Markets turn risk-averse after bumper month

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Asia started Monday in hesitant fashion and has turned steadily grimmer, although there is no obvious catalyst for the risk-off mood. Most regional share markets are modestly lower, as are Wall Street and European futures.

Treasury yields are a few basis points higher, but that hasn’t helped the dollar which lost ground to a broadly firmer yen. Oil prices have slipped further, while gold hit a six-month high above $2,017 an ounce – although no fundamental factors were evident behind the move.

China’s central bank announced it would encourage financial institutions to support private companies, including with a greater tolerance for non-performing loans. The market didn’t seem impressed and China’s blue chips are down around 1.2 percent.

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There has been a build-up of reports about official steps to support the property sector, including white-listing companies for loans, yet it’s still mostly talk rather than action.

The official China PMI for November is due on Thursday and analysts generally look for a small pick-up and maybe a reading above 50.0.

The approach of the month’s end could also generate some caution given the hefty gains investors are sitting on. Japan’s Nikkei is up more than 8 percent so far in November, as is the S&P 500 – and that would be its best performance since mid-2022.

About 55 percent of the S&P 500’s component shares are trading above their 200-day moving averages, the highest share in nearly two months, according to LPL Financial.

The oil market faces a tense few days ahead of a meeting of OPEC+ on Nov. 30, which was postponed from Sunday as producers struggled to forge a unanimous position.

OPEC+ sources have said that African oil producers are seeking higher caps for 2024, while media reports suggest that Saudi Arabia may extend its additional 1 million bpd voluntary production cut which is due to expire at the end of December.

Brent was down another 0.8 percent today, and 8.6 percent for the month so far, which if sustained would be a boon both for the battle against inflation and for consumer spending power.

The Federal Reserve’s favored measure of inflation – personal consumption expenditures – is due on Thursday and forecast to dip back to 3.1 percent , in part due to falling gas prices. The core is seen easing to 3.5 percent , its lowest since mid-2021.

Data on EU inflation is also due Thursday, along with measures for Germany and Spain.

Core EU inflation is forecast at 3.9 percent, the lowest since the middle of last year. – Reuters

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