Weekly market update - 28th of Novembver 2023
Written and accurate as at: Nov 28, 2023 Current Stats & Facts
U.S. Market Surges While Australia Faces Challenges
Last week saw a Thanksgiving feast for market bulls in the United States, marking a notable surge in the S&P 500 by 1% and an impressive 8.9% rise month-to-date. This upswing followed the latest Consumer Price Index (CPI) figures, suggesting a robust performance in the U.S. markets. Several factors contributed to this surge, including dovish signals from the U.S. Federal Reserve, a seasonal uptick, big tech companies' strong performance, and systematic investors' positioning.
However, despite the optimism in the U.S., the Australian market still needs to mirror this trend. The ASX experienced a slight dip of 0.1%. This contrast underscores the divergent monetary policy paths and inflation outlooks between the U.S. and Australia, highlighted by recent comments from RBA Governor Michelle Bullock.
The Federal Reserve's Outlook
The U.S. Federal Reserve's recent minutes revealed a cautious stance towards future rate hikes, suggesting a dovish outlook. The probability of a rate cut by mid-2024 has jumped significantly, now above 60%. However, while the U.S. Treasury yields remained unchanged, the yield curve's further inversion sparked debates about its reliability as a recession indicator.
U.S. Economic Indicators
Most U.S. economic data continue to support the Fed's dovish stance. For instance, October saw a decline in durable goods orders, with a notable drop in aircraft orders. Interestingly, the University of Michigan survey indicated a spike in inflation expectations, adding a twist to the overall economic narrative.
Global Equities and U.S. Market Prospects
Global equities experienced a positive November, with signs indicating potential for further growth. A combination of declining core inflation and rising rate cut expectations have bolstered U.S. market confidence. The Leading Indicators index and initial Black Friday sales data depict potential economic recovery.
The Reserve Bank of Australia's Stance
In contrast to the U.S., the Reserve Bank of Australia (RBA) seems set on a different course. Expectations for a February rate hike have increased, and Governor Bullock's recent speech signals a hawkish approach, emphasising the domestic nature of Australia's inflation challenges.
Commodities and the Global Economy
The global commodities market presents a mixed bag. While iron ore prices have seen an uptick, oil prices experienced a quieter week. Lithium prices continue to decline amidst weak demand and rising inventories. Meanwhile, the Eurozone awaits its inflation data, and China is implementing measures to bolster its construction sector.