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At Monday's stock market close, the Dow Jones Industrial Average (US30) was down by 0.16%, while the S&P 500 Index (US500) was down by 0.20%. The Nasdaq Technology Index (US100) closed negative 0.07% on Monday.

Monday's US economic news was weaker than expected and was bearish for both the dollar and the broad equity market. October new home sales fell by 5.6% m/m to 679.000, which was weaker than expectations of 721.000. In addition, the Dallas Fed's November forecast for overall business activity in the manufacturing sector unexpectedly fell by 0.7 to a 4-month low of minus 19.9, which was weaker than expectations for an increase to minus 16.0. In terms of technical analysis, a divergence has formed in the US stock indices, indicating an impending correction.

Shopify (SHOP) shares rose by more than 3% yesterday after the company reported that merchants set a Black Friday record with sales totaling $4.1 billion. Adobe Analytics (ADBE) raised its Cyber Monday sales forecast to $12.4 billion from an initial forecast of $12 billion after reporting that US shoppers spent a record $9.8 billion online on Black Friday. Additionally, Salesforce Inc. (CRM) data showed that US online sales on Black Friday were up by 9% year-over-year.

As of today, markets are forecasting a 6% probability of a 25 bps rate hike at the next FOMC meeting on December 12-13 and a 12% probability of a 25 bps rate hike at the January 30-31, 2024 FOMC meeting. Markets also factor in a 15% probability of a minus 25 bps rate cut at the March 19-20, 2024 FOMC meeting and a 57% probability of the same 25 bps rate cut at the April 30-May 1, 2024 FOMC meeting.

The Canadian dollar gained bullish momentum, helped by a better-than-expected retail sales report and a rebound in risk sentiment in the broader market. Canadian retail sales for September rose by 0.6% m/m vs. expectations of 0.0% and a previous decline of 0.1%. Retail sales, excluding automakers, rose by 0.2% vs. a previous decline of 0.2%. The Canadian dollar is a commodity currency and is well positioned for further strength if OPEC+ countries agree this week on additional production cuts.

Equity markets in Europe were mostly down yesterday. Germany's DAX (DE40) was down by 0.39%, France's CAC 40 (FR40) decreased by 0.37% on Monday, Spain's IBEX 35 (ES35) fell by 0.03%, and the UK's FTSE 100 (UK100) closed negative 0.37%.

Bank of England Governor Andrew Bailey suggested that an interest rate cut is unlikely in the foreseeable future and warned that the second half of the fight against inflation will be hard work. Officials, including chief economist Huw Pill, have emphasized the risk of continued domestic price pressures, as seen in indicators such as wage growth and service sector inflation. As recently as early last week, markets were leaning towards a rate cut next June as the economic outlook deteriorated. Now, they are not considering a rate cut from the current 5.25% until August 2024.

Crude oil prices settled at mixed levels on Monday. Disagreements among OPEC+ representatives over oil production levels have caused the group to postpone this Thursday's meeting and are weighing on oil prices. Saudi Arabia, which has unilaterally cut oil production by 1.0 million bpd since July, is now asking other OPEC+ members to lower oil production levels, which has prompted a backlash from some African oil producers, including Angola and Nigeria. OPEC+ delegates have said they are moving toward a compromise but have yet to reach an agreement.

Asian markets were mostly down yesterday. Japan's Nikkei 225 (JP225) was down by 0.53% for the day, China's FTSE China A50 (CHA50) lost 1.57%, Hong Kong's Hang Seng (HK50) fell by 0.20% on Monday, and Australia's ASX 200 (AU200) was negative 0.76%.

Falling retail sales in Australia have raised hopes of weaker inflation, which may prompt the Reserve Bank to take a less hawkish stance. RBA Governor Michele Bullock said Australian inflation is largely replicating overseas trends and that the bank needs to be more cautious in raising rates to reduce price pressures.

Hong Kong's exports rose last month for the first time in more than a year on improved trade with mainland China, lending some optimism to the financial hub's economic outlook. Overseas shipments rose by 1.4% year-on-year to HK $379.9 billion ($48.8 billion) in October. This marked the first month of export growth since April 2022. Imports rose by 2.6% year-on-year to HK $405.6 billion. This was the first increase since June 2022. The trade deficit amounted to HK $25.8 billion. Hong Kong recently downgraded its economic growth forecast for this year, indicating that the financial center still faces tough times amid a faltering post-pandemic recovery. Gross domestic product is expected to grow by 3.2% in 2023, down from the previous forecast that saw the economy growing between 4% and 5%.

Main market quotes:

• S&P 500 (US500) 4,550.42 −8.92 (−0.20%)
• Dow Jones (US30) 35,333.40 −56.75 (−0.16%)
• DAX (DE40) 15,966.37 −63.12 (−0.39%)
• FTSE 100 (UK100) 7,460.70 −27.50 (−0.37%)
• USD index 103.19 −0.21 (−0.20%)
   

Important events for today:

• Australia Retail Sales (m/m) at 02:30 (GMT+2);
• Japan BoJ Core CPI (m/m) at 07:00 (GMT+2);
• US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• US FOMC Member Bowman Speaks at 17:45 (GMT+2);
• Eurozone ECB President Lagarde Speaks (m/m) at 18:00 (GMT+2);
• US FOMC Member Barr Speaks at 20:05 (GMT+2).

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