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At yesterday's stock market close, the Dow Jones Index (US30) decreased by 0.19%, while the S&P 500 Index (US500) lost 0.39%. The Nasdaq Technology Index (US100) closed down by 0.58%. The broad market declined yesterday despite economic data out of the US on Wednesday proving dovish for Fed policy. The November US employment change from ADP rose by 103,000, weaker than expectations of 130,000. The Q3 nonfarm labor productivity rose to 5.2% from 4.7%, better than expectations of 4.9%, and became the highest indicator in three years.

The Bank of Canada (BoC) on Wednesday kept its key overnight rate unchanged at 5% and left open the possibility of another increase, saying it remains concerned about inflation, recognizing slowing economic growth and overall weakening prices. Canada's central bank last raised rates by a quarter-point in July and has left them at current levels three times since. The accompanying statement said the Governing Council remains concerned about the risks to the inflation outlook and remains prepared to raise the discount rate further if necessary. In October, the Bank of Canada projected that inflation would hover around 3.5% through mid-2024 before falling back to the 2% target at the end of 2025. As of today, inflation is at 3.1%. Last month, BoC chief Macklem said interest rates may have peaked.

Equity markets in Europe were mostly up yesterday. Germany's DAX (DE40) rose by 0.75%, France's CAC 40 (FR40) gained 0.66% on Wednesday, Spain's IBEX 35 (ES35) jumped by 0.19%, and the UK's FTSE 100 (UK100) closed positive by 0.34%. Yesterday, ECB Governing Council representatives Kazaks and Kazimir denied speculation that the ECB will cut interest rates early next year. Meanwhile, Deutsche Bank said on Wednesday it expects the European Central Bank to cut interest rates by 150 basis points (bps) next year, 50 bps more than its previous forecast, as core inflation shows steady signs of slowing.

In its semi-annual financial stability report, the Bank of England noted that BoE officials recognize signs that the economy is slowing but are not thinking about cutting rates because of signs that inflationary pressures will remain strong. Among the risks noted by the Bank of England are turmoil in China's real estate market, which could worsen, and tensions in the Middle East, which could drive up oil prices and hurt economic growth. Over the past few days, UK financial markets have raised bets on a soon-to-be rate cut by the Bank of England following a similar shift in expectations from the European Central Bank and the US Federal Reserve, and now see the first quarter-point rate cut in May or June next year.

The price of WTI crude oil fell more than 3%, hitting a 5-month low. Investors' doubts about whether the OPEC+ agreement to cut oil production will be honored are weighing on prices. At the same time, excessive global supplies of crude oil put additional pressure on prices. It should be noted that the drop in oil occurred despite a larger-than-expected reduction in weekly crude oil inventories. This suggests that there is an oversupply and that demand for fuel is declining.

Asian markets were predominantly down yesterday. Japan's Nikkei 225 (JP225) jumped by 2.04%, China's FTSE China A50 (CHA50) decreased by 1.88%, Hong Kong's Hang Seng (HK50) ended the day up by 0.83%, and Australia's ASX 200 (AU200) ended Wednesday positive by 1.65%. Most Asian stocks fell on Thursday as lingering concerns over a slowdown in the Chinese economy led to a deterioration in sentiment, while Japanese stocks fell sharply after Bank of Japan Governor Kazuo Ueda discussed options for a potential move away from negative interest rates.

Moody's negative outlook on China has intensified Beijing's struggles, raising pressure on the government, which is required to take stronger measures to prop up falling stocks and stabilize the yuan amid deteriorating investor confidence. On Wednesday, the official Shanghai Securities News reported that China's securities watchdog will push through reforms to attract more long-term capital into the market in an apparent bid to calm the market. Chinese government advisers are expected to call for more stimulus to the economy at the annual "Central Economic Work Conference" to be held in the next week or two. Trade data for November showed a slight improvement in the Chinese economy.

Australia's ASX 200 Index (AU200) fell by 0.4 % on Thursday as the country's trade surplus rose less than expected in October, with exports, especially to China, barely improving.

• S&P 500 (US500) 4,549.34 −17.84 (−0.39%)
• Dow Jones (US30) 36,054.43 −70.13 (−0.19%)
• DAX (DE40)  16,656.44 +123.33 (+0.75%)
• FTSE 100 (UK100) 7,515.38 +25.54 (+0.34%)
• USD Index  104.21 +0.16 (+0.15%)
   

News feed for 2023.12.07:

• Australia Trade Balance (m/m) at 02:30 (GMT+2);
• China Trade Balance (m/m) at 05:00 (GMT+2);
• Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
• German Industrial Production (m/m) at 09:00 (GMT+2);
• Eurozone GDP (q/q) at 12:00 (GMT+2);
• US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• US Natural Gas Storage (w/w) at 17:30 (GMT+2).

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