Stock Markets

It was a week of gains for stocks, albeit moderate. The Dow Jones Industrial Average (DJIA) modestly rose by 0.65% while the DJ Total Stock Market Index rose by a heftier 1.08% although utilities underperformed the other sectors, slipping by 0.32%. The broader S&P 500 Index closely mirrored the Total Stock Market, advancing by 1.06%. The technology-heavy Nasdaq Stock Market Composite gained by 0.94% and the NYSE Composite climbed by 1.31% with all Russell Indexes up. The CBOE Volatility Index (VIX), an indicator of investor risk perception, moved slightly downward by 0.30%.

 The DJIA and the S&P 500 climbed to new all-time highs; for the latter, this marked the 12^th weekly advance out of the last 13 weeks. Overall gains were modest but relatively broad. The small-cap Russell 2000 Index remained almost 20% below its all-time intraday high. Investors’ attention focused on the growing stream of fourth-quarter earnings reports this week, given the lack of comments or speeches by Federal Reserve Officials ahead of the upcoming policy meeting. Included among the stocks that moved the market was Tesla, which plunged sharply after it missed both earnings and revenue estimates. Tesla also warned of slower growth in 2024. On the other hand, Netflix charted solid gains attributable to an unexpected increase in subscribers.

U.S. Economy

Over the week, the economic calendar was light, although two economic reports revealed data that continue to support the argument for a soft landing in the U.S. First, the S&P PMI data for both services and manufacturing indicated that these sectors were expanding in January, if barely. Second, fourth-quarter GDP growth came in at 3.3% and exceeded analysts’ expectations of a 2.0% growth rate. These data may be backward-looking, however, they continue to solidify the upward economic trend and confirm that the U.S. economy was not softening as the new year began. On the contrary, economic growth was seen to accelerate at the end of 2023. Furthermore, inflation showed signs of moderation at the same time the economy was strengthening.

Other developments worth mentioning include the 0.3% increase in December in the orders for nondefense capital goods excluding aircraft, which is widely considered as a proxy for business investment. The economy grew by 2.5% over the year as a whole, an increase from the 2022 growth rate of 1.9%. The core personal consumption expenditure (PCE) price index, which is the Fed’s preferred inflation metric, advanced by 2.0% year-on-year in the fourth quarter, in line with expectations and the Fed’s long-term target. Financial markets should be broadly supported by the “Goldilocks” outcome, referring to the better-than-expected growth simultaneous with easing inflation. Some downward pressure on interest rates should be evident at this point.

Metals and Mining

Gold investors face a challenging environment with the Federal Reserve continuing to chart a course that makes it difficult for the precious metal to gain bullish momentum. The most recent economic data suggests that while falling inflation may provide the Fed room to cut interest rates, the general economic health does not require them to. Gold is struggling to maintain its current levels, partly due to the report by the U.S. Commerce Department that personal consumption increased by 0.7% in December, significantly higher than expected. This confirms the trend suggested by previous data that retail sales activity was robust during the holiday season. However, one worrying aspect of the recent economic growth trend is that it is mostly funded by debt, bolstered by buy-now-pay-later schemes. This is unsustainable. Economists and analysts note that this is the final stage of consumption because consumers have burned through their earnings and inflation continues to erode their purchasing power. The value of holding safe-haven assets such as gold and silver may presently elude most investors, however, for those who are patient, these are the times that present the best opportunities.

The spot prices of precious metals were mixed for the week. Gold lost by 0.54%, dipping from its previous weekly close at $2,029.49 to this week’s close at $2,018.52 per troy ounce. Silver, on the other hand, rose by 0.80%, bringing its weekly close from last week’s $22.62 to this week’s $22.80 per troy ounce. Platinum gained by 1.37% from last week’s closing price of $903.27 to this week’s closing price of $915.68 per troy ounce. Palladium also gained, closing 1.02% higher from last week’s closing price of $950.61 to end this week at $960.31 per troy ounce. The three-month LME prices for base metals were generally up for the week. Copper gained by 2.60%, from the previous week’s price of $8,351.00 to this week’s price of $8,568.50 per metric ton. Zinc climbed by 4.79%, from its previous weekly close at $2,462.00 to the recent week’s close at $2,580.00 per metric ton. Aluminum realized a 3.35% gain, from last week’s close at $2,166.00 to this week’s close at $2,238.50 per metric ton. Tin advanced by 5.34% from last week’s close at $25,298.00 to end this week at $26,648.00 per metric ton.

Energy and Oil

Oil prices were boosted this week to their highest level for the year by the release of stronger-than-expected performance in the U.S. economy. The announcement of a 3.3% GDP growth for the fourth quarter surprised many analysts and investors. The bullish cause gained added momentum as a result of continuous Houthi strikes in the Red Sea and surging product freight rates. The White House has asked for China’s help to rein in the Houthi rebels attacking commercial tankers plying the Red Sea after two Maersk container ships were targeted this week despite the presence of U.S. warship escorts. China has been reaching out to Iran in an attempt to prevent further Yemeni attacks, but this has failed to ease geopolitical tensions. This week, Brent broke through the $80 per barrel threshold and reached $82 per barrel, which is sufficient for a major psychological price barrier to be overcome. This is a technical signal that oil prices may be expected to reach higher levels.

Natural Gas

For the report week that began Wednesday, January 17, and ended Wednesday, January 24, 2024, the Henry Hub spot price fell by $0.43 from $2.87 per million British thermal units (MMBtu) to $2.44/MMBtu. Regarding Henry Hub futures, the price of the February 2024 NYMEX contract decreased by $0.229, from $2.870/MMBtu at the beginning of the week to $2.641/MMBtu by the end of the report week. The price of the 12-month strip averaging February 2024 through January 2025 futures contracts declined by $0.145 to $2.815/MMBtu. International natural gas futures decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $1.01 to a weekly average of $9.49/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.71 to a weekly average of $8.92/MMBtu. In the week last year that corresponds to this report week (the week from January 18 to January 25, 2023), the prices were $22.42/MMBtu and $19.67 /MMBtu in East Asia and at the TTF, respectively.

World Markets

The pan-European STOXX Europe 600 Index closed the week higher by 3.11% on the back of encouraging corporate results and announcement of additional stimulus measures by China. Also contributing to improved market sentiment was the dovish outlook signaled by the European Central Bank (ECB) by leaving interest rates unchanged. Most major indexes in the region climbed. France’s CAC 40 Index surged by 3.56%, Germany’s DAX jumped by 2.45%, and Italy’s FTSE MIB advanced by 0.32%. The FTSE 100 Index of the U.K. climbed by 2.32%. Simultaneously, the European government bond yields declined. The yield on the benchmark 10-year German bond dipped as did the French and Swiss sovereign bonds of the same maturity. The ECB retained its key interest rates at the same level at record highs and repeated that it would continue to enforce its strict monetary policy “at sufficiently restrictive levels for as long as necessary” to bring inflation under control until it reaches the 2% target. The central bank stressed, however, that policy decisions would continue to be guided by economic and financial data as they develop.

Japanese equities declined this week. The Nikkei 225 Index fell by 0.6% while the broader TOPIX Index dropped by 0.5%. The Bank of Japan (BoJ) retained its ultra-accommodative stance and its forward guidance. However, Governor Kazuo Ueda emphasized the BoJ’s progress toward achieving sustained inflation, which raised expectations that a monetary policy shift is within sight. These hopes were somewhat tempered later in the week by a softer-than-forecasted Tokyo area inflation reading, a leading indicator for nationwide price trends. Influenced by ongoing speculation regarding the impending end of Japan’s negative interest rate policy, the yield on the 10-year Japanese government bond (JGB) rose to 0.71% from 0.66% at the end of the week previous. The yen strengthened to the high JPY 147 range from about JPY 148 the week before.  

 Chinese stocks rose after Beijing announced the implementation of forceful stimulus measures in support of the economy. The Shanghai Composite Index advanced by 2.75% while the blue-chip CSI 300 Index rose by 1.96%. The Hong Kong benchmark Hang Seng Index surged by 4.2%. The People’s Bank of China (PBOC) announced a cut in its reserve ratio requirement (RRR) by 0.50% or 50 basis points for most banks. The RRR cut will take effect on February 5 and shall mark the first cut in banks’ reserve this year. The bank also announced that it will lower interest rates by 0.25% or 25 basis points for refinancing and rediscounting beginning January 25, to support agriculture and small businesses. In 2023, the PBOC cut the RRR twice, the last cut being in September. After the PBOC kept its medium-term lending rates unchanged the week prior, Chinese banks maintained their one- and five-year loan prime rates at current rates, as expected. In other developments, regulators lifted the draft rules imposed on online games in late December, aimed at curbing spending and rewards. When they were first announced, the regulations eliminated almost US$80 billion in market value from some of China’s largest gaming companies due to investors fearing the likelihood of another crackdown on the sector.

The Week Ahead

Among the important economic data expected to be released this week are the results of the FOMC meeting and labor market data (nonfarm payrolls report, unemployment rate, and hourly wages for January).

Key Topics to Watch

• S&P Case-Shiller home price index (20 cities) for November
• Job openings for December
• Consumer confidence for January
• ADP employment for January
• Employment Cost Index for the Fourth Quarter
• Chicago Business Barometer (PMI) for January
• Fed interest rate decision
• Initial jobless claims for Jan. 27
• U.S. Productivity for the Fourth Quarter
• S&P U.S. manufacturing PMI (final) for January
• ISM manufacturing
• U.S. nonfarm payrolls for January
• U.S. unemployment rate for January
• U.S. hourly wages for January
• Hourly wages year-over-year
• Factory orders for December
• Consumer sentiment (final) for January

Markets Index Wrap-Up

Stock Markets

Thus far, despite a strong and optimistic start, markets in this new year have been subdued. Not surprisingly, this may be a technical consolidation after the very strong rally that took place in the final weeks of 2023. According to the Wall Street Journal (WSJ) Markets report, the Dow Jones Industrial Average (DJIA) gained by 0.72% while the Dow Jones Total Stock Market Index rose by 1.03%. The broad S&P 500 Index advanced by 1.17% and the technology-heavy Nasdaq Stock Market Composite surged ahead by 2.26%. The NYSE Composite went against the grain and instead declined by 0.42%. The CBOE Volatility (VIX) Index, which tracks investor risk perception, rose by 4.72%.  

Beneath the surface, some segments of the market, including the broader equal-weight S&P 500, small-cap stocks, and investment-grade bonds, appear to have come under some pressure in the first few weeks of 2024. Some sectors continue to remain more resilient such as technology and communication services, however, some defensive sectors, such as health care and consumer staples, continue to outperform. For the holiday-shortened week just ended (markets were closed on Monday in commemoration of Martin Luther King, Jr. Day), information technology stocks outperformed due to a rally in semiconductor shares. Particularly strong was artificial intelligence (AI) chip maker NVIDIA and its rival, Advanced Micro Devices (AMD). The fourth-quarter earnings reporting season is just beginning, with results from only 23 companies in the S&P 500 expected to be released in the coming week. Last Tuesday, shares of DJIA component Boeing plunged sharply following an analyst downgrade warning of possible delivery delays should regulators uncover more safety issues related to the company’s 737 MAX airliners. However, the stock recovered most of its decline towards the end of the week.

U.S. Economy

Investors demonstrated some uncertainty about the economy’s health when an index of manufacturing activity in the New York region took a dive and surprised on the downside, although these concerns later abated in the week. On the other hand, the retail sales numbers for December that were released on Wednesday exceeded expectations and suggested that consumption in the economy remained on solid footing, Retail sales climbed by 0.6% in October with online sales expanding by 1.5% to hit a new record peak. On Friday, a preliminary report issued by the University of Michigan showed a jump in its January index of consumer sentiment to reach its highest level in almost three years and by the most since 2005. This index also rose over the past two months by the greatest margin since 1991, suggesting that consumers believe that the uptrend in inflation has truly reversed.

Metals and Mining

The uncertainty in the direction the Federal Reserve will take regarding rate hikes (or cuts) will continue to dominate the financial markets and gold, in particular. Investors’ expectations of a potential rate cut have been sharply pared back by healthy economic data released this week, The data showed that holiday spending during December was highly robust, signaling that consumers continue to remain resilient to persistent inflation as well as the aggressive tightening policy of the Federal Reserve. This trend could continue, based on the results of the preliminary consumer sentiment survey by the University of Michigan showing that consumer sentiment rose to its highest level since July 2021. Simultaneously, one-year consumer inflation expectations have returned to pre-pandemic levels. These conditions do not suggest a bull market for gold anytime soon since investors expect that soft economic growth may force the Fed to cut interest rates despite inflation remaining above the 2% target.

Over the week, the spot price of precious metals modestly descended. Gold, priced at $2,049.06 at the end of the week prior, closed at $2,029.49 per troy ounce this week for a decline of 0.96%. Silver, which closed at $23.19 last week, ended this week at $22.62 per troy ounce, dipping by 2.46%. Platinum, the former weekly of which was at $911.64, closed this week at $903.27 per troy ounce for a drop of 0.92%. Palladium, which closed at $977.83 one week ago, ended at $950.61 per troy ounce this week for a loss of 2.78%.  The three-month LME prices for industrial metals ended the week mixed. Copper came from its closing price one week ago of $8,339.00 to close this week at $8,351.00 per metric ton for a modest gain of 0.14%. Zinc, which closed one week ago at $2,514.00, ended this week at $2,462.00 per metric ton for a slide of 2.07%. Aluminum closed last week at $2,219.50 and this week at $2,166.00 per metric ton to lock in a loss of 2.41%. Tin, which closed one week ago at $24,631.00, closed this week at $25,298.00 per metric ton, gaining 2.71%.

Energy and Oil

The conflict in the Middle East which began with the Hamas invasion of Israel has escalated, with Pakistan and Iran now exchanging missile attacks and further intensifying the geopolitical risk in the region. In addition, the cold snap in the U.S. has shut in a significant portion of Bakken output in what became the first U.S. supply disruption in many months. Exacerbating the effect of these supply concerns, an improvement in the demand sentiment is further contributing to the upward pressure on oil prices. The International Energy Agency (IEA) has adjusted its 2024 demand figure upward for the third time in a row to 1.24 million barrels per day (b/d). As a consequence, Brent has approached within range of the $80 per barrel mark before falling slightly back toward the $79 level. In the meantime, OPEC published its first monthly market report for the year. In the report, the group divulged its expectation that global oil demand growth would slow down to 1.85 million b/d but left its 2024 demand increase unchanged at 2.25 million b/d.

Natural Gas

For the report week from Wednesday, January 10, to Wednesday, January 17, 2024, the Henry Hub spot price fell by $0.36 from $3.23 per million British thermal units (MMBtu) to $2.87/MMBtu. The Henry Hub price reached a high of $13.08/MMBtu on Friday, the highest daily closing price since February 2021, indicating a run-up in prices observed across the country for that day. For the Henry Hub futures, the price of the February 2024 NYMEX contract decreased by $0.169, from $3.039/MMBtu at the start of the report week to $2.870/MMBtu at the week’s end. The price of the 12-month strip averaging February 2024 through January 2025 futures contracts declined by $0.048 to $2.960/MMBtu.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.93 to a weekly average of $10.51/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.72 to a weekly average of $9.62/MMBtu, the first time averaging below $10.00/MMBtu since mid-summer. By comparison, in the week last year that corresponds to this report week (the week from January 11 to January 18, 2023), the prices were $24.85/MMBtu in East Asia and $20.10/MMBtu at the TTF.

World Markets

In Europe, stocks headed lower for the week. The pan-European STOXX Europe 600 Index ended the week 1.58% lower due primarily to comments from central bank policymakers that caused markets to scale back expectations that interest rates will soon be reduced. The major stock indexes in the region ended mostly softer. Italy’s FTSE MIB slid lower by 0.61%, Germany’s DAX descended by 0.89%, and France’s CAC 40 Index dropped by 1.25%. The UK’s FTSE 100 Index declined by 2.14%. Also ending the week down were European government bonds (when bond yields rise, prices of existing bonds fall). The yield on Germany’s two-year sovereign note rose to more than 2.7%, while the yield on Italy’s two-year note climbed to 3.2%. In the U.K., the yield on the two-year gilt increased to 4.2% after data indicated that inflation had risen, dampening hopes that interest rates would soon be reduced.

Japan’s stock markets rose over the week as the yen’s weakness drove stronger performance among exporters. The Nikkei 225 Index gained by 1.1% to reach a 34-year high while the broader TOPIX Index inched up by 0.6%. Other signs that inflationary pressure was easing further dampened expectations among investors regarding any shift in the monetary stance of the Bank of Japan (BoJ) at its meeting scheduled for January 22-23. The possibility that Japan’s central bank may exit its negative rates policy soon has already been reduced due to the economic impact of the deadly Noto Peninsula earthquake on New Year’s Day. In reaction to the dissipation of hopes of an imminent interest rate hike in Japan, the yen weakened to about JPY 148 against the U.S. dollar from its high-144 range in the prior week. In a further reaction to the more hawkish tone adopted by the U.S. Federal Reserve officials, the yield on the 10-year Japanese government bond rose to 0.66% from 0.59% at the end of the previous week.

Chinese stocks fell in reaction to the latest indicators which highlighted the country’s weak economic outlook. The Shanghai Composite Index dropped by 1.72%, its eighth drop in the past nine weeks. The Shanghai Composite is popular among domestic investors and the index they refer most to in tracking the markets. The blue-chip CSI 300 lost 0.44%, its ninth-weekly drop in ten weeks. Hong Kong’s benchmark Hang Seng Index plummeted by 5.76% for the week. China’s GDP was reported to have expanded in the final quarter over last year, meeting the official annual growth target of Beijing. The economy grew by a quarterly rate of 1.0% compared to the 0.8% third-quarter growth. The quarterly growth readings provide a better picture of China’s underlying economic expansion than the year-on-year growth rates because major cities were still under pandemic lockdown in 2022, the base year. Other data have nevertheless underscored pockets of weakness in China’s economy. Retail sales grew by a lower-than-expected 7.4% in December year-on-year, down from a 10.1% increase in November. Amid higher infrastructure growth, fixed-asset investment expanded by an above-forecast 3.0% for the full year, although there was a deeper decline in real estate investment. Industrial production rose more than expected in December from one year ago; however, urban unemployment rose to 5.1% from 5.0% in November.

The Week Ahead

Among the important economic data scheduled to be released this week are the fourth-quarter gross domestic product (GDP) results and personal consumption expenditure (PCE) inflation.

Key Topics to Watch

• U.S. leading economic indicators for December
• S&P flash U.S. services PMI for January
• S&P flash U.S. services manufacturing PMI for January
• Fourth-quarter GDP (prelim)
• Initial jobless claims for January 20
• Durable goods orders for December
• Durable goods minus transportation for December
• Advanced U.S. trade balance in goods for December
• Advanced retail inventories for December
• Advanced wholesale inventories for December
• New home sales for December
• Personal income for December
• Personal spending for December
• PCE Index for December
• Core PCE Index for December
• PCE (year-over-year)
• Core PCE (year-over-year)
• Pending home sales

Markets Index Wrap-Up

Stock Markets

All the major stock indexes ended higher for the week. The Dow Jones Industrial Average (DJIA) realized a modest gain of 0.34% while its Total Stock Market rose by 1.70% for the week. The broad S&P 500 Index advanced by 1.84%. Meanwhile, the technology-heavy Nasdaq Stock Market Composite surged ahead by 3.09%, outperforming the DJIA, the S&P 500, and the NYSE Composite which inched up by 0.25%. The CBOE Volatility Index (VIX), which measures investor risk perception, dipped by 4.87%. Large-cap growth stocks outperformed the broader market as did the Nasdaq technology stocks. Friday this week was the unofficial end of the earnings season, with the country’s four largest banks (Citigroup, Bank of America, JPMorgan Chase, and Wells Fargo) reporting fourth-quarter results on that day.

Stocks showed some weakness on Thursday morning when the Labor Department released the consumer price inflation data, indicating that investors were closely watching inflation results. While the CPI was slightly higher than expected, core CPI (excluding food and energy) was in line with consensus estimates. For the whole of 2023, core CPI rose by 3.9%, the slowest 12-month pace since mid-2021. Markets will remain closed in the coming Monday in observance of Martin Luther King, Jr. Day.  

U.S. Economy

While consumer price inflation was moderately troubling, the produce price data released on Friday was more encouraging. The headline wholesale prices receded by an additional 0.1% in December, the third straight month that they declined. PPI rose 0.1% while core PPI rose by 1.8% for the whole of 2023, lower than expected and below the overall inflation target set by the Federal Reserve at 2.0%. With the start of the New Year, the labor market appeared to be in a healthy condition. Some 202,000 workers filed for unemployment benefits in the first week of January, according to reports by the Labor Department. This figure is well below expectations, as well as the lowest since mid-October. The report also indicated that 1.83 million filed continuing claims, likewise the lowest since October.

This week also saw the release of two surveys that indicated that consumers and small business owners remained wary concerning the economic outlook, although to a lesser degree than in recent months. Among investors, the rise in optimism seemed palpable which is likewise reflected in the strong performance of the stock market in December. Despite small business owners remaining pessimistic, the NFIB Small Business Optimism Index still rose more than expected and hit its highest level since July. The yield on the benchmark 10-year U.S. Treasury note fell back below 4% over the week, indicating that fixed-income investors were mostly unmoved by the modest upside performance in the consumer inflation data.

Metals and Mining

The gold market remains strong in the opening weeks of the new year as geopolitical uncertainties in the Middle East continued to provide demand for safe-haven assets. The recent interest in the approval of a Bitcoin ETF, while making waves, is not foreseen to make a strong impact on the gold market, unlike its effect in 2021. It became evident in the last two years that when uncertainty is high, investors return to investments that they can hold and have tangible value. Compared to cybercurrencies, gold is an investment with thousands of years of history as a reliable store of wealth. Although demand may be sluggish central banks continue to accumulate gold almost as quickly as it is mined out of the ground. The People’s Bank of China began buying gold in December and just this past week bought nine tons of this precious metal.

This week, the spot prices of precious metals generally moved sideways. Gold gained 0,18% from its closing price last week of $2,045.45 to close this week at $2,049.06 per troy ounce. Silver neither moved up nor down, remaining at its price last week of $23.19 per troy ounce. Platinum slid by 5.45% from its price in the previous week of $964.18 to its closing price this week of $911.64 per troy ounce. Palladium lost 5.12% of its previous week’s closing price of $1,030.56 to end this week at $977.83 per troy ounce. The three-month LME prices of industrial metals were mostly down. Copper came down by 1.47% from its closing price one week ago at $8,463.00 to its closing price this week at $8,339.00 per metric ton. Zinc lost 1.89% of its last price in the previous week of $2,562.50 to end this week at $2,514.00 per metric ton. Aluminum ended lower by 2.38% from its previous week’s close at $2,273.50 to end this week at $2,219.50 per metric ton. Tin remained hardly changed, inching up by 0.04% from its close a week ago at $24,622.00 to its close this week at $24,631.00 per metric ton.

Energy and Oil

Multiple tankers were prompted to divert from the Suez Canal, with Danish shipping company Torm joining the ranks of European companies currently avoiding the Red Sea transits. This continued as the tensions in the region escalated, culminating with the largest US/UK attack on Houthi positions since the start of Operation Prosperity Guardian. The militaries of the United States and the United Kingdom embarked on joint strikes against Houthi militant targets in Yemen. Targets of the assault were radars as well as missile and drone-launching sites of the terrorist group, prompting a call from Saudi Arabia for restraint in the Red Sea area. As a consequence, for the first time in 2024, ICE Brent futures have traded above the $80 per barrel mark. The upside in oil, and possibly even more so for gas, appears to be far from over as the shipping industry tilts towards a blanket ban on all transits through the Bab el Mandeb Strait.

Natural Gas

For the report week beginning Wednesday, January 3, to Wednesday, January 10, 2024, the Henry Hub spot price rose by $0.63 from $2.60 per million British thermal units (MMBtu) to $3.23/MMBtu. The closing Wednesday was the second consecutive day that the Henry Hub was above $3.20/MMBtu. The last time the Henry Hub price was at $3.00/MMBtu or above for more than one day was in early November 2023. Regarding Henry Hub futures prices, the price of the February 2024 NYMEX contract increased by $0.371, from $2.668/MMBtu at the start of the report week to $3.039 at the end of the week. The price of the 12-month strip averaging February 2024 through January 2025 futures contracts rose by $0.142 to $3.008/MMBtu, with higher prices next winter driving up the 12-month average. The January 2025 futures contract advanced to higher than $4.00/MMBtu on January 9, which is significantly higher than futures prices for all other months in the strip.

For this report week, international natural gas futures prices decreased. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.12 to a weekly average of $11.44/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.03 to a weekly average of $10.35/MMBtu. In the week last year corresponding to this report week (for the week starting January 4 and ending January 11, 2023), the prices were $27.67/MMBtu in East Asia and $22.02/MMBtu at the TTF.

World Markets

The lack of any strong indications as to where interest rates are headed brought little activity to European stocks over the week. The pan-European STOXX Europe 600 Index ended the week practically unchanged as traders weighed the likelihood of interest rates staying higher for longer than they expected. Major stock indexes were mixed but the German DAX, French CAC 40 Index, and Italian FTSE MIB registered modest gains. The UK’s FTSE 100 Index dipped by 0.84%. European government bond yields were volatile for the week, due to dovish comments made by policymakers at the European Central Bank (ECB) being offset by moderating market expectations that an interest rate cat will materialize soon. Germany’s benchmark 10-year government bond yield closed the week close to 2.2%, while in the UK, the yield on the benchmark 10-year government bond inched upward in response to November data showing Britain’s economy grew slightly more than expected.

In Japan, strong gains were registered in the stock markets after a holiday-shortened week that opened on Tuesday. The Nikkei 225 Index surged by 6.6% while the broader TOPIX Index jumped by 4.2%. The indexes rallied to their highest levels in almost 34 years, bolstered by the continuation of highly stimulative monetary policy and weakness in the yen that boosted Japan’s exports. The yen hovered at its lowest levels in a month, softening beyond JPY 145 against the U.S. dollar. Hot U.S. inflation reports reduced expectations regarding the time it would take before the Federal Reserve would decide to cut interest rates. The yield on the 10-year Japanese government bond (JGB) held at around 0,6% during the week as it searched for a clear direction.

Chinese stocks descended after data revealed that China’s deflationary cycle continued into December and raised expectations of increased government support in 2024. The Shanghai Composite Index dropped by 1.61% while the blue-chip CSI 300 fell by 1.35%. The Hong Kong benchmark Hang Seng Index declined by 1.76%. The country’s CPI fell by 0.3% year-on-year in December. This is the third monthly decline, coming from November’s 0.5% dip as food prices were weighed down by lower pork prices. The producer price index fell by 2.7% from one year ago compared with November’s 3% decline, marking the 15^th monthly reduction. The most recent inflation data raised some analysts’ expectations that China’s central bank may lower its key policy rate and infuse the financial system with more cash at its next policy meeting, on concerns that the economy may succumb to sustained deflation. In the meantime, China’s exports rose by a better-than-expected 2.3% year-on-year in December, following 0.5% growth in November.     

The Week Ahead

Among the important economic data scheduled to be released in the coming week are retail sales and building permits for December. as well as industrial production and capacity utilization for the same month.

Key Topics to Watch

• Empire State manufacturing survey for January
• Fed Gov. Christopher Waller speaks
• Import price index for December
• Import price index minus fuel for December
• U.S. retail sales for December
• Retail sales minus autos for December
• Fed Vice Chair for Supervision Michael Barr speaks (Jan. 17)
• Gov. Michelle Bowman speaks
• Industrial production for December
• Capacity utilization for December
• Business inventories for November
• Fed Beige Book
• New York Fed President John Williams delivers opening remarks
• Atlanta Fed President Raphael Bostic speaks
• Initial jobless claims for Jan. 13
• Philadelphia Fed manufacturing survey for January
• Housing starts for December
• Building permits for December
• Consumer sentiment (prelim) for January
• Existing home sales for December
• Fed Vice Chait for Supervision Michael Barr speaks (Jan. 19)
• San Francisco Fed President Mary Daly speaks

Markets Index Wrap-Up

Stock Markets

The major stock market indexes were generally down in the week just concluded, partly as a correction following the S&P’s nine-week winning streak, while interest rates moved higher. The WSJ Markets Report shows the Dow Jones Industrial Average (DJIA) slipped by 0.59% and the DJ Total Stock Market Index fell by 1.79%. The broad-based S&P 500 Index marginally dipped by 1.52% while the technology-tracking Nasdaq Stock Market Composite fell by more than twice as much at 3.25% down. The NYSE Composite is slightly lower than the week before by 0.56%, and the Russell Indexes indicate that the correction has affected both small and large-cap stocks. The CBOE Volatility Index (VIX), the investor risk perception indicator, rose by 7.23%.

The moderate sell-off can be attributed to some repositioning that was bound to happen at the start of a new trading year. After all, the markets rallied by 16% during the last two months of 2023 and some profit-taking can only be expected. The new year’s performance may be significantly affected by two primary forces: the interest-rate decisions that the Federal Reserve will be making and the economy’s glide path, both of which ought to be favorable this year. There is some vulnerability, however, in possible surprises on the downside compared to the rosy expectations (referred to as the Goldilocks outcomes, neither too hot nor too cold) for 2024, thus some volatility is likely.

U.S. Economy

Optimism about the economy generally hinges on the strength in the labor market which has proven to be resilient over the post-pandemic recovery period. The Goldilocks scenario is one in which the economy relies on growth in consumer spending and corporate profits to soften the prospects of a possible recession on the heels of the highest rate cuts to mitigate the highest inflation rates in recent history. The easing and possible reversal of the Fed’s rate hike policies should come about by a slowdown in the pace of consumer spending. The labor market is a key determinant of the path of household consumption.

The latest employment report shows that the jobs market retains its resilience, having created a better-than-expected total of 216,000 jobs in December, and the unemployment rate is holding steady at a healthy 3.7%. Despite the strong hiring trend of last month, it is more likely that the labor market will bend, but not break, as 2024 progresses. We may expect a slowdown in the pace of job gains and a moderate increase in the unemployment rate; these are healthy signs. Job openings last December remain robust as it continues to shrink. This development ought to prompt restraint in consumer spending compared to the last two years, without retreating into hibernation that may cause a full-blown recession.

Metals and Mining

Aluminum production was impacted by the power crunch in Europe and Mexico. As a result, prices were driven upward by more than 40% for a second straight year of gains. It, however, also affected the demand for iron ore as China, the world’s largest steel producer, cut output. Iron ore prices crashed in the second semester of 2023 after hitting record peaks in May, as China implemented strict output curbs. Moving forward, base metals are expected to outperform as energy transition will drive demand while supply chain bottlenecks may persist,

The spot price for precious metals came down over the recent week. Gold moderately fell by 0.85% from its previous week’s closing price of $2,062.98 to this week’s closing price of $2,045.45 per troy ounce. Silver slid by 2.56% from its week-ago close at $23.80 to its close this week at $23.19 per troy ounce. Platinum underwent a similar correction as that of silver, dropping by 2.79% from its week-ago close at $991.90 to finish at $964.18 per troy ounce this week. Palladium declined by 6.33% from its close last week at $1,100.24 to end this week at $1,030.56 per troy ounce. The three-month LME prices of base metals followed a similar trend as those of precious metals. Copper corrected by 1.12% from its close last week at $8,559.00 to its close this week at $8,463.00 per metric ton. Zinc fell by 3.59% from its ending price one week ago at $2,658.00 to its ending price this week at $2,562.50 per metric ton. Aluminum gave way by 4.64% from its close last week at $2,384.00 to this week’s close at $2,273.50 per metric ton. Tin lost 3.12% from its closing price one week ago of $25,415.00 to its closing price this week of $24,622.00.

Energy and Oil

Oil rose by 4% midweek due to Houthi militant action in the Red Sea despite U.S. warnings, as well as OPEC’s pledge to support prices.  The price of oil will finish the week with a slight gain due to tensions in the Middle East accounting for recouping losses after US inventory data. A hefty 5.5 million crude stock draw, which was attributable to the typical year-end clearing of inventory to minimize ad valorem inventory taxes, caused an immediate market reaction in the form of a modest decline after both diesel and gasoline posted huge stock builds. Houthi attacks in the Red Sea persisted, however, as well as the worsening confrontation between Israel and Iran, which limited the pricing downside with Brent trading around $76 per barrel.  

Natural Gas

The U.S. became the world’s leading liquefied natural gas exporter as the country’s LNG exports hit monthly and annual record highs in December. 8.6 million tons were shipped by the U.S. last month, bringing the annual total to 88.9 million tons, an increase of 15% from the previous year.

World Markets

The pan-European STOXX Europe 600 Index ended the week down 0.55% which ended seven consecutive weekly gains as the optimism for an early interest rate cut in the new year began to wane. Most of the major stock indexes fell, among which are France’s CAC 40 Index which lost by 1.62%, and Germany’s DAX which gave up 0.94%. Bucking the trend was Italy’s FTSE MIB which managed to squeeze out a 0.29% increase. Joining the losers was the UK’s FTSE 100 Index which slipped by 0.56%. As traders tempered their expectations for an aggressive rate cut, European government bonds fell sharply which sent yields higher. In Italy, the 10-year government bond yield closed the week above 3.8% while the yield on the benchmark 10-year German bund rose to more than 2.1%. The 10-year gilt in the UK ended with an almost 3.8% yield. The resumption in the acceleration of eurozone inflation in December appeared to dash hopes for early rate cuts by the European Central Bank.

Over a New Year’s holiday-shortened week where trading resumed only on Thursday, Japan’s stock markets ended mixed. The Nikkei 225 underperformed the broader TOPIX Index. Punctuating the lackluster market performance was the deadly earthquake on January 1 that ravaged Japan’s Noto Peninsula in the Hokuriku region which was followed by a series of aftershocks. The devastating human cost rose to over 90 fatalities with hundreds unaccounted for. Additionally, major damage to infrastructure threatened to disrupt manufacturing and other supply chains. Multiple semiconductor-related factories were located in the area hardest hit by the earthquake; others anticipate that the disaster may cause delays in the restart of nuclear power plants across Japan. Initial estimates indicate, however, that the macroeconomic impact of the earthquake is likely to be limited. Debate arose about whether the calamity might impact monetary policy decision-making. The yen dropped sharply in reaction to the event, falling to the low JPY 145 to the U.S. dollar from around JPY 141 at the end of the previous week. The yield on the 10-year Japanese government bond remained unchanged at 0.61% over the shortened week.

Stocks in China declined last week over prevailing economic concerns. The Shanghai Composite Index dropped by 1.54% and the blue-chip CSI 300 plunged by 2.97%. The Hong Kong benchmark Hang Seng Index gave up 3% of its value. December’s economic data continued to reflect the same concerning picture about China’s uncertain economy. For a third consecutive month, the official manufacturing Purchasing Managers’ Index (PMI) was firmly in contraction territory, falling to 49.0 in December. The figure, which is below consensus estimates, was due to accelerated declines in new orders and exports. The nonmanufacturing PMI, by comparison, rose to 50.4 in December from 50.2 in November, due to stronger construction activity offsetting weakness in other areas of the services sector. Readings higher than 50 signify expansionary growth from the preceding month. More evidence of China’s property slump highlighted worries about a key growth sector, new home sales by the top 100 developers in the country. This indicator fell by 34.6% in December from the prior-year period, up from the 29.6% drop in November. Failing home prices, construction delays, and guilder defaults weigh on consumer sentiment as the housing downturn continues to drag on China’s economy.

The Week Ahead

Consumer and producer price index inflation data are among the important economic data scheduled for release in the coming week.

Key Topics to Watch

• Consumer credit for November
• Trade deficit for November
• Wholesale inventories for November
• New York Fed President John Williams speaks
• Initial jobless claims for January 6
• Consumer price index (CPI) for December
• Core CPI for December
• CPI (year-over-year)
• Core CPI (year-over-year)
• Budget statement for December
• Producers price index (PPI) for December
• Core PPI (year-over-year)

Markets Index Wrap-Up

Stock Markets

During the holiday-shortened weekend, the major benchmarks were mixed. The Dow Jones Industrial Average (DJIA) gained 0.81% and the DJ Total Stock Market advanced by 0.26%. The broad S&P 500 Index added 0.32% while the technology-heavy Nasdaq Stock Market Composite Index rose by 0.12%. The NYSE Composite Index climbed by 0.49%. The CBOE Volatility Index (VIX), an indicator of investor risk perception, declined by 4.45%. This was the S&P 500 Index’s ninth straight weekly gain, its longest rally since 2004, bringing it to within 0.53% of its record intraday high. The Nasdaq Composite recorded its sixth-biggest annual gain since the index was launched in 1971. Since trading was closed on Monday and many investors were out of the office, this being the week between Christmas and the New Year, trading volumes were muted and market movements were light.      

U.S. Economy

The week’s economic calendar was mostly light, but there was arguably a negative overall tone. On Wednesday, an index of Mid-Atlantic manufacturing activity was reported to have fallen sharply in December, indicating the fastest pace of contraction since February. Further bad news emerged on Friday when a barometer of overall business activity in the Chicago region surprised significantly on the downside and descended once more into contraction territory. Pending home sales for November were flat in defiance of expectations for a modest increase, supposedly in response to a recent drop in mortgage interest rates. Lastly, there was an unexpected rise in weekly jobless claims, reaching 218,000, their highest level since the start of the month. Volumes were light in bonds trading for most of the week, although spreads modestly tightened as investors favored risk assets.

Metals and Mining

The spot market for precious metals was mixed for this holiday-shortened trading week. Gold gained marginally by 0.48% from last week’s closing price of $2,053.08 to end at $2,062.98 per troy ounce. Silver lost 1.61% of its value, moving down from last week’s closing price of $24.19 to end at $23.80 per troy ounce. Platinum moved up by 1.57% from its close last week at $976.60 to close this week at $991.90 per troy ounce. Palladium declined by 8.76% from its previous week’s closing price of $1,205.81 to end this week at $1,100.24 per troy ounce. The three-month LME prices of base metals were also mixed. Copper lost 0.42% from its previous week’s close at $8,595.50 to end the week at $8,559.00 per metric ton. Zinc gained by 4.36% from last week’s closing price of $2,547.00 to this week’s closing price of $2,658.00 per metric ton. Aluminum climbed by 6.24% from last week’s close at $2,244.00 to this week’s close at $2,384.00 per metric ton. Tin ticked up by 1.04% from its ending price last week of $25,153.00 to this week’s ending price of $25,415.00 per metric ton.

Energy and Oil

On Tuesday, oil prices rose almost by 3% due to worries of global trade and crude supply disruption caused by militant attacks on shipping in the Red Sea. However, bearish sentiment took over by the end of the week due to concerns that the market is oversupplied from record production outside the OPEC. U.S. crude closed the year at more than 10% lower than when the year began. The U.S. is producing crude at a record pace, pumping an estimated 13.3 million barrels per day during the week. Brazil and Guyana are also producing record outputs. This historic production outside the OPEC group coincides with an economic slowdown in China and other major economies. The Brent contract for March lost $0.11, or 14%, to settle at $77.04 per barrel on Friday, while the West Texas Intermediate (WTI) contract for February lost $0.12, or 17%, to settle at $71.65 per barrel. Despite ongoing geopolitical risk in the Middle East resulting from the war in Gaza, U.S. crude and the global benchmark recorded their first annual decline since 2020. WTI has descended by 10.73% while Brent has shed 10.32% for the year.  

Natural Gas

For this report week beginning Wednesday, December 13, and ending Wednesday, December 20, 2023, the Henry Hub spot price rose by $0.16 from $2.33 per million British thermal units (MMBtu) to $2.49/MMBtu. Regarding Henry Hub futures prices, the price of the January 2024 NYMEX contract increased by $0.112, from $2.335/MMBtu at the start of the report week to $2.447/MMBtu at the end of the week. The price of the 12-month strip averaging January 2024 through December 2024 futures contracts increased modestly to $2.564/MMBtu. Natural gas spot prices rose at most locations this report week in the different regions of the country.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $2.47 to a weekly average of $13.30/MMBtu.  Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.84 to a weekly average of $10.89/MMBtu. In the week last year corresponding to this report week (the week from December 14 to December 21, 2022), the prices were $34.42/MMBtu in East Asia and $34.99/MMBtu at the TTF.

World Markets

As traders returned from an extended Christmas break and only a few days left in the year, trading volume was light but equities were higher for the last trading week of the year. The pan-European STOXX 600 Index gained 0.41% on heightened optimism that interest rates may be reduced next year. The region’s major stock indexes were mixed. Germany’s DAX gained a modest 0.22% while France’s CAC 40 and Italy’s FTSE MIB hardly changed. The UK’s FTSE 100 ascended by 0.66%. Spain, the first major eurozone economy to report December inflation, released a preliminary estimate of consumer price growth and it showed headline prices slowing in December to 3.1% year-over-year. This is a happy surprise in place of the acceleration to 3.3% initially expected by economists. FactSet, the national statistics agency, attributed the price slowdown to a fall in motor fuel prices. A European Central Bank (ECB) official, Madis Muller, announced that the ECB is not likely to raise interest rates again in light of the slowing inflation.

In Japan, stocks ended higher for the last trading week of 2023. The Nikkei 225 Index rose by 0,.89% while the broader TOPIX Index climbed by 1.28% in quiet trading ahead of the New Year’s holiday. The optimism was due to expectations that the Bank of Japan (BoJ) could continue with its ultralow interest rate policy. The Nikkei climbed 28% while the TOPIX gained 25% for 2023, their biggest annual gains since 2013. The Nikkei was the best-performing index in Asia. Economic data for the week was mixed and had little correlation with the stock market. Unemployment remained unchanged at 2.5% in November. Industrial output fell for the first time in three months but by much less than expected. Retail sales, however, grew robustly year-over-year on the back of recovering consumption from the pandemic slump. The yen strengthened to JPY 141 per U.S. dollar. The yield on the 10-year Japanese government bond (JGB) eased slightly to 0.6%.

Chinese equities ascended in the last trading week of the year, in response to the government’s announcement of new online game approvals. This calmed fears of a possible clampdown on the gaming sector. The Shanghai Composite Index gained 2.06% for the week, while the blue-chip CSI 300 Index climbed by 2.81%. The Hong Kong benchmark Hang Seng Index rallied by 4.33%. A bout of fresh approvals for new online games was announced by Chinese regulators to support the industry. This followed a draft of new rules designed to curb spending that caused stocks to plunge the week earlier. Shares of one of China’s largest online gaming companies, Tencent, plummeted by more than 12% amid concerns that the government may resume controls on big technology companies after its two-year crackdown that began in 2021. Stocks recovered some of their losses, however, as Beijing’s softer stance appears to have coaxed back some of the lost investor confidence. As Beijing’s latest stimulus measures supported growth, profits at industrial firms shot up by 29,5% in November year-on-year and rose from October’s 2.7% gain. Economists forecast China’s gross domestic product (GDP) growth to slow to 4.6% in 2024 from 5.2% in 2023 as the country continues to be dogged by persistent property woes and growing deflationary pressures.

The Week Ahead

Among the important economic data that are expected to be released this week are the month’s auto sales, ISM manufacturing, and several labor market readings that include nonfarm payrolls, JOLTS job openings, and the unemployment rate for December.

Key Topics to Watch

• S&P final U.S. manufacturing PMI for December
• Construction spending for November
• Richmond Fed President Tom Barkin speaks
• U.S. job openings for November
• ISM manufacturing for December
• Minutes of Fed’s December meeting
• Auto sales for December
• ADP employment for December
• Initial jobless claims for December 30
• S&P final U.S. services PMI for December
• U.S. unemployment report for December
• U.S. unemployment rate for December
• U.S. hourly wages for December
• Hourly wages (year-over-year)
• ISM services for December
• Factory orders for November
• Richmond Fed President Tom Barkin speaks
• Dallas Fed President Lorie Logan speaks

Markets Index Wrap-Up

Stock Markets

It was a quiet week with little news and economic data, the absence of market motivation causing indexes to move marginally upward to extend their winning streaks. U.S. Stock markets were up for the week ahead of the Christmas holidays when markets will take a break. The Dow Jones Industrial Average (DJIA) was up slightly by 0.22% with the DJ Total Stock Market Index gaining 0.91%. The broad S&P 500 Index rose by 0.75% while the technology-heavy Nasdaq Stock Market Composite outperformed with a 1.23% gain. The NYSE Composite is likewise up for the week, advancing by 0.97%. The investor risk perception metric CBOE Volatility (VIX) indicator rose by 6.11%.

U.S. Economy

For the 16^th year since 1980, the average quarterly U.S. GDP growth in 2023 topped 3%. This fact highlights the surprising resilience of the economy, even in the face of strong headwinds resulting from the Federal Reserve rate hikes in its bid to curb inflation. In the third quarter of this year, GDP grew by 4.9%, the strongest quarterly growth rate since 2014, excluding the past-pandemic reopening period. The U.S. GDP grew at a rate of 5% or more in 26 quarters from 1980 to 2020. The main catalyst for economic growth in 2023 was consumer spending and its main driver was a historically strong labor market. The lowest point in the unemployment rate going back to 1980 was 3.4%, which matches the lowest unemployment figure since 1969. A lower jobless rate can only be found by going back to 1953 when unemployment registered at 2.5%.  

Metals and Mining

The spot market for precious metals was up this week. Gold gained 1.66% from its close last week at $2,019.62 to end at $2,053.08 per troy ounce this week. Silver climbed by 1.38% from the previous week’s close at $23.86 to end the week at $24.19 per troy ounce. Platinum, which closed last week at $944.51, ended the week at $976.60 per troy ounce for a gain of 3.40%. Palladium, which closed a week ago at the price of $1,177.06, closed this week at $1,205.81 per troy ounce for a gain of 2.44%. The three-month LME prices of base metals ended mixed. Copper closed this week at $8,595.50 per metric ton for a gain of 0.54% over last week’s closing price of $8,549.00.  Zinc ended the week at $2,547.00 per metric ton to mark a 0.59% increase over last week’s close of $2,532.00. Aluminum closed this week at $2,244.00 per metric ton for a slide of 0.16% from last week’s closing price of $2,247.50. Tin closed this week at $25,153.00 per metric ton, a loss of  0.09% from the previous week’s close at $25,175.00.      

Energy and Oil

With Christmas just around the corner, trading liquidity was thin. Angola parted ways suddenly with OPEC, which nevertheless failed to move the needle either way on this lackluster trading week. ICE Brent remained at approximately $80 per barrel whilst WTI moved up to $75 per barrel as the Red Sea diversions became the new trend in international shipping. This marks the second consecutive week-on-week gain in WTI which fully rebounded to levels it treaded one month ago, Angola left OPEC due to a quota spat. The African country’s departure dealt a political blow to the group which said that membership provided Angola with no gains and no longer serves its interests. Angola follows in the footsteps of Ecuador and Qatar in this sudden and bold move.

Natural Gas

For the report week from Wednesday, December 13 to Wednesday, December 20, 2023, the Henry Hub spot price rose by $0.16 from $2.33 per million British thermal units (MMBtu) to $2.49/MMBtu. Regarding the Henry Hub futures, the price of the January 2024 NYMEX contract increased by $0.112, from $2.335/MMBtu at the beginning of the report week to $2.447/MMBtu at the end of the week. The price of the 12-month strip averaging January 2024 through December 2024 futures contracts increased slightly to $2.564/MMBtu.

International natural gas futures decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $2.47 to a weekly average of $13.30/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.84 to a weekly average of $10.89/MMBtu. In the week last year corresponding to this report week (from December 14 to December 21, 2022), the prices were $34.420 and $34.99 in East Asia and at the TTF, respectively.

World Markets

The pan-European STOXX Europe 600 Index inched up 0.21% higher this week in local currency terms and remained near its almost one-year high. Some major continental stocks showed softness while others moved sideways in listless trading on thin volumes just before the Christmas holidays. France’s CAC 50 Index declined by 0.37%, Germany’s DAX ticked down by 0.27%, and Italy’s FTSE MIB was modestly down, The UK’s FTSE 100 Index rose by 1.60%. UK’s inflation slowed more than expected, from 4.8% in October year-on-year to 3.9% in November year-on-year. The unexpected drop was due to a fall in prices for food, motor fuels, recreation, and culture. Core and services inflation showed that underlying price pressures eased, coming in at 5.1% and 6.3%, respectively. All inflation metrics remain well above the 2% inflation target set by the Bank of England (BoE). Revisions by the Office for National Statistics to the Gross Domestic Product (GDP) indicate that the economy performed worse than previously thought in certain quarters. In the April to June period, the GDP was lowered from 0.2% to flat, while the estimate for the third quarter indicated that the economy shrank by 0.1%. Despite lower inflation figures, the BoE stated that interest rates are likely to remain at elevated levels, according to BoE Deputy Gov. Ben Broadbent.

In Japan, the stock markets registered modest gains for the week. The Nikkei 225 Index rose by 0.6% while the broader TOPIX Index gained by 0.2%, with support from a dovish Bank of Japan (BoJ). In line with expectations, the BoE retained its ultra-accommodative monetary policy stance at its December meeting, including forward guidance. The central bank avoided commenting on possible policy adjustments next year, seemingly pushing back against market expectations of a near-term interest rate hike. The yield on the 10-year Japanese Government Bank (JGB) fell to 0.62% from 0,70% at the end of the previous week. The yen initially weakened but finished broadly unchanged for the week, ending at the low levels of the JPY 142 range versus the U.S. dollar. Data released towards the end of the week showed that Japan’s core consumer price index rose by 2.5% year-on-year in November, lower than the 2,9% October reading and the softest inflation level it has been since July 2022.

Chinese stocks declined in response to government announcements imposing new restrictions in the gaming sector. The Shanghai Composite Index fell by 0.94% while the blue-chip CSI dipped by 0.13%, its sixth consecutive weekly decline and capping its largest losing streak since January 2012. The Hong Kong benchmark Hang Seng Index gave up 2.69%. A draft of new rules was announced by Chinese regulators. The new measures are aimed at curbing spending and rewards for online video games. The regulations eliminated almost US$80 billion in market value from some of China’s largest gaming companies, reflective of investors’ concerns about the potential impact on earnings and the possibility of another government crackdown on the sector. In the past, Beijing set strict playtime limits for players younger than 18 and suspended the approvals of new video games, effectively kicking off in 2021 a two-year clampdown on big technology companies. The restrictions were formally ended in 2022 as the government resumed new game approvals and eased regulations for most of 2023.  

The Week Ahead

Economic news will be light this week due to the Christmas holidays when the markets will be closed. Expected for release are initial jobless claims and consumer confidence reports.

Key Topics to Watch

• S&P Case-Shiller home price index (20 cities) for October
• Consumer confidence for December
• Initial jobless claims for December 23, 2023
• Advanced U.S. trade balance in goods for November
• Advanced retail inventories for November
• Advanced wholesale inventories for November
• Pending home sales for November
• Chicago Business Barometer for December

Markets Index Wrap-Up

Stock Markets

Holiday cheer and the absence of significantly negative news drove the stock markets up for the seventh consecutive week. According to the Wall Street Journal Markets report, the Dow Jones Industrial Average (DJIA) roared upwards by 2.92% for the week as its Total Stock Market Index climbed by 2.85%, suggesting that institutional buying may be driving the purchase of index-linked stocks. The Nasdaq Stock Market Composite, a tracker for technology stocks, also rose by 2.85% while the broad S&P 500 Index ascended by 2.49%. The NYSE Composite Index gained by 2.48% even as the Russell 2000 Index shot up by 5.55% and the Russell 1000 added 2.68%, suggesting that small-cap stocks massively outperformed the large-cap issues. The CBOE Volatility Index (VIX) only moved the needle slightly downward by 0.57%, suggesting that investors perceive risk to have mitigated in the markets and have lowered expectations of market volatility.

The run-up this week lifted the S&P 500 and Nasdaq Composite Indexes to 52-week highs and the DJIA to its all-time peak. The seven weeks of straight gains was the longest streak for the S&P 500 Index since 2017. The week’s gains were also broadly based, as indicated by the equally-weighted index of S&P 500 stocks outpacing by 131 basis points its market-weighted counterpart. The Russell 2000 Index gains for the week lifted it out of bear market territory (a descent of 20% from its peak) for the first time in more than 20 months. Volumes were also elevated at the end of the week as the number of shares exchanging hands daily reached a new high for 2023. Since volume follows the trend, this may be a bullish sign that markets could be ready to move higher.

U.S. Economy

What appears to be incentivizing the rise in market participation among investors is the expectation of a more benign inflation environment among policymakers. On Tuesday, the report released on consumer price inflation was approximately in line with expectations. Core inflation, which excluded food and energy, remained steady at 4.0% year-over-year. The producer price inflation report which was released on Wednesday reported core inflation running at 2.0% for the year, its lowest level since January 2021 and surprising modestly on the downside. While the Federal Reserve left rates unchanged, the quarterly “dot plot” which summarizes individual policymakers’ rate expectations shows that the median projection was for 75 basis points of rate cuts, up from 50 basis points in previous projections, coming in 2024.

Another indicator was the retail sales data released on Thursday which arguably disrupted the disinflation narrative, but investors appeared to generally discount the data and take it in stride. Retail sales rose by 0.3% unexpectedly in November while October’s decline was revised lower. This reflects a strong start to the holiday shopping season. Particularly strong were online sales and sales at restaurants, which shows a resilience in discretionary spending. However, other data released during the week point to some surprising weakness in the manufacturing sector. Overall, the Fed forecasts a form of soft landing with a steady unemployment rate of 4.1% despite lower growth and inflation for 2024. The soft-landing recession expected signifies that there will likely be cooler economic growth and moderating inflation without a meaningful decline in joblessness.

Metals and Mining

The Federal Reserve will continue to drive gold prices, according to the broadest consensus among analysts. With the Fed Funds rate at its peak, however, the only trend possible is downwards, leaving only the question of when and how fast the decline will be. The Fed signaled in its updated economic projections on Wednesday that it sees the potential for three rate cuts in 2024 – the first clear signal that the committee is ready to pivot in its interest rate direction, which will be a positive development for gold prices. In the past year, precious metals were able to withstand the Fed’s most aggressive hiking cycle in more than four decades. The $1,800 per ounce level proved to be a major support for gold despite the rising yields. As headwinds start to dissipate, the implications for the yellow metal could be bullish.

The spot prices of precious metals this week saw significant gains. Gold rose by 0.75% from its previous weekly close at $2,004.67 to this week’s closing price of $2,019.62 per troy ounce despite treading close to new highs. Silver ascended by 3.74% from last week’s close at $23.00 to this week’s close at $23.86 per troy ounce. Platinum’s weekly close saw a 2.59% elevation from last week’s price of $920.65 to this week’s price of $944.51 per troy ounce. Palladium ascended by 24.33% from last week’s closing price of $946.74 to this week’s closing price of $1,177.06 per troy ounce. The three-month LME prices of base metals also climbed this week. Copper rose by 2.48% this week from its last weekly closing price of $8,342.00 to this week’s closing price of $8,549.00 per metric ton. Zinc ascended by 5.22% from last week’s close of $2,406.50 on its way to this week’s close of $2,532.00 per metric ton. Aluminum gained by 5.39% from last week’s $2,132.50 price to this week’s $2,247.50 per metric ton close. Tin inclined by 2.03% from last week’s closing price of $24,675.00 to this week’s closing price of $25,175.00 per metric ton.

Energy and Oil

At last, the oil markets are on track for its first week-ion-week increase in eight weeks, with the price of Brent rising toward $77 per barrel. The United States accounted for much of the bullish sentiment, despite continuous attacks on tankers in the Red Sea. The first reason is the Federal Reserve’s pledge to start cutting interest rates in the coming year, an announcement that drove the markets in general due to positive investor sentiment. The second reason is the larger-than-expected U.S. inventory draw which pushed oil prices further up. For now, the Brent decline down to the low 70s is off the table, but the question remains as to how long. In the December monthly oil report released this week, the OPEC reiterated that it is optimistic for robust oil demand growth in 2024, by as much as 2.46 million barrels per day (b/d). It oil producers’ group blamed the recent plummet in oil prices on exaggerated oil demand concerns that negatively and disproportionately impacted market sentiment.    

Natural Gas

For the report week beginning Wednesday, December 6, and ending Wednesday, December 13, 2023, the Henry Hub spot price fell by $0.40 from $2.73 per million British thermal units (MMBtu) to $2.33/MMBtu. Natural gas spot prices fell at most locations this report week, mostly in line with the U.S. benchmark Henry Hub price. Price changes ranged from a decrease of $6.41/MMBtu at Algonquin Citygate to an increase of $1.23/MMBtu at the Waha Hub.

Regarding the Henry Hub futures, the price of the January 2024 NYMEX contract decreased by $0.234, from $2.569/MMBtu at the start of the week to $2.335/MMBtu by the end of the report week. The price of the 12-month strip averaging January 2024 through December 2024 futures contracts declined by $0.183 to $2.563/MMBtu.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.33 to a weekly average of $15.77/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $1.18 to a weekly average of $11.73/MMBtu. During the week last year that corresponds to this report week (beginning December 7 and ending December 14, 2022), the prices were $33.46/MMBtu in East Asia and $42.46/MMBtu at the TTF.

World Markets

On the back of expectations that the central banks may eventually reverse its rate hiking policy, European equities reflected investors’ increasing optimism. The pan-European STOXX 600 Index closed higher by 0.92% for the week in local currency terms as financial markets increasingly expect to cut interest rates in 2024. The major stock indexes in the region ended mixed. France’s CAC 40 Index gained 0.93%. Ending modestly lower were Germany’s DAX and Italy’s FTSE MIB. The UK’s FTSE 100 Index inched upward by 0.29%. The European Central Bank maintained its key deposit rate at a record high of 4.0% but it cut its inflation and growth forecasts for 2023 and 2024. In December, business activity in the Eurozone shrank, according to a report by S&P Global. An early estimate of the Purchasing Managers’ Index (PMI) based on the combined output of the manufacturing and services sectors fell to 47.0 from 48.6 in November. This is a two-month low and a seventh straight month of contraction, indicated by a rating below 50.

Japan’s stock markets ascended over the week. The Nikkei 225 Index gained 2.1% while the broader TOPIX Index rose by 0.3%. The buy-up was spurred by the U.S. Federal Reserve signaling by the clearest indications so far that it will pivot away from monetary policy tightening, holding interest rates steady, and projecting more aggressive rate cuts in 2024. However, the yen strengthened somewhat, creating disadvantages for Japan’s exporters. The yield on the 10-year Japanese government bond (JGB) fell from 0.77% to 0.70% over the week due to speculation waning that the Bank of Japan (BoJ) is likely to end its negative interest rate policy sooner than expected, a reaction to the Fed’s pivot. The yen reacted by strengthening to the JPY 141 level against the dollar from the high range of JPY 144 during the previous week. Much of the currency’s strength is due to expectations about narrowing U.S.-Japan interest-rate differentials.

Chinese equities slid due to persistent deflationary pressures that weighed on the country’s economic outlook. The Shanghai Composite Index declined by 0.91% while the blue-chip CSI 300 slipped by 1.7% over the past week. The Hong Kong benchmark Hang Seng Index rose by 2.8% amid the global stock rally in response to the Fed keeping interest rates unchanged and signaling rate reductions in 2024. China’s consumer price index dipped in November by 0.5% year-on-year, higher than October’s 0.2% contraction. It is also the steepest drop since November 2020 as lower pork prices brought food prices lower. In the meantime, the producer price index fell by 3% from last year, a figure bigger than expected and its 14^th straight month of decline. The circumstances point to potential deflation which is problematic for China. According to economists, it could trigger a downward spiral of economic activity.

The Week Ahead

Scheduled for report this coming week are PCE inflation data, home sales data, and retail sales data for November, among others.

Key Topics to Watch

• Consumer Price Index (CPI) for November
• Core CPI for November
• CPI year-over-year
• Core CPI year-over-year
• Monthly U.S. federal budget for November
• Producer price index (PPI) for November
• Core PPI for November
• PPI year-over-year
• Core PPI year-over-year
• FOMC interest rate decision
• Fed Chairman Jerome Powell press conference
• Initial jobless claims for December 9
• Import price index for November
• Import price index minus fuel for November
• U.S. retail sales for November
• Retail sales minus auto for November
• Business inventories for November
• Empire State manufacturing survey for December
• New York Fed President John Williams speaks
• Industrial production for November
• Capacity utilization for November
• S&P flash U.S. services PMI for December
• S&P flash U.S. manufacturing PMI for December

Markets Index Wrap-Up

Stock Markets

The major U.S. stock market indexes were mixed this week. According to the Wall Street Journal Markets report, the Dow Jones Industrial Average moved sideways for the week, adding a slight 0.01% and while the transportation and utility sectors came down, the total stock market index advanced by 0.26%. The broad S&P 500 Index gained by 0.21% although it was outperformed by the technology-heavy Nasdaq Stock Market Composite which climbed 0.69%. The NYSE Composite declined by 0.34%. The CBOE Volatility Index (VIX), an indicator of investor risk perception, ended lower by 2.22%. While the market is already set on expecting a rate cut instead of a rate hike from the next Fed move, the timing of this event may be a cause for some volatility.

The week began with a sell-off but a late rally helped the major indexes close flat to modestly higher. For the third time in the past four weeks, the small-cap Russell 2000 Index outperformed the S&P 500 Index which resulted in narrowing its significant year-to-date underperformance. Growth stocks have built slightly over their value counterparts, and energy stocks lagged within the S&P 500 due to oil prices falling below the $70-per-barrel level for the first time since June. One factor that seemed to boost the growth indexes and the technology-heavy Nasdaq Composite is the continuing enthusiasm of the market over the potential of generative artificial intelligence (AI). On Thursday, Alphabet, Google’s mother company, rose by more than 5% after the company divulged its new AI model, Gemini. This product can process text, code, audio, images, and video, and can be incorporated into mobile applications. Simultaneously, Advanced Micro Devices climbed by almost 10% upon announcing its launch of a new generation of AI chips, Earlier in the week, Apple moved back to near its summer all-time highs when it eclipsed $3 trillion in market capitalization.

U.S. Economy

The economic news released during the week drove market sentiment northward. Surprising on the upside was the nonfarm payrolls report released on Friday, revealing that employers added 199,000 jobs in November which was higher than consensus estimates of around 180,000. The unemployment rate also perked interest by falling back to 3.7% from a two-year high of 3.9% in October. Average hourly earnings rose above expectation at 0.4%, however, the year-over-year increase was maintained at the expected 4.0%. The biggest market reaction, though, was the University of Michigan’s preliminary gauge of consumer sentiment in December. The metric surged to its highest level since August due to calming inflation fears. The survey respondents expected prices to increase by a much lower 3.1% in the coming year from the 4.5% registered in November. December’s reading is also the lowest rate recorded since March 2021. Also rising considerably are gauges of consumer expectations and their assessment of current economic conditions.

Other economic data that emerged during the week drew mixed reactions. There was a modest pickup in services sector activity in November, as indicated by data from both the S&P Global and the Institute for Supply Management released on Tuesday. However, the Labor Department’s count of October job openings dropped by more than expected to 8.73 million, the lowest level since March 2021. On Monday, reported data on October factor orders also fell more than expected.

Metals and Mining

The gold market went through a rollercoaster week as the price of gold rallied to an all-time of high only to plunge and close at 3% lower than last week. On Monday, bullish momentum triggered a buy signal in an illiquid market in the Asian session, driving the precious yellow metal to hit $2,152.30 per ounce, a new high. The subsequent parabolic move, however, showed the rally to be unsustainable and cratered into a selling momentum triggered by occasional buy stops. It is not surprising, though, that gold was sold down after it breached past the $2,100 per ounce level because of the profit-taking potential provided to investors after prices hit a major projection level. This does not signify, however, that there is no long-term bullish sentiment in gold; this remains intact. Many analysts were warning investors that gold was in overbought territory, thus the near-term selloff was only to be expected.

The spot prices for precious metals ended the week down. Gold, which ended last week at $2,072.22, closed this week at $2,004.67 per troy ounce for a loss of 3.26%. Silver came down by 9.77% from its previous week’s close at $25.49 to end this week at $23.00 per troy ounce. Platinum, which ended last week at $937.15, went further south by 1.76% to close this week at $920.65 per troy ounce. Palladium came down by 5.90% from its close last week at $1,006.13 to end this week at $946.74 per troy ounce. The three-month LME prices of industrial metals were generally lower at the week’s close. Copper lost 1.45% this week from its previous close at $8,464.50, ending this week at $8,342.00 per metric ton. Zinc also dipped, ending the week lower by 2,79% from its previous week’s close at $2,475.50, for a closing price of $2,406.50 per metric ton. Aluminum descended by 2.76% to close this week at $2,132.50 per metric ton from last week’s closing price of $2,193.00. Tin bucked the trend and ended this week at $24,675.00 per metric ton, higher by 6.15% from last week’s close of $23,246.00.               

Energy and Oil

The research unit of China’s national oil company, CNPC, announced that China’s oil demand is expected to peak by the year 2030 at approximately 15.6 to 16 million barrels per day. However, even sooner, Chinese oil demand has been slowing down into the fourth quarter of this year. Last week’s announcement of OPEC+ production cuts has failed to create a significant reaction in the market, with non-OPEC supply continuing to grow (Guyana is starting its third FPSO this month). These developments contribute to a less-than-rosy outlook for an increase in oil prices. Both the WTI and Brent dropped to their lowest readings since June, falling below $69 and $74 per barrel respectively, before bouncing back to regain some of those losses on Friday morning. To break the bearish sentiment in the oil market that has materialized over the past week would necessitate some very optimistic macroeconomic news or major supply disruption. In the U.S., gasoline prices continue to decline as the national average dropped to $3.185 per gallon on Friday. This is the lowest price since January and may continue to drop below the $3 per gallon threshold by Christmas for the first time since 2021.    

Natural Gas

For the report week from Wednesday, November 29, to Wednesday, December 6, 2023, the Henry Hub spot price rose by $0.03 from $2.70 per million British thermal units (MMBtu) to $2.73/MMBtu. Regarding the Henry Hub futures market, the price of the January 2024 NYMEX contract decreased by $0.235, from $2.804/MMBtu at the start of the report week to $2.569/MMBtu at the end of the report week. The price of the 12-month strip averaging January 2024 to December 2024 futures contracts declined by $0.238 to $2.746/MMBtu.

International natural gas futures prices decreased for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.47 to a weekly average of $16.10/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $1.06 to a weekly average of $12.91/MMBtu. In the week last year corresponding to this report week (week from November 30 to December 7, 2022), the prices for international gas futures prices were $32.98/MMBtu in East Asia and $42.95/MMBtu at the TTF.

World Markets

Shares in Europe advanced for the fourth straight week on expectations that banks may cut interest rates in the coming year. The pan-European STOXX Europe 600 Index ascended by 1.30% as stocks received a lift from optimism among investors that inflation would be slowing and European economies have been cooling. Major stock indexes in the region have tracked the European index. France’s CAC 40 Index rose by 2.46%, Germany’s DAX climbed by 2.21%, and Italy’s FTSE MIB gained 1.59% for the week. The UK’s FTSE 100 Index added 0.33%. Meanwhile, European government bond yields ended generally lower as pronouncements by some European Central Bank (ECB) officials spurred hopes that interest rate reductions may be seen during the first half of the new year. The yield on the benchmark 10-year German bond descended towards its lowest levels during the year-to-date period, while the Italian government bond yields likewise slid. The 10-year UK government bond yield dropped to below 4% for the first time since the middle of May on speculation that the Bank of England may begin reducing borrowing costs by mid-2024. In the meantime, however, Germany’s economy struggled as its jobless rate rose, and the UK housing market continued to weaken.

In Japan, the stock market descended over the week, with the Nikkei 225 Index plummeting by 3.4% and the broader TOPIX Index sliding by 2.4%. Speculation went rife on the back of comments by officials of the Bank of Japan (BoJ) that the bank may abandon its policy of negative interest rates sooner than expected, weighing on riskier assets. Data showing that Japan’s economy contracted by more than initially estimated in the third quarter of 2023 brought greater pressure on equities. The yield on the 10-year Japanese government bond (JGB) rose to 0.77% from 0.71% at the end of the previous week amid the perceived BoJ hawkishness. Another factor that pushed yields higher was a notably weaker-than-expected 30-year JGB auction. Meanwhile, the yen strengthened to the new low-144 level against the U.S. dollar from 146.8 at the end of the week before, due to growing speculation about BoJ policy normalization. This is the currency’s highest level in nearly four months, which is also partially due to anticipation of reduced interest rate differentials with the U.S. The market consensus appears to be converging around the view that the Federal Reserve has completed its cycle of raising interest rates for now.

Chinese stock indexes fell as a result of a credit downgrade on China’s sovereign debt by Moody’s credit rating agency, further underscoring the country’s uncertain economic outlook. The Shanghai Composite Index lost by 2.05% on this week’s trading, while the blue-chip CSI 300 plunged by 2.4% after it fell midweek to its lowest level in almost five years. The Hong Kong benchmark Hang Seng Index plunged 2.95%. On Tuesday, Moody’s downgraded its outlook for China’s government bonds from “stable” to “negative,” citing the country’s debt-heavy local governments and state firms as posing significant economic downside risks. China has been grappling with a yearslong property market downturn and negative consumer and business confidence. The flurry of pro-growth stimulus measures adopted by Beijing earlier this year has been deemed by analysts to be insufficient to revive the economy.

The Week Ahead

For this week, the important economic data scheduled for release include the November CPI and PPI inflation data, the FOMC meeting, and import price index data for November.

Key Topics to Watch

• Consumer price index for November
• Core CPI for November
• CPI year over year
• Core CPI year over year
• Monthly U.S federal budget for November
• Producer price index for November
• Core PPI for November
• PPI year over year
• Core PPI year over year
• FOMC interior rate decision
• Fed Chairman Jerome Powell press conference
• Initial jobless claims for Dec. 9
• Import price index for November
• Import price index minus fuel for November
• U.S. retail sales for November
• Retail sales minus autos for November
• Business inventories for November
• Empire State manufacturing survey for December
• Industrial production for November
• Capacity utilization for November

Markets Index Wrap-Up

Stock Markets

All major indexes ended the week and month on a strong run. According to the Wall Street Journal Market Data, the Dow Jones Industrial Average surged by 2.42% even as the DJ Total Stock Market ended 1.16%. The broad-based S&P 500 Index gained 0.77% while the technology tracker Nasdaq Stock Market Composite advanced by 0.38%. The NYSE Composite likewise added 1.75% for the week. The investor risk indicator CBOE Volatility Index (VIX) rose by 1.36%. The weekly winning streak resulted in the first monthly gain by the S&P 500 for July.

The stellar performance for the last week of November was due to favorable news that addressed all the key concerns of the market. The inflation rate continued on its downtrend to the relief of worried investors, prompting the Federal Reserve to comment that it did not see the need to tighten policy from this point on. Corporate earnings came in better than expected, and the economy appeared to defy the gravity of high interest rates. The encouraging macroeconomic performance in November gave the impression that strengthening fundamentals may support further improvement, although this did not discount the possibility of an occasional hiccup now and then as we advance to 2024. It is safe to say, however, that 2023 is headed towards the market’s highs for the year, which promises to springboard towards a strong opening for the new year.

U.S. Economy

The Commerce Department reported on Thursday that the core personal consumption expenditures (PCE) price index, which excludes food and energy, rose 0.2% in October, marking a slowdown from September. The core PCE index is the Federal Reserve’s preferred inflation gauge since it does not include the more volatile components of consumer spending. This brings the indicator’s year-over-year increase down to 3.5% which is the lowest level since April 2021, although it is still well above the Fed’s 2% target. Core PCE was running even slower over the past six months, chalking up an annualized rate of 2.5%.

A noted Fed hawk, Boar Member Christopher Waller, surprised investors when he announced before the inflation data release that he was “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.” Despite cautioning that further work remained in controlling inflation, he nevertheless acknowledged that “we have seen the most rapid decline in inflation on record,” and that the Fed may start to lower the policy rate if inflation continues to moderate over the coming three to five months.

There was more news to indicate that the economy was indeed headed towards a “soft landing.” In September, personal spending rose by 0.2%, its smallest increase in six months. Personal incomes rose at the same rate. Housing permits rose above expectations although actual starts were lower than expected. The weekly jobless claims inched downward, however, continuing claims climbed above expectations to 1.93 million, their highest level since 2021. The release of the Fed’s Beige Book on Thursday may have boosted hopes that the economy is in the “Goldilocks” scenario – neither too hot nor too cold. The economic activity of the 12 separate districts periodically surveyed by the Fed was split down the middle, with half reporting contraction and the other half reporting growth.

Metals and Mining

Gold did not do much through most of the year, but the past week has given some hope to investors as the precious metals market closed November with strong gains. The market showed its resilience as it bounced off critical support levels and this week set new all-time closing highs. February futures ended the week around $2,090 per ounce and the market realized a healthy gain of more than 4%. Gold prices shot up as investors priced in a potential rate cut as early as March. When the week began, consensus estimated a rate cut by the end of the first quarter of 2024 at 25%. After pronouncements by Fed officials that policy rates may be coming down sooner, those expectations jumped to 52.5%. The worst-case scenario appears to be that the Fed may keep interest rates higher for a little longer than expected, but the central bank’s next move may be likely a cut, making non-yielding assets like precious metals even more attractive.

The spot market for precious metals was mostly up for the week. Gold came from its close last week at $2,000.82 to settle this week at $2,072.22 per troy ounce, up by 3.57%. Silver, which closed a week ago at $24.33, ended this week at $25.49 per troy ounce for a gain of 4.77%.  Platinum gained 0.26% over its close last week at $934.75, ending this week with a closing price of $937.15 per troy ounce. Palladium bucked the trend and lost 6.23% from its previous weekly close at $1,073.00 when it ended this week at $1,006.13 per troy ounce. The three-month LME prices for base metals were mixed for this week. Copper came from last week’s close at $8,409.50 to end this week at $8,464.50 per metric ton for a weekly gain of 0.65%. Zinc lost 2.44% from its previous week’s close at $2,537.50 to end this week at $2,475.50 per metric ton. Aluminum descended by 1.42% from its close last week at $2,224.50 to settle this week at $2,193.00 per metric ton. Tin declined by 5.03% from last week’s closing price of $24,476.00 to end this week at $23,246.00 per metric ton.

Energy and Oil

OPEC+ members agreed to voluntary production cuts that total 2.2 million barrels per day (b/d) for the first quarter of 2024. Saudi Arabia, the group’s de facto leader, rolled over its current voluntary cut of 1 million b/d while Russia increased its pledge to 500,000 b/d. The oil market response to the new OPEC+ deal of 2.2 million b/d voluntary cuts was lukewarm, with Brent erasing all its earlier gains and falling back to $81 per barrel. The production target confusion was aggravated by the fact that markets expected deeper cuts, going over and above what Saudi Arabia or Russia have already curbed from their output. These developments led even the most seasoned industry watchers to begin losing track of which country will be cutting what amount against which reference level, adding further confusion to the direction the market will go.

Natural Gas

For the report week beginning Wednesday, November 22, and ending Wednesday, November 29, 2023, the Henry Hub spot price fell by $0.02 from $2.72 per million British thermal units (MMBtu) to $2.70/MMBtu. Regarding the Henry Hub futures price, the December 2023 NYMEX contract expired on November 28, Tuesday, at $2.706/MMBtu, down by $0.19 from the start of the report week. The January 2024 NYMEX contract price decreased to $2.804/MMBtu, down by $0.23 from the start to the end of the report week. The price of the 12-month strip averaging January 2024 through December 2024 futures contracts declined by $0.12 to $2,983/MMBtu.

International natural gas futures prices declined this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.26 to a weekly average of $16.57/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.45 to a weekly average of $13.97/MMBtu. In the week last year corresponding to this week (the week from November 23 to November 30, 2022), the prices were $31.01/MMBtu and $40.01/MMBtu in East Asia and at the TTF, respectively.

World Markets

This week European stocks rose on optimism about inflation coming under control. The pan-European STOXX Europe 600 Index closed 1.35% higher on news of a steep decline in inflation and falling bond yields, raising investor sentiment. Major stock indexes in the region similarly rose. France’s CAC 40 Index rose by 0.73%, Italy’s FTSE MIB gained by 1.69%, and Germany’s DAX outperformed both by climbing 2.30%. The UK’s FTSE 100 Index added 0.55%. Lower-than-expected inflation data raised expectations that the European Central Bank (ECB) may consider cutting interest rates next year, sending European government bond yields broadly lower this week. In Germany, the yield on the benchmark 10-year government bond descended to its lowest level in more than four months, while the yield on the benchmark 10-year Italian bond fell toward 4%. Bond yields in the UK bucked the broader trend and rose instead from midweek lows, in reaction to hawkish comments by ECB policymakers who commented that despite the drop in the inflation rate, it is not yet time for rate cuts. 

Japan’s stock market ran counter to the broad trend and fell over the week. The Nikkei 225 Index lost by 0.6% while the broader TOPIX Index slid by 0.4%. The sell-off was mostly due to profit-taking after equities rallied in November of expectations that the U.S. interest rates may have peaked. The surging market this month was also supported by a strong corporate earnings season and weakness in the yen that impacted stocks favorably. The yield on the 10-year Japanese government bond fell to 0.71%, from what was 0.77% the week before, tracking the weakness in the U.S. bond market spurred by dovish remarks from the Fed amid signs of slowing economic activity. The yen strengthened to the high-JPY 147 range versus the U.S. dollar from the mid-JPY 149 range in the week before. It was an environment of general weakness in the greenback, due largely to anticipation that policy rates may be cut by the Fed by the first quarter of next year. In the economic arena, the government committed to adopting necessary measures to cushion the negative effects of recent price hikes. It aims to boost growth and help households cope with the rising cost of living by adopting a new economic stimulus package worth more than USD 110 billion.

Chinese stocks likewise declined in response to official indicators that underscored worries about the country’s fragile recovery. The Shanghai Composite Index dropped by 0.31% and the blue-chip CSI 300 gave up 1.56% for the week. Hong Kong’s benchmark Hang Seng Index slumped by 4.15%. October’s economic data presented a mixed picture of China’s economy. The official manufacturing Purchasing Managers’ Index (PMI) surprised on the downside with a below-consensus 49.4 in November. It is lower than October’s 49.5, marking the second straight monthly contraction. The non-manufacturing PMI descended to a lower-than-expected 50.2 in November from 50.6 in October, but since the reading exceeded 50, growth remains expansionary albeit to a lesser degree. Another indicator, the private Caixin/S&P Global survey of manufacturing activity rose to a higher-than-forecasted 50.7 in November from 49.5 in October, as new order growth rose to the highest level since June. Furthermore, in Beijing’s latest effort to boost business confidence, Chinese authorities issued a 25-point plan to strengthen financial support for the private sector. The measures are geared towards unblocking financial channels such as loans, bonds, and equity financing.

The Week Ahead

This week, among the important economic data expected to be released, are the October JOLTS report, the November unemployment rate, and preliminary consumer sentiment for December.

Key Topics to Watch

• Factory orders for October
• S&P U.S. services PMI for November
• ISM services for November
• Job opening for October
• ADP employment for November
• U.S. productivity (revision) for Q3
• U.S. trade deficit for October
• Initial jobless claims (December 2)
• Wholesale inventories for October
• Consumer credit for October
• Consumer sentiment (prelim) for December
• U.S. unemployment report for November
• U.S. unemployment rate for November
• U.S. hourly wages for November
• Hourly wages year-over-year

Markets Index Wrap-Up

Stock Markets

The past week was a holiday-shortened trading week as the Thanksgiving celebration closed the markets on Thursday while Friday saw a truncated trading session that ended at 1 p.m. EST instead of the usual 4 p.m. The major stock indexes ended up on mostly quiet trading. The Dow Jones Industrial Average (DJIA) advanced by 1.27% while the DJ Total Stock Market Index performed almost as well by gaining 1.25%. The broad-based S&P 500 Index gained 1.13% and the technology-tracking Nasdaq Stock Market Composite inched up by 0.97%. The NYSE Composite Index ascended by 1.70%. Investor risk perception eased as the CBOE Volatility Index (VIX) descended by 12.99%. The shortened trading session on Friday was also followed by bond markets which also closed early in observance of the holiday weekend.

The markets have historically performed well after Thanksgiving such that for three decades, the average return in December has been recorded at 1%. Three-fourths of the time, the market registered post-holiday gains, so much of the uptick may be attributed to seasonality, with market gains expected to continue the following year. Leading to Thanksgiving, the market trekked an upswing that added to a strong year-to-date gain. Going back to the 1950s, there were 19 instances when the market came into the holiday season with a year-to-date gain of 20% or more; the average return was 17% in the year that followed.

This week, there was one third-quarter earnings report carefully monitored by investors. NVIDIA is an artificial intelligence chipmaker that was recently the world’s sixth-largest company by market capitalization. The company beat earnings and revenues estimates in its earnings report this week but issues forward-looking cautious guidance due to export restrictions to China. The weakness in NVIDIA’s stock prices impacted Nadaq’s Composite Index, although overall, growth stocks outperformed value stocks

U.S. Economy

A couple of notable economic releases punctuated an otherwise quiet holiday trading week. The Commerce Department on Wednesday reported that durable goods orders in October had fallen by 5.4%, chalking up the second-biggest decline since April 2020. The slide was largely attributable to a steep drop in highly volatile civilian aircraft orders. However, orders excluding aircraft and defense purchases (typically considered a proxy for business investment) also lost ground slightly for the second straight month.

The second market-moving economic news was released by S&P Global on Friday regarding its estimates of growth in business activity in November. The report reflected the fastest pickup in the services sector in the last four months, compensating for a bigger-than-expected slowdown in manufacturing. S&P also noted, however, that “relatively subdued demand conditions and dwindling backlogs led firms to cut their workforce numbers for the first time since June 2020,” tempering market sentiment that perked at the reported acceleration in services.

Metals and Mining

While gold appears stuck in range trading, its striking distance of close to $2,000 can be viewed optimistically. The fact that it has reached this important milestone while most Western investors have shunned the market hints at exciting possibilities for gold as an investment even as it treads water. Simultaneously, the precious metal is approaching its best seasonal period of the year. Analysts noted that in the last six years, gold prices had seen an average return of 4% in December while silver prices have seen an average return of 7.25%. While there is reason for healthy optimism, potential risks still exist. The cease-fire between Israel and Hamas tends to reduce safe-haven demand for gold. The Federal Reserve also continues to hold sway over the future of precious metals. The minutes of the November monetary policy meeting of the Fed released this past week signaled policymakers’ continued intention towards a restrictive monetary policy for the foreseeable future.

The spot prices of precious metals went up this week. Gold closed the week at $2,000.82 per troy ounce, 1.01% above last week’s closing price of $1,980.82. Silver ended at $24.33 per troy ounce, 2.57% higher than the week ago’s $23.72 close. Platinum settled at $934.75 per troy ounce, higher by 3.55% from last week’s close at $902.72. Palladium ended at $1,073.00 per troy ounce for the week, gaining 1.53% from the previous week’s close at $1,056.78. The three-month LME prices of industrial metals were mixed. Copper gained by 1.72% from the prior week’s closing price of $8,267.00 to end the week at $8,409.50 per metric ton. Zinc, which closed at $2,555.00 a week ago, ended this week at $2,537.50 per metric ton for a slight loss of 0.68%. Aluminum, which came from a closing price of $2,207.00 the week previous, closed this week at $2,224.50 per metric ton to lock in a gain of 0.79%. Tin slid by 1.51% from last week’s closing price of $24,852.00 to finish this week at $24,476.00 per metric ton.

Energy and Oil

The volatility in oil prices over the past weeks was settled down as market participants await the results of the next OPEC meeting. The event was postponed from its original schedule this week to November 30 and was revised from an in-person summit to an online conference due to quota spat. Speculations ran rife that the negotiation of production quotas with African oil producers Angola, Nigeria, and the Congo, has been met with significant resistance. OPEC+ said after its last meeting in June that the 2024 output quotas of the three were conditional on reviews by outside analysts. Other members of the group defy calls to chip in with cuts. The surprise delay of the meeting sent oil prices sliding, The ICE Brent front-month futures have settled within a narrow range of $81-83 per barrel for the entire week, with the main developments firmly focused on the Eurasian landscape in light of the Thanksgiving holidays in the U.S. Higher U.S. inventories offset a better outlook for China’s property sector, thus the trendsetter for the next weeks’ pricing direction remains with the OPEC+ impending meeting.

Natural Gas

Colombia’s national oil company Ecopetrol is planning to start importing natural gas from Venezuela. The move is prompted by the cheaper cost offered by Venezuela at $5 per MMCf which is significantly lower than Colombia’s current import options. In other developments, the U.S. Federal Energy Regulator Commission greenlighted Freeport LNG’s request to ramp up production to full capacity, bringing Phase II infrastructure back and taking the total liquefaction rate back to 2.1 billion cubic feet per day.

World Markets

The pan-European STOXX Europe 600 Index rose by 0.91% in local currency terms amid hopes that central banks may start cutting interest rates in the next year’s first semester. The major stock indexes in the region were listless in the absence of any strong trend. Germany’s DAX climbed by 0.69% and France’s CAC 40 Index did a bit better by rising 0.81%, but Italy’s FTSE MIB dipped by 0.22% and the UK’s FTSE 100 slid by 0.21%. European government bond yields moved higher. Germany’s 10-year government bond edged up from a more than two-month low of 2.516% earlier in the week. The yields climbed after Germany was reported to contemplate suspending debt limits for the fourth consecutive year. Additional support was due to statements suggesting that the European Central Bank (ECB) policymakers are determined to keep monetary policy tight for the time being. French and Swiss bond yields also rose. In the U.K., the Purchasing Managers’ Index (PMI) unexpectedly rose into positive territory in November, moving the yield on the 10-year benchmark bond higher. The ECB tried to dampen hopes of any impending rate cuts by reiterating that the fight to rein in inflation was not finished and may last for “the next couple of quarters.”

Japan’s equities markets recorded modest returns for the week as the Nikkei gained by 0.1% and the broader TOPIX remained flat. In early optimistic trading during the week, the Nikkei rose to its highest level since 1990 on the back of a strong domestic corporate earnings season. Manufacturers’ earnings benefited from weakness in the yen and easing supply chain constraints. Sentiment was also supported by expectations that the U.S. interest rates may have peaked, pushing growth stocks noticeably higher. Economic news also created some impact, with a hot October consumer inflation report stoked speculation that the Bank of Japan (BoJ) may push further monetary policy normalization. According to flash PMI data, private sector activity stalled in November, due mainly to further deterioration in business conditions in manufacturing. Based on these developments, the yield on the 10-year Japanese government bond (JBG) ascended to 0.77% from 0.72% at the end of the previous week. For the second consecutive week, the BoJ reduced its JGB purchase operations. In the currency market, the yen finished the week mostly unchanged despite initially strengthening to its highest level in more than two months and amid general weakness in the U.S. dollar. The yen remained at about JPY 149 against the greenback.

Chinese stocks retreated despite news that Beijing may introduce fresh stimulus measures for the property sector as investors viewed the announcement as inadequate to alleviate the country’s broader economic concerns. The Shanghai Composite Index dipped by 0.44% while the blue-chip CSI 300 gave up 0.84%. Hong Kong’s benchmark Hang Seng Index inched up by 0.6%. A funding plan was formulated by Chinese regulators for property developers in the hope of staving off an ongoing property crisis. Reportedly including 50 private and state-owned developers, the list will act as a guide for financial institutions to deliver a range of financial measures to strengthen balance sheets. In a separate move, the National People’s Congress, China’s parliament, encouraged banks to accelerate support measures for real estate developers to reduce the risk of further defaults and ensure the completion of outstanding housing projects. The reports dovetail with recent property data underscoring a current downturn in a crucial sector of China’s economy. Property investment, sales, and new home prices plummeted in October. Economists expect that Chinese government advisers may propose an economic growth target of 5% in 2024 at the annual Central Economic Work Conference scheduled in December. The measure will aim to promote job growth and to ensure that long-term development goals remain attainable.

The Week Ahead

Among the important economic data scheduled for release in the coming week are the November ISM manufacturing report, the Personal Consumption Expenditures (PCE) inflation data, and the first revision for the third quarter Gross Domestic Product (GDP).

Key Topics to Watch

• New home sales for October
• S&P Case-Shiller home price index (20 cities) for September
• Consumer confidence for November
• Fed Gov Christoper Waller speaks
• Chicago Fed President Austan Goolsbee speaks (Nov. 28)
• Fed Governor Michelle Bowman speaks
• Fed Governor Michale Barr speaks (1:05 p.m., Nov. 28)
• Fed Governor Michale Barr speaks (3:30 p.m., Nov.28)
• GDP (first revision) for Q3
• Advanced U.S. trade balance in goods for October
• Cleveland Fed President Moretta Mester speaks
• Fed Beige Book
• Initial jobless claims (Nov. 25)
• Personal income (nominal) for October
• Personal spending (nominal) for October
• PCE index for October
• Core PCE index for October
• PCE (year-over-year)
• Core PCE (year-over-year)
• New York Fed President John Williams speaks
• Chicago Business Barometer (PMI) for November
• Pending home sales for October
• Fed Governor Michael Barr speaks (Dec. 1)
• ISM manufacturing for November
• Construction spending for October
• Chicago Fed President Austan Goolsbee speaks (Dec. 1)
• Fed Chair Jerome Powell speaks (Dec. 1)
• Fed Chair Jerome Powell and Fed Governor Lisa Cook talk to local leaders in Atlanta
• Auto sales for November

Markets Index Wrap-Up