracts to 370,331
Speculators increase CBOT US Treasury Bonds futures net short position by 11,361 contracts to 58,775
Speculators trim CBOT US 2-year Treasury futures net short position by 31,747 contracts to 1,202,899
Speculators increase CBOT US 5-year Treasury futures net short position by 95,529 contracts to 1,861,100
Speculators trim CBOT US 10-year Treasury futures net short position by 34,702 contracts to 891,901
Euro net short position is -57,489 contracts
Japanese yen net long position is 2,334 contracts
Swiss franc posts net short position of -41,094 contracts
British pound net long position is 19,326 contracts
Bitcoin net short position is -1,595 contracts
Technical & Trade Views
SP500 Bullish Above Bearish Below 6000
Daily VWAP bearish
Weekly VWAP bullish
Below 5990 opens 5930
Primary support 5795
Primary objective 6100 - TARGET HIT NEW PATTERN EMERGING
EURUSD Bullish Above Bearish Below 1.0450
Daily VWAP bullish
Weekly VWAP bearish
Above 1.0590 opens 1.0728
Primary resistance 1.0950
Primary objective 1.0728
GBPUSD Bullish Above Bearish Below 1.26
Daily VWAP bullish
Weekly VWAP bearish
Above 1.2760 opens 1.2859
Primary resistance 1.3050
Primary objective 1.2859
USDJPY Bullish Above Bearish Below 154
Daily VWAP bullish
Weekly VWAP bearish
Below 150 opens 148
Primary support 150
Primary objective is 157.50
XAUUSD Bullish Above Bearish Below 2600
Daily VWAP bullish
Weekly VWAP bearish
Below 2530 opens 2467
Primary support 2530
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 92000
Daily VWAP bullish
Weekly VWAP bullish
Below 91000 opens 87500
Primary support is 85000
Primary objective is 100,000 TARGET HIT NEW PATTERN EMERGING
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!