A look at the day ahead in U.S. and global markets from Mike Dolan
A seemingly robust U.S. employment report did little to dissuade markets that another Federal Reserve interest rate is coming this month, and China added to the easy money mix on Monday in a historic change of monetary stance.
With the European Central Bank, Swiss National Bank and Bank of Canada among the major central banks expected to ease policy again this week, markets remain buoyant and Wall Street futures hover near their latest records.
Just three weeks to the end of 2024, the S&P500 is up almost 28% for the year.
The financial calm comes against more volatile geopolitics.
A nervy weekend saw fresh tensions in South Korea and the spectacular collapse of Bashar al-Assad’s regime in Syria, which throws another curve ball into an already fractious Middle East while undermining the credibility of Assad’s foreign sponsors Russia and Iran.
South Korea’s won and stocks fell sharply on the refusal of the ruling party to back impeachment of the president following a botched attempt at martial law last week.
Oil prices ticked up slightly on the Syrian drama.
But Wall St is trying to keep eyes on its own slightly puzzling domestic script and the how the world’s biggest economy is navigating next month’s change of power in Washington.
Headlines on November payrolls and average earnings data on Friday appeared to come in at or above forecast. But there were enough signs of weakness in the slightly higher unemployment rate and related household survey to prod futures markets into upping bets on a Fed cut next week.
As it stands, those markets now see an almost 90% chance the Fed cuts by another quarter point on December 18. The big test of that confidence this week will come from Wednesday’s consumer price inflation update.
Fed Chair Jerome Powell may feel more secure in his job, meantime, after President-elect Donald Trump on Sunday said he would not try to remove him before his term ends in 2026.
But central banks around the world are easing as fast, if not faster, than the Fed.
After another alarming inflation miss and signs of persistent deflation pressures, China surprised on Monday with an historic change of its monetary policy orientation.
Hong Kong stocks surged more than 2% late in the day after state media cited a Politburo meeting as saying China will adopt an “appropriately loose” monetary policy next year as part of steps to support economic growth.
While that seems anodyne on the face of it, given the headwinds China’s facing, it marked the first such shift towards loosening since 2010, and may show one of the ways Beijing is bracing for a threatened trade war with the United States under the incoming Trump administration.
