Asian shares in SYDNEY (Reuters) got off to a hesitant start on Monday, anticipating potentially market-moving inflation data from the United States and Europe later in the week and an oil producer meeting that could either halt or extend the recent price decline.
Given the sizable gains investors have been holding onto, the approaching month-end may warrant some caution. Japan’s Nikkei increased by 0.3% after rising 9% in November.
Outside of Japan, MSCI’s broadest index of shares in the Asia-Pacific region was flat but 6.7% higher for the month.
Nasdaq futures lost 0.2%, while S&P 500 Futures eased 0.1%. The S&P 500 has now posted its best performance since mid-2022, rising 8.7% over the past four consecutive months.
Market expectations that the next change in prices will be negative are supported by the Federal Reserve’s preferred measure of inflation, expected on Thursday, which is anticipated to decrease to its lowest level since mid-2021.
At a Hearth Talk on Friday, Fed Chair Jerome Powell may have the opportunity to push back against these expectations, and at least seven different Fed speakers are scheduled for this week.
According to Bruce Kasman, head of global economics at JPMorgan, “One view we clearly hold is that central banks are unlikely to provide easing in the first half of 2024 unless there is a threat to economic expansion or stability.”
Indeed, given recent economic market developments, this message of patience will likely stand out in future DM policy communications.
OPEC+ Oil Meeting
Christine Lagarde, President of the European Central Bank, has also made it clear that she is in no rush to tighten policy and will have another opportunity to deliver this message to the EU parliament later on Monday.
Title and base rates are expected to cool by Thursday, according to data on EU consumer prices for November, which supports market expectations for price reductions.
Markets have priced in roughly 83 basis points for the ECB and nearly 90 basis points for U.S. easing next month.
Yields on 10-year Treasuries have fallen 37 basis points so far this month to 4.49%, signaling a significant rally in bonds on the prospect of lower borrowing costs.
The currency, which lost 3% against a basket of major counterparts this month, has been negatively affected by this.
The dollar held steady at 149.53 yen on Monday, while the euro was trading at $1.0940, not far from its recent four-month high of $1.0965.
The decline in yields has boosted non-yielding gold, which was trading at $2,000 per ounce and nearing its October high of $2,009.29.
An OPEC+ meeting on November 30 is causing tension in the oil sector in the weeks leading up to it. Originally scheduled for Sunday, it was postponed as suppliers struggled to reach an agreement. Reports suggest that Saudi Arabia may extend its voluntary production cut of 1 million bpd, which is set to expire at the end of December, while American oil producers are reportedly seeking higher caps for 2024.
On Monday, prices remained low due to uncertainty, with Brent rising 15 cents to $80.73 per barrel and U.S. crude rising by 14% to $77.68.