[Market Review]
U.S. stimulus package negotiations are at an impasse. Recently, U.S. Treasury Secretary Nuchin returned to the stimulus table with a $916 billion proposal. The proposal was supported by Senate Republican leader Mitch McConnell, but was opposed by House Speaker Pelosi and Senate Democratic leader Chuck Schumer. In response, McConnell bluntly criticized the Democrats as “uncooperative”. Today, the only bipartisan consensus is that every effort must be made to avoid a congressional shutdown and to buy time for negotiations on new coronary aid. The current stopgap spending bill expires on Friday, and the U.S. House of Representatives voted to pass a one-week stopgap spending bill, which will be sent to the Senate later. The U.S. Stimulus package talks have stalled, with U.S. stocks slipping from record highs and the dollar index shaking upward, returning to the 91 level.
Gold fell sharply during the day. Gold fell from a two-week high to near $1,830 on worrisome progress in U.S. stimulus package negotiations. The U.S. dollar rose, U.S. equities slipped from record highs, and U.S. Treasury yields rose, reducing demand for non-interest-bearing asset gold.
Silver ended the session sideways. Silver’s trend was roughly similar to gold’s. Earlier in the session, silver was trading at 24.5. Earlier in the session, silver was trading sideways around $24.3. As the dollar strengthened again, silver followed gold’s decline and broke below the $24 barrier, reaching as low as $23.61 per ounce.
Significant differences remain in the UK-EU negotiations. Let’s move on to the news from the UK and Europe. Overnight, British Prime Minister Johnson and European Commission President Von der Leyen had a face-to-face conversation. The market had high expectations for this meeting. However, the outcome was yet another disappointment for the markets. The two sides failed to reach a major consensus as core differences remained. For this reason, the UK and Europe decided to make a firm decision on the future of the negotiations by Sunday. Previously, the pound had fallen sharply against the dollar due to the strong dollar, and with the Brexit news, the pound dived 90 points in the short term.
EU summit will be held. Today, the European Union will hold a summit, where von der Leyen will likely update EU leaders during talks. Sources said that EU leaders will not participate in the debate on the matter of the Brexit trade deal and do not plan to make any decisions on Brexit during the summit. German Chancellor Angela Merkel has said that if Britain continues to reject the EU’s approach, the German government is willing to let the negotiations break down and let Britain move toward a no-deal Brexit. The British Prime Minister’s spokesman also revealed that Johnson made it clear that there would be no negotiations in 2021. This means that if the UK and Europe cannot reach an agreement in the coming days, no new deal will be proposed next year.
The EU budget impasse will be broken. Likewise, the rally in the U.S. dollar, coupled with investors taking out long euro profit taking positions ahead of the ECB interest rate decision, extended the EURUSD decline to over 80 points at one point. In addition, we should also note that Poland and Hungary accepted the EU’s budget package of up to 1.8 trillion euros and are now awaiting approval from the Netherlands and other skeptical member states, according to senior Polish government officials.
EIA crude inventories unexpectedly rose by more than 15 million barrels. Finally, a look at the oil market. Two oil wells in a small oil field in northern Iraq have been bombed. The field was reported to be producing about 25,000 barrels per day. This news supported oil prices at one point. However, the subsequent release of the US EIA’s crude oil inventories, which rose by 15.189 million barrels, hit oil prices hard, with US oil once below $45.
In the bond market
Overnight, the yield on China’s 10-year Treasury note fell by 0.04%, while the yield on the US 10-year Treasury note rose by 0.78% and the yield on the US 3-month Treasury note fell by 4.13%.
In the stock market
The S&P 500 Index fell 0.80%, the Nasdaq fell 1.94%, and the Dow Jones fell 0.35%; this morning, China’s stock market opened in the green, the Shanghai Composite Index fell 0.18%, the ChiNext Index fell 0.32%, and Hong Kong’s Hang Seng Index fell 0.63%.
[Key Outlook]
Canadian Dollar: Bank of Canada stays put U.S. and Canada expected to maintain consolidation
TD Securities noted that the Bank of Canada held back yesterday. The Bank of Canada said it was satisfied with the status quo. Given the uncertainty in the outlook, the Bank of Canada will not reveal much information before the January resolution. TD Securities expects that the USD/CAD will consolidate at the end of the year and is expected to break the 1.30 barrier again.
Pound: UK and EU may reach a preliminary agreement Pound may rise to 1.36
National Australia Bank noted that the UK and the EU have agreed to continue negotiations, which is a positive development for the pound. The bank still believes that the UK and Europe can reach a preliminary agreement by the end of this week or early next week, and the pound is likely to remain volatile in the short term. However, the institution is inclined to buy below 1.33 and could break 1.36 or 1.37 next week.
U.S. stocks: U.S. stocks in the short term, the risk of a correction in the long term or continue to rise
U.S. equity positions look “extreme” and overextended, which increases the risk of a small pullback in the broader market, Goldman Sachs said. Goldman Sachs strategists say the recent surge in hospitalizations for new coronary pneumonia and weaker-than-expected U.S. economic data increase the risk of a short-term correction in U.S. stocks. However, factors including the low interest rate environment and capital flows are supportive of U.S. stocks in the medium term.
[Key Outlook]
20:45 ECB expected to extend emergency bond purchases
First, let’s focus on the interest rate decision that the European Central Bank will announce. Last week, a number of ECB officials also welcomed the extension of the bond-buying program. Some officials said that if the Governing Council proposes to extend the emergency antiepidemic bond-buying program by 12 months to mid-2022, ECB policymakers may agree to the proposal.
Based on this, we believe that the ECB may extend the emergency bond-buying program by 12 months. Nonetheless, sources also reveal that this decision may still be contested, as there are concerns that extending the program for 12 months would expose unreasonable assumptions about the post-pandemic economy.
A number of investment banks believe that the ECB will extend the emergency bond-buying program by six months to the end of 2021, and expand the scale by 500 billion euros. At the same time, the ECB will also adjust its targeted long-term refinancing operations to provide new long-term loans to banks.
21:30 Lagarde or emphasize high economic uncertainty
After the interest rate decision, ECB President Lagarde will speak. Earlier this month she said that the second wave of the epidemic was starting to slow down in Europe, but recent data show that the economy is still sluggish. The ECB will recalibrate some of its tools to support the economy. Earlier she said that the Eurozone economy will be affected by a surge in new cases of coronary cases as uncertainty remains high due to the global increase in new cases. Although the ECB may extend its bond purchases and expand the scale of bond purchases at the interest rate decision, it will still adjust its instruments according to the situation. But it will still adjust its instruments according to the situation.
Therefore, we believe that Lagarde may indicate that economic uncertainty is high and the ECB will adjust its instruments to support the economy if necessary.
All in all, Lagarde’s speech will maintain a cautiously dovish stance, please also pay attention.
21:30 U.S. CPI in November is difficult to show bright performance
Finally, let’s take a look at the November CPI data that will be released in the United States. The CPI has been steadily declining in recent months, recording a 0% monthly rate in October.
By November, the data is hardly bright. The November data can be found, Markit composite PMI final value hit a five-year high, but the ISM non-manufacturing PMI hit a six-month low, non-farm payrolls in November new jobs far less than expected.
At present, the market is expected the U.S. November quarterly CPI monthly rate of 0.1%, if the announced value is greater than expected, or good for the U.S. dollar; otherwise, the U.S. dollar is short.
At the same time, the U.S. will be announced the number of initial jobless claims, you also please consider, make a reasonable layout. If both sets of data are weak, gold is expected to be supported.
Also of note today are the following data.
15:00 UK Three-Monthly GDP Rate for October: Previously 15.5%, Forecast 10.1%.
15:00 UK Oct Manufacturing Output: Previous value 0.2%, Forecast 0.3%.
15:00 UK October Quarterly Merchandise Trade Balance: Previous -9.348bn, Forecast -9.6bn.
15:00 U.K. Oct Industrial Output: previous value 0.5%, forecast 0.3%.
15:45 France October Industrial Output: previous value 1.4%, forecast 0.4%.
21:30 U.S. November quarterly CPI: previous value 0%, forecast 0.1%.
21:30 U.S. initial jobless claims for the week ending Dec. 5: prior 712,000, forecast 725,000.
23:30 EIA Natural Gas Inventories for the week of December 4: Previous -10.0 Bcf, Forecast -86.0 Bcf.
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