November 11, 2024, has seen significant movements across global markets as investors continue to respond to post-election developments in the U.S., recent geopolitical updates, and economic data out of China. With the U.S. dollar (DXY) strengthening, equities in the green, and a notable slump in crude oil prices, the market dynamics showcase the global economic shifts influenced by the recent U.S. presidential election and ongoing international negotiations.
Equities Rally Across U.S. and European MarketsEuropean Markets
European equities started the week on strong footing, with the Stoxx 600 index gaining 1% by mid-morning, though some of this momentum had moderated by noon. Sectors like Construction & Materials, Insurance, and Chemicals led the way, with Basic Resources slightly underperforming due to recent losses in metals. This sectoral strength reflects a constructive market outlook fueled by optimistic investor sentiment across Europe.
U.S. Equity Futures
In the U.S., all major equity futures are trending upwards, with the Russell 2000 (RTY) outperforming, up by 1.2%, while the S&P 500 (ES) and NASDAQ (NQ) are up by 0.3%. The so-called “Trump Trade” remains a central theme, with investor sentiment buoyed by expectations of pro-growth policies under the new administration. These policy expectations have led to a surge in small-cap stocks, particularly those sensitive to economic growth indicators.
Currency Market Insights: USD Strengthens Amid Trump Trade Optimism
The U.S. dollar index (DXY) began the week with gains as markets processed the likely impact of the Trump administration’s anticipated economic policies. DXY extended above last Friday’s high at 105.20, nearing a post-election peak of 105.44.
Euro and Pound Performance
- Euro (EUR): EUR/USD declined further to trade near 1.06, with limited signs of improvement in the Eurozone outlook. Analysts warn that the euro may test its year-to-date low of 1.0601 unless significant positive economic developments emerge.
- British Pound (GBP): The GBP is down against the USD, though it has fared better than other currencies. GBP/USD remains within the 1.2884-1.2989 range seen last Friday, while EUR/GBP hit a year-to-date low of 0.8282.
Japanese Yen (JPY)
The Japanese yen (JPY) has been the weakest performer among major currencies following the Bank of Japan’s recent Summary of Opinions, which indicated limited urgency for policy rate hikes. USD/JPY climbed as high as 153.85, reflecting a divergence in policy outlooks between the Fed and BoJ.
Fixed Income Markets: European Bonds Gain, U.S. Treasury Trading Closed
European bonds started the week on a positive note, with German Bunds gaining following discussions of an early no-confidence vote, which could disrupt the current coalition but reduce political uncertainty in Germany. German Bund yields have seen some stabilization, reaching a peak of 132.61 before pulling back slightly.
U.S. Treasury trading remains closed in observance of Veterans Day, with U.S. bonds slightly softer following last week’s post-election rally, particularly on expectations of fiscal policies anticipated under Trump’s administration.
Commodity Markets: Crude Oil Slips Amid Middle East Negotiations, Stronger Dollar Weighs on Metals
Crude Oil
Crude oil prices initially showed modest gains but quickly reversed after Al Arabiya reported that Hezbollah indicated ongoing negotiations to halt the conflict in the Middle East. Brent crude fell to session lows of $72.79 per barrel. This potential easing of tensions has weighed on oil prices as markets reassess the likelihood of sustained geopolitical disruptions in oil supply.
Precious Metals
Gold prices declined as the stronger U.S. dollar and lower-than-expected inflation data from China weighed on demand. The precious metal’s appeal as a safe-haven asset has been tempered by investors moving to the USD as a hedge against geopolitical risks.
Base Metals
Base metals like copper have also experienced downward pressure amid China’s economic struggles and lackluster fiscal stimulus announcements. The benchmark 3-month LME copper price dipped below the $9,500 mark, reflecting concerns about industrial demand in China.
Geopolitical Updates: Middle East Developments and U.S. Foreign Policy Outlook
Several notable developments in the Middle East have impacted global risk sentiment:
- Israel-Hezbollah Negotiations: Hezbollah announced ongoing negotiations for a ceasefire in the Israel-Gaza conflict, with Israeli Foreign Minister expressing readiness to end the war once strategic objectives are met.
- Iran and IAEA: The International Atomic Energy Agency (IAEA) is set to visit Tehran, raising hopes of diplomatic progress on nuclear discussions.
- Trump-Putin Call: Reports indicated that President-elect Trump had a phone conversation with Russian President Vladimir Putin to discuss the war in Ukraine, with Trump urging de-escalation. This adds a new dimension to U.S.-Russia relations under the forthcoming administration.
Asia-Pacific Markets and Economic Data
Asian markets showed a subdued start to the week, weighed down by underwhelming Chinese inflation data and a lack of significant fiscal stimulus. China’s Consumer Price Index (CPI) for October came in at -0.3% month-over-month and 0.3% year-over-year, missing expectations. The Producer Price Index (PPI) was also disappointing, posting a year-over-year decline of -2.9%. These figures highlight the persisting economic challenges in China and reflect continued deflationary pressure within its manufacturing sector.
APAC Equities
- ASX 200: Declined, led lower by weakness in commodity and consumer-related sectors.
- Nikkei 225: Traded indecisively, supported slightly by the weaker yen.
- Hang Seng and Shanghai Composite: Chinese stocks were pressured by the underperformance in property and tech sectors, though semiconductor stocks saw support after the U.S. restricted advanced chip exports to China.
Looking Forward: Market Outlook and Investor Takeaways
With U.S. equity markets closed today for Veterans Day and a lack of major economic data releases, trading is expected to remain thin. However, investors are closely watching several factors that could shape near-term market movements:
- Global Policy Shifts: Market sentiment will likely remain influenced by evolving policies under the Trump administration, especially regarding trade, fiscal stimulus, and international relations.
- Geopolitical Risks: Ongoing negotiations in the Middle East and potential changes in U.S.-Russia relations are crucial for risk sentiment. Any concrete agreements could lead to further asset repricing in the crude oil and precious metals markets.
- Economic Data from Key Regions: China’s underwhelming inflation data could prompt additional fiscal or monetary policy measures from the People’s Bank of China, which would impact demand for commodities and industrial inputs globally.
The global market landscape remains sensitive to shifts in U.S. policy and geopolitical dynamics, with the dollar’s strength likely to play a central role. Investors should be prepared for increased volatility as markets adjust to the expected shifts in international and economic policies under the upcoming administration.
