Pre-market data subdued ahead of more retail earnings releases

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

Central bankers’ speeches on the need for further monetary tightening caused some concern this week, resulting in a mixed close for financial markets. Volatility could resurface at any time as the spectre of a global recession still looms and financial markets have risen sharply in recent months. The major averages each posted an up-day but a down-week in the previous trading session. The Dow rose nearly 200 points, or 0.6%, while the S&P climbed 0.5% and the Nasdaq Composite finished just 0.01% above the flat line. Futures tied to the broad market index were lower by 0.1%. Dow Jones Industrial Average futures were lower by 38 points, or 0.1%, as Nasdaq 100 futures hovered at the flat line. 

Summary

• Investors will be able to take the temperature of the major economies this Wednesday, when the November PMI indicators for manufacturing and services are released. On the same day, they will learn about the US durable goods orders and the minutes of the last Fed meeting. This Thursday, while Americans celebrate Thanksgiving, European markets will be monitoring the Ifo business climate index in Germany.   
• The yield curve is still inverted in the US, a sign that the market is anticipating a recession, but this is not new. What has changed a bit is that the 10-year has seen its yield stay around 3.78% after its sharp decline the week before. If our interpretation is correct, it is that investors believe the Fed, despite its recent warnings, is approaching a pivot. In parallel, the Bund yield fell back to just below 2% on 10 years, while the French OAT is at 2.46%.   
• Morgan Stanley’s Mike Wilson predicts the S&P 500′s bottom, calling it a ‘terrific buying opportunity’. 
• After its recent sharp decline, the dollar seems to have found a support zone, in particular against the euro at USD 1.0337. Meanwhile, the British pound has improved its positions. The Cable is at USD 1.1895. The euro also regained some ground against the Swiss franc, at CHF 0.9863. 
• European markets are heading for a lower open on Monday as investors continue to assess inflationary pressures and the possible trajectory of central bank interest rates. 
• China stocks fell on Monday as domestic COVID-19 outbreaks dashed some investors’ hopes of an early easing in strict pandemic curbs, but the surge in infections lifted some healthcare shares. On a positive note, Chinese real estate stock surged this month, although analysts warn of a ‘weak reality’ versus high expectations. 
• Oil prices gave up some ground this week. Prices were thus more oriented by the forecasts of OPEC, which lowered its oil demand forecasts once again due to the slow reopening of China, still penalized by its zero-Covid policy. The cartel’s statement, which painted a bleak picture of the global economy, has weighed on investor sentiment. 
• The European Union will ban Russian oil product imports, on which it relies heavily for its diesel, by the 5^th February. That will follow a ban on Russian crude taking effect in December. 
• Base metal prices are catching their breath after their strong rally since the beginning of the month. All eyes are on China and its new measures to stimulate demand for metals.   
• After taking a -22% drop last week, bitcoin has stabilized this week around the 16500-dollar mark at the time of writing. FTX’s fall last week continues to worry economic agents exposed to the crypto-currency market, as evidenced by liquidity withdrawals on exchange platforms.