Equity Markets Higher Overnight

OVERNIGHT

Global equity markets were higher overnight except for certain subsectors of the FTSE which traded fractionally lower. Critical economic data released overnight included an expansion of New Zealand imports/exports, continued weakness in New Zealand retail sales, a slight softening of Japanese coincident and leading economic index readings for September, a minimal increase in Swiss employment, weaker than expected German IFO business climate and current assessment readings for November and a slight increase in German IFO expectations for November. US economic data scheduled for release today includes the Chicago Fed national activity index reading for October, a Dallas Fed Manufacturing Business Index report for November and a two year US treasury note auction at midsession.

CURRENCY FUTURES

With the dollar index taking out last Friday’s massive range up and new contract high with a reversal down today we suspect follow-through selling is likely. However, residual confidence in the dollar arising from Wall Street optimism toward the US treasury secretary nominee and ongoing views the ECB is in a rate cutting mode should underpin the dollar above key support at 106.41. In fact, given the entrenched uptrend in the dollar, minimally positive US scheduled data later this week could add to the technical underpin created by the mid-November consolidation above 106.00. On the other hand, a basket of currencies (Indian rupee, Chinese yuan, Russian ruble, Australian dollar and New Zealand dollar all firmed suggesting a temporary trend reversal.

STOCK INDEX FUTURES

Equity markets were positive around the globe overnight with falling interest rates apparently more than offsetting regulatory problems for Meta, Google and Apple. In fact, Meta was fined €797 million over Facebook marketplace practices. It should also be noted that the headlines are littered with further big tech regulatory problems in India, and the UK which could result in big tech losing the leadership role to the chip sector, energy sector, and the banking sector. However, a US holiday later this week has historically prompted investor optimism, and the approach of Black Friday should provide speculative interest toward retailing. Therefore, Tuesday’s consumer confidence reading and Wednesday’s durable goods orders are likely to amplify the market’s reaction to the kickoff of the holiday shopping season. Unfortunately for the bull camp the net spec and fund long in the S&P is becoming concerned with the market adjusted for the 80 point rally likely presenting the largest net spec and fund long since February 2022.

INTEREST RATE MARKET FUTURES

In addition to a measure of technical short covering we suspect treasury prices forged their gap higher opening trade today off the selection for the US Treasury Secretary nominee who is seen as a possible friend to banks and the energy sector. In addition to the recent track back into a positive yield curve slope, the interest rate markets have speculators and funds shifting into a net spec and fund long in Bonds while the same group of traders continue to hold a massive 850,000 contract net spec and fund short which is within 10% of the record short. The highlight of this week’s economic report slate is likely to be the monthly cycle of quarterly and monthly PCE readings for the month of October. However, Wednesday will also produce critical data on the pace of the economy in the form of durable goods and GDP.

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