Will there be a Santa rally? Equities have rallied strongly in November, with markets betting inflation has peaked, allowing central banks to slow interest rate hikes. However, recession risks remain, which could undermine corporate earnings growth, suggesting the recent equity rally may be overdone relative to the economic outlook. Government bonds have also rebounded but offer appeal as a hedge given lingering uncertainty; further moderate yield declines seem plausible for softening growth and inflation. Key upcoming data and the Fed chair speech will drive volatility, but investors should be cautious of extrapolating the recent optimism too far, given headwinds still facing the global economy and concern over the resurfacing of health crisis in China.

EQUITY

Wall Street closed flat Wednesday but remains on track for strong November gains, engulfing two months of weakness. GM surged over 9% on an accelerated $10 billion buyback and dividend hike, while CrowdStrike and Intuit also rose on earnings beats. Treasury yields extended declines after upwardly revised Q3 GDP growth of 5.2% ahead of a key inflation report. Meanwhile, the UAW announced plans to unionise nonunion automakers like Tesla to secure better worker wages and benefits, sending shares lower.

GOLD

Gold reached prices not seen since 2020 as the precious metal edged towards a technical "golden cross" indicator that may trigger profit-taking after the asset was lifted by inflation hedging and expectations of slower Fed hikes. Thus, analysts forecast the bullion could break past record highs if the favourable macroclimate and strong central bank buying continue.

OIL

Crude prices gained ahead of the OPEC+ meeting, where the cartel is expected to announce a fresh supply cut to shore up the market. An unexpected 1.6 million barrel build in U.S. stockpiles indicated weak demand, with contractions seen in Chinese manufacturing. Disruptions in Kazakhstan and Russia, which have severely capped output in the Black Sea region, provided some upside. 

CURRENCY

The US dollar steadied after sizable declines over four days to a three-month low versus the euro and yen. Upcoming PCE inflation and Q3 GDP data, as well as a speech by Fed Chair Powell, will drive conviction on whether moderating price pressures coupled with a cooling labour market will halt tightening and commence rate cuts in 2024. Markets focus shifted as to when loosening may start amid broad dollar weakness in November, while the yuan surging on steady PBoC support.