Hang Seng jumps over 3% after an encouraging Biden – Jinping face-to-face meeting. Weak Chinese industrial production and retail sales fuel hopes of further stimulus.
•GBP/USD rises after a mixed jobs report with unemployment and wages rising.
•German ZEW economic sentiment is forecast to imp; DAX trades at a 5-month high.
•US PPI is expected to cool to 8.3% YoY, down from 8.5%. Could this push the S&P500 over 4000?
Stocks on Wall Street closed lower on Monday after a reality check from several Federal Reserve speakers. Fed Governor Waller and Vice Chair Lael Brainard suggested that the time could be approaching for the pace of rate hikes to slow. However, they added that there was still much work to be done to rein in inflation. In other words, rates are likely to remain higher for longer.
Asian stocks have seen an upbeat session following the meeting between President Biden and China’s Xi Jinping, which saw the two leaders move to stabilise relations. In the first face-to-face meeting since Biden took office, the leaders agreed to resume talks on major global priorities while acknowledging areas of profound disagreement.
The Hang Seng jumped over 3.6%, while the Hang Seng tech index surged over 6%. The Biden – Jinping meeting has overshadowed weaker-than-expected Chinese industrial production data. China’s factory output grew by a smaller than-forecast 5% in October. Meanwhile, retail sales fell by –0.5%, defying expectations of a 2.5% rise.
The data suggests that China’s economy is losing momentum as it struggles with COVID restrictions and a property downturn. While recent moves to ease some zero-COVID measures and support the property market have helped sentiment rebound recently, this data shows that the strict zero-COVID policy continues to hit economic growth. Investors are hoping for more stimulus measures lifting stocks.
Europe points to a mixed open ahead of a busy day for economic data. The DAX points to a 0.24% rise as it trades around a five-month high. The FTSE points to a modestly weaker open as its falls away from 7400.
UK jobs data was mixed. On the one hand, unemployment rose to 3.6%, up from 3.5%,
employment fell to 75.5%, and wages rose. Average earnings excluding bonuses rose by a larger than forecast 5.7%.
GBP/USD has risen following the release, as higher wages add to inflationary pressures,
suggesting that the BoE still has plenty of work to be done to rein in inflation.
German ZEW economic sentiment
Looking ahead, Eurozone GDP data is expected to confirm that the Eurozone economy avoided contraction in Q3. This is the second reading, so it isn’t expected to be so market-moving. Instead, more attention is likely to be on German ZEW economic sentiment data, which is expected to rise to -50 in November, from -59.2, possibly helped higher by government support to households and small businesses to pay gas bills.
In the US session, in addition to earnings from Walmart and Home Depot, which could shed some light on how the US consumer is holding up, attention will also be on PPI data. Inflation at the factory gate level is expected to fall slightly to 8.3%, down from 8.5%. PPI is often considered a lead indicator for consumer price inflation. A cooling in PPI could fuel bets of a less aggressive Fed and help stocks push higher and pull the USD lower. Could cooler PPI boost the S&P500 over 4000?
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Sources: Bloomberg, CNBC, Reuters
Original article provided by Trading Writers