General Market Analysis – 28/11/24

US Markets Tepid Ahead of Thanksgiving – Nasdaq Off 0.6%

US stocks suffered a mild setback ahead of today’s Thanksgiving Day break after Core PCE data came in largely as expected, increasing anticipation of a 25-basis-point rate cut from the Federal Reserve in December. The Nasdaq dropped 0.6% on the day as tech stocks bore the brunt of the selling, followed by the S&P, which closed down 0.38%, and the Dow, which ended 0.31% lower. The dollar saw a notable decline, with the DXY down 0.73%. Treasury yields also fell, with the 2-year yield losing 3.1 basis points to settle at 4.223% and the 10-year yield dropping 5.4 basis points to 4.248%. Oil and gold prices had an unusually subdued session, with Brent inching up by just 0.01% to $72.83, WTI edging down 0.02% to $68.72, and gold adding 0.35% to close at $2,638.23.

Fed Cut Bets to Come into Focus in the Coming Weeks

Expectations of a 25-basis-point rate cut by the Federal Reserve in December were slightly reinforced yesterday after PCE data aligned with forecasts, with markets now pricing in a 65% probability of the cut. However, traders anticipate increased volatility in this pricing – and consequently the market – over the next 20 days leading up to the decision. Minutes from the last meeting reaffirmed that FOMC members remain divided, and stronger US economic data, particularly from next week’s critical jobs report or the following week’s CPI release, could prompt a pause on 18 December. Such an outcome would likely drive the dollar significantly higher. With several trading sessions remaining before the decision, focus on the potential rate cut is expected to intensify as we approach the December trading period.

Thanksgiving Day Holiday to Dominate Markets Today

A more subdued trading session is anticipated today, with only a couple of tier-one macroeconomic events on the calendar and liquidity expected to thin as the Thanksgiving Day holiday begins to take effect. The Asian session is relatively quiet, although Australian traders may note RBA Governor Michele Bullock’s evening address. During the European session, German CPI data will be released throughout the day as individual states report separately. However, activity and liquidity are likely to decline significantly as the New York session opens and the holiday mood sets in.

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