October PCE and November Fed minutes in focus
1. On November 25th (Monday) pre-market, U.S. stock futures across the board rose. As of press time, Dow futures were up 0.66%, S&P 500 index futures were up 0.49%, and Nasdaq futures were up 0.54%.
2. As of press time, the German DAX index was up 0.37%, the UK's FTSE 100 index was up 0.19%, the French CAC 40 index was down 0.03%, and the Euro Stoxx 50 index was up 0.22%.
3. As of press time, WTI crude oil was down 0.25%, at $71.06 per barrel. Brent crude oil was down 0.25%, at $74.44 per barrel.
Market News
This week, some U.S. economic data and events are announced in advance due to the U.S. Thanksgiving holiday (Thursday). On the data front, the U.S. initial jobless claims, the third-quarter GDP revision, and the Federal Reserve's favored inflation indicator—the monthly PCE inflation data—are scheduled to be released ahead of time at 21:30 Beijing time on November 27th (Wednesday), and 23:00 Beijing time on November 27th (Wednesday), respectively. The U.S. natural gas inventory data will be released ahead of time at 01:00 Beijing time on November 28th (Thursday), and the U.S. oil rig data will be released ahead of time at 02:00 Beijing time on November 28th (Thursday). On the events front, the minutes of the Federal Reserve's November monetary policy meeting will be released ahead of time at 03:00 Beijing time on November 27th (Wednesday). Investors are advised to take note.
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The U.S. October PCE data and the Federal Reserve's November meeting minutes are the focal points of the week. The U.S. October PCE price index data will be released on Wednesday evening. The market currently estimates that the U.S. October PCE price index will rise 2.3% year-on-year, higher than the 2.1% in September; it is expected that the October core PCE price index, excluding food and energy, will rise 2.8% year-on-year—this would be the largest year-on-year increase since April and higher than the previous value of 2.7%, and rise 0.2% month-on-month—unchanged from the previous value. The minutes of the Federal Reserve's monetary policy meeting released at 03:00 on November 27th (Wednesday) will provide investors with more details on the discussions surrounding the rate cut in November. Currency market pricing shows that investors currently estimate the possibility of a rate cut by the Federal Reserve in December to be slightly above 50%, with a total reduction of only 67 basis points from now until the end of 2025.
After Scott Bessent was nominated as U.S. Treasury Secretary, the dollar's rise took a breather, and the U.S. dollar index fell below 107. Nominated Scott Bessent as the U.S. Secretary of the Treasury, which has somewhat eased the recent upward momentum of the dollar. The dollar weakened against the currencies of the Group of 10 countries, with the euro, pound, and Australian dollar leading the gains against the dollar. Among emerging market currencies, the Mexican peso, Thai baht, and renminbi performed well. The U.S. dollar index fell below 107. The dollar set a record for the longest weekly gain in over a year last Friday, as traders continued to digest fiscal policies, including comprehensive trade tariffs and sustained economic growth. This led to the euro falling to a two-year low against the dollar and the Swiss franc falling to its lowest since July. However, after Bessent's nomination, surveyed market participants believe that this hedge fund manager will adopt a more phased approach to tariffs and attempt to control the budget deficit.
The U.S. bond sell-off fades! As the "anchor of global asset pricing" reaches 4.5%, traders step in to "bottom fish." The U.S. bond market is finally showing signs of stabilization, with investors starting to buy heavily whenever U.S. bond yields test new peaks. Since mid-September, high inflation and a series of strong economic data have significantly pushed up the 10-year U.S. Treasury yield, and there is currently no clear consensus on where the yield may head. However, the "anchor of global asset pricing," the 10-year U.S. Treasury yield, quickly reversed its trend after breaking through 4.5% on November 15th, in a wave of massive buying, and has not broken through this level since. The 10-year U.S. Treasury yield closed at 4.4% last Friday, down 3 basis points from the previous week's close.
MLIV Pulse Survey: A short-term boost for the dollar, but the long-term outlook remains unclear. The latest MLIV Pulse survey shows that the dollar will start 2025 on a solid footing but will face risks such as accelerating U.S. inflation and surging fiscal deficits over the next year. Looking into next year, 89 respondents have differing views on the biggest risk facing the dollar. 38% of respondents are most concerned about the deficit issue. Another 32% believe that if the promised tariffs to be implemented in January next year are imposed, U.S. and global economic growth will slow down next year, putting pressure on the dollar. The Bloomberg Dollar Spot Index set a record for the longest weekly gain in a year last week, reaching its highest point since 2022, as traders believe that policy will support the dollar.
Hedge funds bet big on financial stocks to a 15-year high! Follow or not? According to Goldman Sachs strategists, hedge funds have shifted their stock holdings towards cyclical sectors such as finance. Goldman Sachs strategist David Kostin said in a report on November 22nd, "Hedge funds have reduced their net holdings in healthcare, consumer staples, and real estate while increasing their holdings in financial stocks to the highest level in at least 15 years." The company's basket of "cyclical versus defensive stock pairs" rose 6% on November 6th, the day after, marking the largest single-day increase in cyclical stocks since the World Health Organization declared the COVID-19 pandemic in March 2020.
Tariff worries! This may cause Americans' annual purchasing power to "shrink" by $78 billion. A report from the National Retail Federation (NRF) shows that proposed tariffs on U.S. imported goods could significantly increase the prices of clothing, toys, furniture, home appliances, footwear, and travel goods. The report says that if new tariffs are imposed, U.S. consumers could lose between $46 billion and $78 billion in purchasing power annually, or a loss of $362 to $624 per household. He has stated that he will impose 10% to 20% tariffs on all imported goods and 60% to 100% tariffs on Chinese imported goods. If Mexico does not enact stricter border regulations, he also proposes a 25% tariff on Mexico. According to Goldman Sachs, "the biggest risk is the imposition of high tariffs across the board, which could severely hit economic growth."
Individual stock news
Tesla (TSLA.US) rises more than 2% pre-market due to multiple news stimuli. According to the latest news from social media X, Tesla is actively promoting the domestic launch plan for the Cybertruck, but the model must meet a series of strict safety standards before entering the Chinese market. In addition, Tesla announced on social media a limited-time promotion for the Model Y in China, offering an immediate reduction of 10,000 yuan on the final payment. The promotion is limited to Model Y vehicles ordered and collected between November 25th and December 31st (inclusive). Taking the Model Y rear-wheel-drive version as an example, the total car price is reduced by 10,000 yuan to 239,900 yuan.
It is reported that the U.S. government plans to reduce Intel's (INTC.US) chip subsidies to below $8 billion. According to reports, the U.S. government plans to reduce Intel's (INTC.US) initial federal chip subsidies from $8.5 billion to below $8 billion.
The change takes into account a $3 billion chip manufacturing contract the Pentagon had offered Intel, people familiar with the matter said. In the spring, the government said it would provide Intel with nearly $20 billion in subsidies and loans to boost the company's domestic chip production in the United States, the largest U.S. government subsidy for cutting-edge chip production. The U.S. announced a preliminary agreement that would provide $8.5 billion in subsidies and up to $11 billion in loans to Intel's Arizona plant, some of which would be used to build two new plants and modernize an existing one.
The oil industry mergers and acquisitions continue, with U.S. crude oil pipeline operator ONEOK (OKE.US) acquiring EnLink Midstream (ENLC.US) for $4.3 billion. U.S. oil pipeline operator ONEOK (OKE.US) and EnLink Midstream (ENLC.US) have signed a definitive merger agreement, according to which ONEOK will acquire all outstanding publicly held common units of EnLink in exchange for $4.3 billion in ONEOK common stock. According to the agreement, each EnLink common unit not already owned by ONEOK will be converted into 0.1412 shares of ONEOK common stock. The exchange ratio is derived by dividing $15.75 per unit (equivalent to EnLink's closing price on November 22, 2024) by ONEOK's 10-day volume-weighted average price (VWAP). Overall, ONEOK will issue approximately 37 million shares according to the proposed transaction, representing approximately 6.0% of ONEOK's total outstanding shares following the transaction.