By Andy Silvester
Asian stocks climbed on Monday, aligning with Wall Street’s Friday rally, while Treasuries and the dollar held firm, unfazed by Moody’s downgrade of the U.S. credit outlook to “negative.” In contrast, oil prices dipped on concerns over fading demand in the U.S. and China.
Demand fears drive oil prices lower
Oil prices retreated on Monday, reversing Friday’s gains, as concerns about diminished demand in the U.S. and China impacted market sentiment. Brent crude for January dropped 0.96% to $80.65 a barrel, and U.S. West Texas Intermediate for December fell 1.0% to $76.40. Despite a nearly 2% rise on Friday with Iraq supporting OPEC+ oil cuts, both benchmarks recorded a 4% weekly loss, marking their third consecutive weeklydecline since May.
Japan’s wholesale inflation slows sharply in October
Japanese wholesale inflation dipped below 1% for the first time since February 2021, signalling a potential alleviation of the cost-push pressures that had been inflating prices. The Corporate Goods Price Index (CGPI) for October increased by 0.8% year-on-year, in line with the market forecast of 0.9%, but notably lower than the 2.2% rise seen in September. This marks the 10th consecutive month of declining wholesale inflation.
Moody’s cuts U.S. credit outlook to ‘negative’; Tim Scott suspends 2024 White House run
Moody’s downgraded the U.S. credit rating outlook from ‘stable’ to ‘negative’ on Friday, citing substantial fiscal deficits and diminished debt affordability. Tim Scott, the only Black Republican in the Senate, suspended his 2024 presidential nomination run on Sunday, removing one more obstacle to a Trump-Biden re-run.
What’s driving global trends this week
Central bankers will convene at the 33rd Frankfurt European Banking Congress to discuss the sustainability of high interest rates in the U.S., UK, and EU. Key U.S. inflation readings, along with labour market and CPI data in the UK and EU, will fuel the ongoing debate on inflation and interest rates.
In Asia, attention will be on Indian inflation, Japanese Q3 GDP, and a decision from the Philippine central bank. The meeting between Joe Biden and Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) will be a focal point. China’s money supply, lending, and ‘total social financing’ will also be in focus. Wednesday’s highlights encompass key figures like October’s retail sales, industrial production, and unemployment rates.
Asian markets soar on Wall Street’s tech boost
Asian stocks rose on Monday, driven by a surge in tech stocks, similar to the U.S. trend last week. Japan’s Nikkei climbed 0.46%, led by chip-related shares, while Taiwan’s tech-heavy benchmark surged 1.17%. Hong Kong’s Hang Seng gained 0.49%, buoyed by strong tech performance. Mainland Chinese blue chips dipped slightly, and Australia’s resource-heavy benchmark slipped 0.13%. U.S. 10-year Treasury yields held steady at about 4.646%, consolidating near their top range since November 3. This followed softer labour market data, easing concerns about a more hawkish Federal Reserve. The U.S. dollar index, just below its post-payrolls peak of 106.01, traded around 105.80. Spot gold edged up 0.1% to $1,939.19 per ounce, and U.S. gold futures rose 0.3% to $1,943.40.
