Global stocks continue to dominate in November, while oil prices face uncertainty due to OPEC deliberations. Yesterday, world equity markets extended their impressive performance, marking their best month since the breakthroughs in Covid vaccines in late 2020. Amidst Europe’s absorption of another far-right election upset, oil prices experienced a decline as OPEC+ postponed its weekend meeting. Despite reduced trading volumes due to the US Thanksgiving holiday, traders found plenty to keep them engaged.
Positive PMI data from Germany, France, and the UK contributed to slight increases in the euro, sterling, and bond yields. However, Sweden’s crown experienced a drop as its central bank decided to maintain interest rates, while Dutch bank stocks declined following the victory of far-right populist Geert Wilders in the elections.
Robert Alster, Chief Investment Officer at Close Brothers Asset Management, believes that the PMI beats are insufficient to indicate an economic turnaround, emphasizing that Germany and France’s economic activities still contracted. Alster also expressed surprise over Wilders’ win in Holland and expects the market to wait and see the implications of a coalition government.
Wilders, a critic of Islam and a supporter of Hungary’s eurosceptic Prime Minister Viktor Orban, has pledged to halt immigration, reduce Dutch payments to the EU, and prevent the entry of new members like Ukraine. Surpassing expectations, his Freedom Party secured 37 out of 150 seats, surpassing both the joint Labour/Green ticket and the conservative People’s Party for Freedom and Democracy (VVD), which is currently led by outgoing Prime Minister Mark Rutte.
Meanwhile, traders awaited the release of the European Central Bank’s minutes from their latest meeting, which revealed cautious optimism regarding inflation-fighting efforts. The minutes indicated that the disinflation process was progressing as anticipated, albeit somewhat faster.
Turkiye’s central bank also demonstrated its commitment to combating inflation by significantly increasing its policy rates to 40%. This decision marks a remarkable rise from the 8.5% rate observed in early June before President Tayyip Erdogan’s re-election.
In the US, traders prepared for Thanksgiving celebrations, temporarily halting their activities. Overnight in Asia, attention was focused on potential measures aimed at aiding China’s struggling property market. The MSCI Asia-Pacific shares outside Japan rose by 0.3% in light trading, with Japanese markets also closed for the holiday. Chinese real estate stocks experienced a 3% surge following reports that Country Garden, burdened with debt, might receive support.
On a different note, a major wealth management firm that heavily invested in the property market revealed potential insolvency, reporting liabilities of up to $64 billion. Chinese government advisers are expected to propose economic growth targets of 4.5% to 5.5% for next year during the annual policymakers’ meeting.
In terms of global equities, Wall Street’s S&P 500 is nearing a new high for 2023, with both the S&P 500 and MSCI’s all-country world index recording more than an 8% increase for the month. The MSCI world index’s performance is the strongest since November 2020, when optimism surrounding Covid-19 vaccines caused significant market volatility.
Germany’s benchmark 10-year bund, the leading indicator for Europe, is projected to close about 5 bps higher at 2.62%. Last month, it briefly touched 3%. Similarly, 10-year US Treasuries currently stand at 4.4%, compared to the October peak of 5%.
The euro’s rebound pushed the dollar index back toward a 2.5-month low, having deviated from this level on Wednesday after a greater-than-expected decrease in the number of Americans filing new claims for unemployment benefits.
Despite initial setbacks suffered on Wednesday when UK Finance Minister Jeremy Hunt presented tax cuts in his autumn budget, the pound recovered, although Hunt also revised the economic outlook to reflect a more sluggish growth trajectory than previously expected.
In the commodity markets, news of OPEC+’s postponed meeting caused Brent and US WTI oil prices to drop by as much as 2% to $80.70 and $76.03 per barrel, respectively. The delay has fueled speculations that the group might not cut output to the extent originally anticipated.
Cryptocurrency buyers are still digesting the news of Binance chief Changpeng Zhao stepping down and pleading guilty to violations of US anti-money laundering laws as part of a $4 billion settlement. Following a nearly 5% increase on Wednesday, Bitcoin declined by 0.8% to $37,117.
In conclusion, global stocks are poised for another strong month, while oil prices face concerns due to the delay in the OPEC+ meeting. Europe grapples with the aftermath of a far-right election victory, and economic data from Germany, France, and the UK offer some encouragement but reinforce the need for caution. The global market outlook remains optimistic, with US indices approaching new highs and Asian markets showing signs of potential support for China’s property market. As investors await further developments, fluctuations in currencies, bonds, and cryptocurrency markets continue to influence trading decisions.
