Market recap: Week of 13–17 Nov 2023

US fiscal concerns

The Guardian: The credit ratings agency Moody's shifts its outlook on the US government from stable to negative, citing DC division and fiscal risks. Concerns include persistent deficits amid rising interest rates and potential hurdles in reaching a consensus on fiscal plans due to political polarization. With a looming shutdown, bipartisan cooperation is crucial for the House, Senate, and White House to secure funding this week. 

Energy news

Energy.gov: Brent and WTI register third consecutive weekly losses since May, but exit oversold territory. Analysts cite shifting concerns from Middle East production fears to demand worries. Iraq supports OPEC+'s oil cuts, while U.S. energy firms reduce operating rigs for the second consecutive week. The U.S. DOE's Office of Petroleum Reserve plans monthly oil purchases for the Strategic Petroleum Reserve through May 2024 at or below $79 per barrel, aiming to secure cost-effective deals for taxpayers. 

Spending bill

The Hill: Senate Majority Leader Chuck Schumer expresses satisfaction with Speaker Mike Johnson's plan to avert a government shutdown.

Schumer acknowledges the 'laddered' stopgap spending bill's imperfections but sees it as a 'clean' measure to fund the government for the next two months.

US consumer price index

Factset: October 2023 CPI Estimate: 3.3% YoY. If realized, it signals the first decline since June. Last month saw a 3.7% increase.

Meanwhile, the current effective Fed fund rate at 5.33% stands 2% above the forecasted CPI. On 27 Oct, Oppenheimer's investment chief predicts an 18% surge in the S&P 500 by year-end.

Economy update

Yahoo Finance, CNBC, Barrons and Fortune: The Dow Jones Industrial Average was up about 490 points, or 1.4%. The S&P 500 was up 1.9%. The Nasdaq Composite was up 2.4%. In a surprising twist, US October CPI comes in at 3.2% and last month's 3.7%.

Bank of America’s Fund Manager Survey reveals an unprecedented 80% of respondents predicting falling bond yields in 2024, marking a significant shift in sentiment towards lower inflation and rates. Investors are now overweight equities for the first time since April 2022.

Cryptocurrency news

Market Watch: Cryptocurrencies, including Bitcoin, lag behind as stocks and gold surge on positive U.S. inflation data hinting at a potential halt in Fed interest rate hikes.

Bitcoin has slipped 2% to under $36,300, retreating from last week's peak near $38,000.

UK consumer price index

The Guardian and Forbes: The UK's inflation rate took a significant dip to 4.6% in October, marking a two-year low, thanks to reduced costs in gas and electricity.

This decline from September's 6.7% exceeded economists' predictions at 4.8%. 

The smallest increase in two years is steering investor expectations towards potential BoE rate cuts in the coming year.

Notably, HSBC, Halifax Intermediaries, and Virgin Money are responding with adjusted rates, offering competitive fixed rates for home purchases and remortages.

US retail sales

The Wall Street Journal: According to the Commerce Department, U.S. retail sales slipped 0.1% in October, marking the first downturn since March after a 0.9% increase in September.

Higher interest rates impacted auto sales, and lower gas prices reduced station spending.

Even excluding these categories, sales only advanced 0.1%, following a 0.6% average gain in the prior six months.

Home Depot reported a 3.1% drop in same-store sales, and Target's comparable sales fell 4.9% in the three months ending Oct. 28.

Rising borrowing costs and economic uncertainties may contribute to restrained consumer spending.

Gold economy

Reuters: Gold prices saw a notable uptick of over 1% today, driven by a dip in the dollar and Treasury yields.

The surge followed higher-than-expected U.S. weekly jobless claims, reinforcing expectations of a Federal Reserve pause in its interest rate hikes.

The rise in unemployment claims may contribute to the Fed's efforts to curb inflation.

Additional economic indicators include a 3.5-year low in U.S. producer prices for October, and steady U.S. consumer prices reported earlier this week.

European economic risks

ECB and SPGlobal: ECB President Christine Lagarde warns of potential significant hits to EU banks if forced to sell bonds for cash.

Risks, including high inflation affecting households' disposable income, a sharp fall in asset prices, and a deteriorating economy, could amplify each other's impact. 

NPLs are low, but challenges persist.