The conflict in Israel was seeing some movement this week with the Israeli government agreeing with Hamas on a four-day fighting pause. A total of 50 hostages will be released from Gaza as well as 150 Palestinians held in Israel. Humanitarian aid will also be allowed into Gaza. While the agreement marks a change in the path of war, it did not have clear implications for financial markets as the fighting is set to resume within days.
Looking beyond geopolitical events, traders examined the minutes of the Federal Reserve’s (Fed) last monetary policy meeting, which was released on Tuesday, only to find a familiar line about the careful approach the central bank intends to take in the coming months. The minutes of the Federal Open Market Committee (FOMC) from 31 October to 1 November showed agreement that further tightening may be necessary should inflation increase again. However, the US dollar and Treasuries moved little after the release.
Central bankers on the other side of the Atlantic also repeated their familiar lines on Tuesday and did little to excite markets. European Central Bank (ECB) President Christine Lagarde said its too early to declare victory over inflation and the bank needs time to see how quickly inflation continues to come down. In October, inflation in the euro area fell to 2.9% on an annualised basis, down from 4.3% the previous month and not far above the ECB’s 2% target. Bank of England Governor Andrew Bailey was more explicit, saying it was much too early to begin thinking about rate cuts. In the UK, inflation slowed to 4.6% in October.
Canada became on Tuesday the next country to post inflation decelerating at a faster pace than the market had previously expected. Inflation in October fell to 3.1% on an annual basis, down from 3.8% the previous month. While that number is still above the Bank of Canada’s 2% inflation target, some investors saw the slower pace of price increases as the final evidence that Canada’s central bank will end its rate hiking cycle and possibly even begin lower rates from the 2-decade high of 5% in the first half of 2024.
Despite the central bank chatter, stock markets didn’t move too strongly Tuesday. Indices in New York were down just enough to show that the rally since the end of October has come to a clear end. The Dow Jones Industrial and the S&P 500 both lost 0.2%. The Nasdaq-100 dropped 0.6%.
In individual stocks on Wall Street, shares of Best Buy came under some pressure after the electronics retail company cut its full-year sales forecast. The electronics giant referred to difficult-to-predict consumer demand, which could mean the US economy is in for a weak holiday retail sales season. Nvidia stock was down nearly 1% despite releasing third-quarter earnings that beat market expectations. The company said that the ongoing battle between the US and China regarding chip imports would impact sales but that sales in other regions should compensate for the loss of Chinese business.
In individual stocks out of Europe, Siemens Energy dropped nearly 8% on Tuesday as the company held its capital markets day and said equipment defects at its wind turbine unit couldn’t be ruled out. Germany’s DAX ended Tuesday’s session roughly flat following the shock of the Bayer stock slump at the beginning of the week. The Euro Stoxx 50 finished Tuesday's session 0.2% lower.
Asian stock markets were mixed on Wednesday with no major losses or gains. In Tokyo, the Nikkei 225 closed up 0.2% and in South Korea, the Kospi gained 0.1%. In Australia, the S&P/ASX 200 lost 0.1%. Hong Kong's Hang Seng Index was down 0.2%, while the Shanghai Composite lost 0.6%.
Corporate news in focus: Q3 figures from Deere & Co.
Economic data in focus: European Central Bank Financial Stability Review (10:00 CET), UK Autumn Statement (11:00), US weekly initial jobless claims (14:30), US durable goods orders (14:30), University of Michigan Consumer Sentiment Index (16:00), weekly US EIA Petroleum Status Report (16:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.