- US S&P Global services PMI 44.4 vs 46.8 expected
- Fed's Williams: We're well on the way to where we need to be
- Fed's Mester: Recent inflation data is welcome news
- Fed's Daly: We are resolute and focused on bringing inflation down
- More from Fed's Daly: I don't know why markets are so optimistic on inflation
- Baker Hughes oil rig count -5 to 620
- Italy's central bank forecasts 7.3% inflation in 2023
- Canada November new housing price index -0.2% vs -0.2% prior
- Canada Oct wholesale trade +2.1% vs +1.3% expected
Markets:
- Gold up $16 to $1793
- US 10-year yields up 3.6 bps to 3.48%
- WTI crude oil down $1.80 to $74.31
- S&P 500 down 43 points to 3852 (-1.1%)
- JPY leads, CHF lags
The market continued to digest the Fed and ECB stance on Friday and the message is a souring of the mood, leading to selling of equities and the euro on slowing growth prospects.
USD/JPY fell as the bond market stridently expresses the view that the Fed won't hike as high as it's promising, with the terminal rate in Fed fund futures at 4.84% and US 2s lower than at the start of the week. USD/JPY fell after the S&P Global US PMI showed an economy slowing rapidly. It sank as low as 136.30 then bounced to 136.67 to wrap up the week. That move reversed all of yesterday's rally in US trading.
Cable continued to struggle, falling a quarter cent on the day even as the US dollar felt some pressure elsewhere. There was some good news with energy prices falling on better weather forecasts but it didn't translate.
Putting all the pieces together today was challenging with quad witching in stocks and year-end fast approaching. Next week will be all about flows but we did get a taste today of Fed messaging and officials pushed the idea of higher rates but not with the enthusiasm of Powell.
Oil may be exemplifying the intensifying fears on the global economy as it fell as much as $4 from high to low today. There was a surprise reprieve as the US announced purchases for the SPR starting in Feb. The 3 million barrels is a small amount but it would signal some support for crude.
