Daily Market Outlook - Thursday, Nov. 16

By Patrick Munnelly of Tickmill

Thursday, November 16, 2023 5:00 AM EST

Stock Exchange, Courses, Shares, Trading, Forex

Image Source: Pixabay

Asia - Stocks experienced a mixed performance, influenced by the choppy trading in the U.S. and a waning of recent data-driven momentum. The Nikkei 225, despite better-than-expected exports and machinery orders, saw a 0.1% decline as investors opted to book profits. in Hong Kong, the Hang Seng fell by 1.4%, and the Shanghai Composite dipped by 1.5%. These declines were attributed to mixed tech earnings and the aftermath of the Biden-Xi meeting. The rhetoric from the meeting was described as constructive and productive, with both leaders agreeing to restart cooperation on counter-narcotics and establish forums for military-to-military contact. However, reports also noted that President Biden referred to President Xi as a dictator and raised concerns about China's human rights abuses in Xinjiang, Tibet, and Hong Kong. Biden emphasized that the U.S. would take action to prevent its technology from being used to undermine its security. The nuanced outcomes of the Biden-Xi meeting, coupled with tech earnings and global economic considerations, contributed to the mixed performance in the Asia-Pacific markets.

Europe - This morning, there are no major data releases in the UK or Eurozone. Sterling markets are expected to continue digesting yesterday's lower-than-expected Consumer Price Index (CPI) inflation data, influenced by the soft U.S. CPI figures the day before. Financial markets are currently anticipating first rate cuts by the Bank of England, the Federal Reserve, and the European Central Bank around the middle of next year. It remains to be seen whether there will be any pushback against these expectations, as central banks have not definitively ruled out further tightening. Many policymakers have previously emphasized that it is too early to consider rate cuts. Several central bank rate-setters are scheduled to appear today. However, many, including ECB President Lagarde and the Bank of England's Ramsden, are speaking at a financial stability conference, and it is uncertain if they will discuss near-term prospects for monetary policy.

US - Stateside, In terms of data, US industrial production is expected to have declined in October, and the Philadelphia Fed manufacturing survey is forecasted to have remained weak in November. Yesterday's retail sales data also showed a slowdown in spending, indicating a moderation in growth in Q4 after a strong third quarter. The Federal Reserve speakers scheduled for today include Fed's Williams, Waller, Barr, Cook, and Mester. Their speeches may provide insights into the Fed's current stance on monetary policy, economic conditions, and their outlook for the future. Investors and analysts will closely watch these speeches for any hints or signals about potential policy adjustments by the central bank in response to the changing economic landscape.

FX Positioning & Sentiment

The demand for USD put options increased after the October NFP data and the U.S. CPI miss. Risk reversals showed a preference for USD puts over calls against currencies such as EUR, GBP, and AUD. USD/CNH 1-month expiry risk reversals flipped to USD puts from calls, indicating fear of USD/CNH losses. USD/JPY option flows were dominated by sellers. AUD/USD realized volatility outperformed implied volatility and maintained a long volatility bias. G10 FX is expected to stay within familiar Q4 ranges, limiting any potential FX implied volatility gains.