Week ahead: market insights for the 22nd of November
Last week didn’t see much in the way of fresh catalysts. We started out with a broadly stronger dollar and choppier action in major US equities.
US Indices resumed their march higher and some dollar selling came in on Wednesday, albeit with little follow through.
Tricky times in FX too. Fundamentally, there seem to be few reasons to bet against the dollar, although the rally is looking stretched from a technical perspective.
Key data points this week are the Flash PMI’s. We’ll be looking for signs of supply chains and new orders normalising & if the transition from goods to services activity is continuing. Plus:
- RBNZ Interest Rate Decision
- German IFO Business Confidence & GfK Consumer Confidence
- US Durable Goods Orders
- Core PCE Inflation & FOMC Minutes
Rarely is there much focus on the New Zealand Dollar. This week may prove to be an exception.
The RBNZ will announce their rate decision at 01.00 (GMT) on Wednesday, with a press conference an hour later.
Markets already expect a 25bps OCR hike (to 0.75%), and pricing a 36% chance of a 50bps hike at the time of writing.
Strange as it seems, that probability could be underpriced.
Back in August, the RBNZ wanted to start hiking.
Unfortunately the meeting fell on the same day that New Zealand went into lockdown. Under those circumstances the central bank felt it would have been hard to communicate the case for hiking so held rates steady.
The hike was postponed until the October meeting when a 25bps increase was announced.
Lockdowns seem to have been navigated successfully, and there have been strong upside surprises to both employment and inflation measures since the October meeting.
So, is a 50bps move plausible?
A few days after the decision not to hike at the August meeting, RBNZ Deputy Governor Hawkesby said that “a 50 basis point move was definitely on the table in terms of the options that we actively considered”.
Once this weeks’ meeting is done, the next RBNZ decision is not until February 23rd 2022…
There’s definitely a case to be made for either a 50bps hike or at least strong communication regarding further hikes in 2022.
Markets increasingly anticipate that the Federal Reserve will begin hiking in 2022 and the US economy is ticking over nicely, so let’s look away from the dollar.
Across the Tasman Sea, the RBA reiterated their dovishness in the meeting minutes and Governor Lowe says “it’s still plausible that rate won’t be raised until 2024”
Eyes on AUDNZD for another look at the 1.02 area.
Further monetary policy divergence between the RBA & RBNZ could see more NZD strength, and a continuation of the downtrend.
Increasing energy prices have the Biden administration squirming.
On Friday morning, the White House confirmed that the US discussed a possible joint release of oil from reserves with China and other countries, and reiterated the need for more available supply from OPEC.
There has also been further discussion about the ‘NOPEC’ bill: (No Oil Producing and Exporting Cartels), which would amend and update the 1890 Sherman Antitrust Act that was used to break up Rockefeller’s oil empire.
It’s unlikely that such drastic measures would be taken. However, the pressure on OPEC+ to increase production at a faster pace is constant.
It’s been all talk and no action, but the rhetoric has worked.
We’ve seen a decent pullback from the October high just shy of $85 per barrel, with buyers once again stepping in around the $77 area this past week.
OPEC Secretary General Mohammad Barkindo remains unconvinced of the need to go faster than the current additions of 400k bpd each month.
His comments at a recent energy conference sum the position up well:
- "The surplus is already beginning in December,"
- "The projections, not only from OPEC but from the IEA (International Energy Agency) and other sources, show that throughout the quarters of next year there will be oversupply in the market using the metric of the OECD stocks,"
With warnings over ‘downward pressures’ in the Chinese economy and the prospect of lockdowns and restrictions in Europe again, it’s little wonder we haven’t heard much talk of $100 per barrel lately…
For the past few years, there’s been hype and speculation about an Apple Car. Deals have been discussed with multiple manufacturers, although nothing has ever been publicly confirmed.
Last week, rumours began to circulate again, sending Apple stock through the prior all-time highs
The media love quotes from people familiar with the situation and these folks have been surprisingly chatty…
One thing that really stands out is the potential for a fully autonomous vehicle to be launched by 2025.
According to the Bloomberg report:
The company reached a key milestone in developing the car’s underlying self-driving system, people familiar with the situation said.
Apple believes it has completed much of the core work on the processor it intends to eventually ship in the first generation of the car.
Much has been written about Tesla and their struggles with the FSD technology.
Even so, they are also widely seen as ahead of the competition in this regard, and in many of the software and subscription add-ons.
Tesla stock initially took a tumble in a knee- jerk reaction to the rumours, but recovered into the close.
It’s worth remembering we’ve been here before with Apple Car speculation.
Apple executives have sauntered out to set the record straight in the past, and we may see the same again in coming weeks.
Keep an eye on Tesla if Apple does confirm any of these rumours though, especially regarding FSD technology.
Traditional manufacturers continue to make inroads in the EV space and there’s the potential for increased competition from new names such as Rivian, Nio & Lucid.
If Apple truly threatens the one area that Tesla is expected to dominate, what’s the Tesla USP…?
TIP: Apple’s weighting in the Nasdaq is just over 10% at the current market cap, as is Microsoft. If you’re trading the Nasdaq 100, keep an eye on these two!
Not investment advice. Past performance does not guarantee or predict future performance.
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