Daily Market Outlook, December 4, 2024
Munnelly’s Macro Minute...
"Political Turmoil Front & Center, As European Markets Await French Confidence Vote”
Asian markets declined following South Korea's political turmoil, triggered by a brief declaration of martial law that unsettled investors. The MSCI Asia Pacific Index fell by 0.3%, while the Kospi Index dropped as much as 2.3%. Japanese shares remained stable, while those in mainland China dipped. The Won appreciated after a decline in offshore trading. The unexpected declaration of martial law by South Korean President Yoon Suk Yeol late Tuesday, later rescinded, has thrown the nation into political turmoil, prompting calls for his impeachment by the opposition. The uncertainty surrounding this significant economy, a key player in global trade, has increased investor apprehension in Asia, especially with Trump's potential return and China's economic challenges dampening sentiment. Oil prices have stabilised after experiencing the largest increase in over two weeks. Gold prices steadied after a rise on Tuesday, driven by the political instability in South Korea and France, which heightened demand for safe-haven assets.
This morning, the focus of political unrest monitoring has shifted to Europe as French lawmakers prepare to vote on no-confidence motions on Wednesday, a move that could potentially topple the unstable coalition government. French bond futures are under pressure, as are European futures, while the euro hovers close to a two-year low reached in November, just ahead of the critical vote for the eurozone's second-largest economy. PMI data from the region is expected to shed more light on the economic situation. Investors have reacted negatively to French assets amid the political crisis, with the gap between French bonds and the German benchmark widening further and a sell-off in the euro gaining momentum. Since President Emmanuel Macron called for snap elections in early June, France's CAC 40 has fallen nearly 10%, making it the biggest loser among major EU economies. The single currency has also declined by nearly 4% during the same timeframe.
Meanwhile, market expectations for ECB easing have been shifting towards a gradual approach. After previously anticipating significant cuts, the likelihood of a 50bp reduction in the next two meetings has decreased, while the chances of a 25bp cut in April and June have risen. Long-term risks like political instability, an ongoing economic slowdown, and geopolitical threats influence this change. ECB officials, including President Lagarde and Vice President Guindos, advocate for a data-dependent, gradual easing strategy, with even dovish members not supporting large cuts. Consequently, recent ESTR rate movements align with the ECB's gradualist communication, suggesting this trend may persist.
Overnight Newswire Updates of Note
French PM Barnier Makes Effort To Prevent Government Collapse
Defiant Macron: Won’t Resign, Doubles Down On Barnier’s Survival
S. Korean Opposition Seeks To Impeach Yoon For Treason
Japan DPP’s Tamaki Temporarily Steps Down As Head Over Scandal
Australia’s Economic Growth Tepid In Challenge For RBA
Aussie Stays Heavy Below 0.6450 Amid Weak Australian GDP
China's Caixin Services Activity Expansion Eases In Nov
China’s Trade Reprisals May Extend To Minerals Like Rare Earths
Fed Policymakers Steer Clear Of December Rate-Cut Guidance
Traders Eye NFP Data; Trump’s Next May Matter More
Salesforce Shares Rise; Earnings Beat On Revenue, Q4 Guidance
US Debt Ceiling To Over Complicate Fed’s Balance-Sheet Runoff
Bundesbank Chief Seeks Softer Debt Brake To Ramp Up Investment
(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: 1.0400 (1.8BLN), 1.0425 (560M), 1.0450 (830M), 1.0465-75 (538M),
1.0490 (550M), 1.0525 (1.9BLN), 1.0530-40 (773M), 1.0575-90 (1.5BLN)
USD/CHF: 0.8800 (594M), 0.8900-10 (856M)
EUR/GBP: 0.8320-30 (645M)
GBP/USD: 1.2500 (550M), 1.2600 (423M), 1.2735 (298M)
AUD/USD: 0.6440-50 (1.7BLN), 0.6500 (1.3BLN), 0.6550 (650M)
EUR/AUD: 1.6400 (750M). USD/CAD: 1.4045-55 (695M)
USD/JPY: 148.00 (370M), 150.00 (452M), 150.40 (245M)
151.00 (250M), 151.15-25 (930M)
CFTC Data As Of 29/11/24
Equity fund managers raise S&P 500 CME net long position by 60 contracts to 1,079,539
Equity fund speculators trim S&P 500 CME net short position by 29,885 contracts to 258,924
Euro net short position is -42,557 contracts
Japanese yen net short position is -46,868 contracts
Swiss franc posts net short position of -37,071
British pound net long position is 40,315
Bitcoin net short position is -2,084 contracts
Speculators trim CBOT US Treasury bonds futures net short position by 6,123 contracts to 35,645
Speculators increase CBOT US 10-year Treasury futures net short position by 91,701 contracts to 907,502
Speculators increase CBOT US 5-year Treasury futures net short position by 113,816 contracts to 1,983,026
Speculators increase CBOT US 2-year Treasury futures net short position by 23,473 contracts to 1,447,344
Technical & Trade Views
SP500 Bullish Above Bearish Below 6000
Daily VWAP bullish
Weekly VWAP bullish
Below 5990 opens 5930
Primary support 5795
Primary objective 6100
EURUSD Bullish Above Bearish Below 1.0450
Daily VWAP bearish
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 bearish
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 bearish
Weekly VWAP bullish
Below 2530 opens 2467
Primary support 2530
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 92000
Daily VWAP bearish
Weekly VWAP bullish
Below 91000 opens 87500
Primary support is 85000
Primary objective is 100,000
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!