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Nov. 30, 2022 - China reopening optimism grows; Markets await Fed's Powell


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‼️ China reopening optimism grows; Markets await Fed's Powell

Wall Street posted moderate gains, boosted by a renewed positive performance by Asian and European equities on signs that Beijing is easing some of its strict Covid Zero restrictions. European equities also received a tailwind from data showing that inflation in the Eurozone fell for the first time in a year and a half.

Stocks in both Europe and the U.S. are up for the second consecutive month on the last trading day of the month. Much of the current gains can be attributed to hopes that equity markets will experience a year-end rally and that interest rates in major economies may be nearing their peak. At the same time, investors are concerned that Fed Chairman Jerome Powell will try to dispel those hopes as he is scheduled to deliver a major speech on the economy (18:30 GMT), the labor market and, most importantly, Fed monetary policy. 

I expect Powell to be rather hawkish and reiterate that further tightening is necessary to get inflation back under control. However, signs of a slowdown in the pace of coming rate hikes could support stocks in the near term - which I think is even more likely. In particular, clear signs of an end to 75 basis points of rate hikes could provide some relief - although this is widely expected.

Oil prices continued to rally, as we predicted, as more data pointed to falling crude inventories and colder temperatures, and investors awaited this weekend's OPEC+ meeting, where the group could agree on a production cut.

Measures announced by China to reopen markets would further boost the market, while investors remain cautious ahead of Powell's comments. I expect concerns about further monetary tightening to continue to underperform the growth sector and investors to turn more to defensive stocks (or even bonds). The energy and materials sectors are benefiting from higher commodity prices. 

I see limited upside for the USD, especially after ADP data showed a slowdown in US job growth (and fewer new jobs created than expected). A less aggressive stance from Powell would weigh heavily on the USD later today.


🇺🇸 US Markets ↕️ (headwinds before Powell's speech; then maybe gains)
Cyclical Stocks ↕️
Tech/Growth Stocks ↕️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️
Energy/Materials Stocks ↗️

💱 Forex Markets
AUD, NZD,  CAD ↗️ 
GBP ➡️/↗️
EUR ➡️
JPY, CHF, USD ➡️/↘️

⚒ Commodity Markets ↗️
Oil prices ↗️
Natural Gas prices ➡️/↗️
Metal prices ↗️
Precious Metals ➡️/↗️

⚡️Crypto Market ↕️/↗️
(no recommendation to trade a "recovery")

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 🇨🇳🌅🏦🇺🇸👨🏼‍💼🔍


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