DAILY MARKET NEW - 07-12-2023

Ariff Azraei

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Investment banks and asset managers are divided on 2024 economic predictions, with outlooks ranging from recession to continued growth. While the Fed's aggressive rate hikes are expected to cause an economic slowdown, views diverge on severity, with some foreseeing a mild contraction prompting early rate cuts, others seeing no recession, and rates staying elevated out of fear of reinflation. Stocks could continue to rally or reverse after an almost 20% gain this year, though inflation is widely believed to have peaked. Government bonds are also controversial, with optimistic investors betting on dramatic rate cuts versus those saying markets overshot.


Major US stock indexes fell Wednesday on slow private payroll growth in November. The ADP report showed a 103,000 increase in private payrolls last month, while job gains for October were revised downward. Additional data indicates that slowing job growth and easing price pressures give reason for markets to price in the strong likelihood of a March rate cut. Europe's DAX zoomed past July's high ahead of ECB's December 14 monetary policy meeting, which expects a rate rate earlier than the Fed.


Gold prices edged up as cooling labour data and anticipation of looser monetary policy supported bets on rate cuts in early 2024, though prices stabilised Wednesday after retreating from a record high Monday. Traders now eye Friday's jobs report, next week's inflation data, and the Fed meeting for further clues on the interest rate outlook and its impact on bullion.


Oil prices rebounded slightly after plunging to six-month lows, but doubts persist around weak demand and economic slowdowns. The sell-off came despite OPEC+ agreeing to a voluntary cut of 1 million barrels per day in 2024 on top of 2.2 million barrels already supporting the market, underscoring the group's waning influence as internal disagreements grow. Though Saudi and Russia pledged closer cooperation following high-level talks, disappointing China import data weighs on the price.


The US dollar reached a two-week high as headwind from traders betting that the ECB will cut rates earlier than the fed in March 2024 to combat falling inflation. However, the yuan eased on mixed Chinese trade data and after Moody’s downgraded the country’s credit outlook to negative, while the dollar index held steady above 104 ahead of the US jobs report on Friday, which could provide clear insights into labor market conditions and future fiscal policy.