Daily Market Outlook - Monday, Nov. 25

By Patrick Munnelly of Tickmill

Monday, November 25, 2024 4:34 AM EST

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The market's response to fund manager Scott Bessent's selection as the next U.S. Treasury Secretary has dominated Asian trade. Asian markets are trading mostly higher on Monday, buoyed by the positive performance on Wall Street on Friday, with significant gains in Japan, Indonesia, and South Korea. The general investor sentiment is satisfaction that Bessant is a well-known candidate rather than an unknown one. Bessent's fiscally conservative rhetoric has pushed 10-year Treasury yields lower, but it is unclear if he will be able to reduce deficits while extending tax cuts that are about to expire. He has mentioned reducing spending and boosting economic growth in order to address the massive amount of U.S. debt and bring the budget deficit down to 3% of GDP. Critics would point out that the United States has seen robust growth for a long time and that the deficit has only become bigger, and that the amount of discretionary spending that may be reduced is insignificant when compared to necessities like Medicare and defence. Though the tariff levels stated, like 60% on Chinese goods, were "maximalist" stances that might be softened, Bessent has advocated for tariffs and suggested that they be "layered in gradually." In an apparent attempt to counter President-elect Donald Trump's prior experiment with devaluation as a means of reducing trade deficits, he has also expressed support for a strong dollar. With markets fully priced for a quarter-point cut from the ECB next month and implying a nearly 58% possibility that it will loosen by a full 50 basis points on December 12, the dollar has been supported by the difference in economic performance between the U.S. and Europe. The likelihood of a rate cut in December has decreased from 70% a month ago to 52%, indicating that bets on the Fed have shifted in the opposite direction. By the end of 2025, the market has only factored in 65 basis points of Fed easing, whereas the ECB has factored in 154 basis points.

This week's key events include U.S. inflation data that will further shape Federal Reserve rate expectations and China's official PMIs. While trading may slow ahead of the Thanksgiving holiday, there is a busy U.S. data calendar, including consumer confidence, new home sales, and the FOMC minutes. Significant releases also include GDP, personal income, and the Fed's preferred inflation gauge, the core PCE price index. Reactions to President-elect Trump's Treasury secretary nomination will be monitored. The RBNZ is widely expected to cut rates, and China's central bank is likely to hold its medium-term lending facility rate. Japanese data will provide a broad snapshot of the economy, while the euro zone and UK have a relatively light schedule. Australia's CPI and Canada's GDP are also due.

Overnight Newswire Updates of Note

German Ifo Morale Set For Slight Dip After Trump Win
China Keeps MLF Rate Unchanged For Second Month
Shadow Board Favours 50bps RBNZ Rate Cut This Week
NZ Retail Spending Slows Again, Pointing To Recession
Fed Survey Finds Inflation Risk Fading; Debt, Trade Wars Rise
Ken Griffin: Wary Of Trump’s Tax-Cut And Tariff Agenda
Trump Picks Scott Bessent As Treasury Secretary
Trump Wants Deals On Ukraine And Israel
Axios: Israel, Lebanon On Cusp Of Ceasefire Deal
Gold Prices Ease From A Three-Week Peak On Profit-Taking
Bitcoin’s Rally Stalls After Nearing The Historic $100K Level
Amazon’s Chip Making Plan To Rival Nvidia In AI Chips
UniCredit Makes Offer For Italian Rival Banco BPM

(Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0425 (2.2BLN), 1.0435-40 (2.2BLN), 1.0470 (808M),
1.0485 (1.4BLN), 1.0490-1.0500 (820M), 1.0550-55 (408M), 1.0600 (1.2BLN)
EUR/CHF: 0.9395-0.9400 (314M). EUR/GBP: 0.8300 (543M)
GBP/USD: 1.2645-50 (434M), 1.2700 (444M)
AUD/USD: 0.6530-40 (441M)
NZD/USD: 0.6000 (1.8BLN)
USD/CAD: 1.3925 (550M)1.4015 (485M)
USD/JPY: 156.50 (762M)

CFTC Data As Of 22/11/24

Equity fund managers raise S&P 500 CME net long position by 60 contracts to 1,079,539
Equity fund speculators trim S&P 500 CME net short position by 29,885 contracts to 258,924
Euro net short position is -42,557 contracts
Japanese yen net short position is -46,868 contracts
Swiss franc posts net short position of -37,071
British pound net long position is 40,315
Bitcoin net short position is -2,084 contracts
Speculators trim CBOT US Treasury bonds futures net short position by 6,123 contracts to 35,645
Speculators increase CBOT US 10-year Treasury futures net short position by 91,701 contracts to 907,502
Speculators increase CBOT US 5-year Treasury futures net short position by 113,816 contracts to 1,983,026
Speculators increase CBOT US 2-year Treasury futures net short position by 23,473 contracts to 1,447,344