Summary:
Last Week Review
• The third week in November will experience a gear-shift for market participants as US voters re-elected Donald J Trump on Tuesday Nov 5th which will push for a major re-allocation in assets for the forthcoming months. Meanwhile, the US October inflation rate is expected to tick up to 2.6% YoY by Consensus which is higer than September’s 2.4% YoY.
• Bank of Japan policymakers were divided on how soon they could raise interest rates with some warning of the risk of renewed market volatility, a summary of opinions at the October policy meeting showed on Monday. Many in the nine-member board highlighted the need to scrutinise market developments, particularly yen moves, in determining whether Japan’s economy can weather higher borrowing costs, the summary showed. While the risk of a U.S. hard landing has subsided, the BOJ must spend time scrutinising market developments “as it was too early to conclude markets will restore calm,” one member said. Another member said the BOJ must “take time and exercise caution” when raising rates. Others, however, saw the need to communicate clearly the BOJ’s resolve to continue raising rates if its economic and price forecasts are met, the summary showed.
• China’s consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, data showed on Saturday, even as Beijing doubled down on stimulus to support the sputtering economy. In its latest stimulus measures, the country’s top legislative body approved a 10 trillion yuan ($1.4 trillion) package on Friday to ease local government “hidden debt” burdens, rather than directly injecting money into the world’s second-biggest economy, as some investors had hoped. Analysts say the package will likely do little to boost economic activity, demand and prices in the near term. The consumer price index (CPI) rose 0.3% from a year earlier last month, slowing from September’s 0.4% rise and marking the lowest since June, data from the National Bureau of Statistics showed, short of the 0.4% increase forecast in a Reuters poll of economists.
This Week’s Outlook
• Focus this week was squarely on upcoming consumer price index inflation data for October, for more signs that inflation is easing. The reading comes just a week after the Fed cut interest rates by 25 basis points, and reiterated that future easing will be largely dependent on the path of inflation. This week’s CPI data is expected to factor into the outlook for rates. While U.S. inflation did fall earlier in the year, it turned sticky in recent months amid persistent strength in the economy and the labor market. Beyond the CPI data, focus this week is also on addresses by a string of Fed officials, who are expected to offer more insight into the central bank’s plans for interest rates. Traders are betting on a 65.9% chance for a 25 basis point cut in December, and a 34.1% chance that rates will remain unchanged, CME Fedwatch showed. Futures rose after Wall Street clocked a series of record highs, as markets cheered a Trump victory. The president-elect has vowed to cut corporate taxes and dole out more expansionary policies, which bode well for corporate earnings.
• Investors in Asia have their first chance on Monday to react to a batch of key economic indicators and news out of China, and should do so in a relatively bullish frame of mind after the record-setting rally on Wall Street on Friday. The S&P 500 rose above 6,000 points for the first time, continuing its powerful rally following Donald Trump’s victory in the U.S. presidential election on Tuesday and the Federal Reserve’s interest rate cut on Thursday. That sealed a weekly gain of almost 5%, the S&P 500’s best week since September 2023. This helped lift the MSCI World equity index to a new high on Friday, too. It is worth recapping how monumental last week was for world markets – the U.S. election and Fed rate cut super-charged risk appetite and the dollar, while investors also navigated a UK rate cut and the collapse of the German government.
• OIL prices look set to remain volatile as the geopolitical risk premium of MIDDLE EAST CONFLICT offsets concerns of rising supply and a still-weak demand outlook. Oil prices rose last Friday on reports that IRAN is preparing a retaliatory strike against ISRAEL to be launched from Iraq in the coming days. Prices were also supported by expectations that OPEC+ will postpone its planned December oil production hike for a month or more on concerns of weak global demand and rising supply. For the week, BRENT posted a decline of around 4%, while US WTI crude oil futures fell around 3% as record US production weighed.
• INDONESIA: October’s Car Sales and Consumer Confidence Index will be released on Monday November 11th with Septmeber’s Retail Sales being released on the following day Tuesday November 12th. As Car Sales continue to slump downwards with a shrinkage as much as 9.1% in September, Consumer Confidence has also taken a downward trend as well. Retail Sales, however, were resilient in September but may begin to wane as indicated by the October results from the two prior mentioned leading indicators.
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