Weekly Macro Matters
Macro Matters – Weekly review, w/c December 11
The S&P 500 hit a new 2023 high, bolstered by strong employment data and cooling inflation. Anticipation of dovish pivots from the Federal Reserve and ECB signals potential market shifts ahead.
TradeDay Macro Matters
Macroeconomic / Geopolitical Developments
• S&P 500 Hits New 2023 High
The S&P 500 reached a yearly high on December 8, driven by a robust November jobs report and improved consumer sentiment. Major indices extended their six-week rally as optimism around a “soft landing” scenario grew, fueled by declining inflation expectations and resilient economic data. Stocks like Boeing, FedEx, and Costco also surged to yearly highs.
• PMI Beat Expectations
The European composite PMI rose to 47.6, its highest since July, surpassing expectations. Similarly, the US ISM Services PMI climbed to 52.7, reflecting growth in business activity and other subindices. These improvements highlight economic resilience despite global uncertainties.
• US Employment Report Indicates Soft Landing
November saw the addition of 199,000 jobs, reducing the unemployment rate to 3.7%. This strong performance suggests cautious hiring and a gradual return to pre-pandemic norms. Analysts predict slower growth and reduced inflation, with potential delays to rate cuts as the Fed monitors economic impacts.
• University of Michigan Survey Shows Cooling Inflation, Consumer Sentiment Jump
The survey revealed a significant drop in the one-year inflation outlook to 3.1%, the lowest since March 2021, alongside a rise in consumer sentiment to 69.4. These improvements, driven by falling energy prices and interest rate impacts, may influence the Fed’s approach in 2024.
• ECB Dovish Pivot Anticipation
ECB board member Isabel Schnabel signaled a shift from hawkish policy amid falling inflation, now at 2.4%. Investors anticipate rate cuts in 2024, with the first expected by March. ECB leaders, including Christine Lagarde, remain cautious, emphasizing stable rates over the next several quarters.
What’s Ahead
Central Bank Watch:
• Wednesday, December 13: FOMC Interest Rate Decision, Monetary Policy Statement, Projections, and Press Conference.
• Thursday, December 14: SNB, BoE, and ECB Monetary Policy Decisions.
Macro Data Watch:
• Tuesday, December 12: UK Employment Report; EU and German ZEW Economic Sentiment Surveys; US CPI.
• Wednesday, December 13: Japanese Tankan Survey; UK GDP and Manufacturing Data; EU Industrial Production; US PPI.
• Thursday, December 14: Australian Employment Report; US Retail Sales.
• Friday, December 15: China Industrial Production and Retail Sales; Global Composite, Services, and Manufacturing Flash PMI from S&P Global.
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