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USA and Wall Street
After three consecutive months of selling, US stocks will have a chance to gain in November. Investors usually like November as much as they are afraid of September. Data shows that in the past 11 years, the S&P 500 Index has fallen only once, in November 2021, and in the past 100 years, the index has averaged an increase of more than 1% in November. So far, decreasing the bond yields from above 5% in 10-year treasury bills to under 4.7% following market guess about peaking the rates and ending the rate hike cycle, overall sentiment for the stock markets is positive. At the same time, oil prices have been decreasing, which means the inflation pressures will lower and help the economy to grow better.
Based on published data, the US economy performed much better than expected in the last quarters of this year. The labor market is still tight, and retail sales are increasing. However, lower savings and higher rates can discourage consumers from spending and incurring more expenses. Considering all these conditions and contradictory data, any recession this year should prove short and shallow and confirm the Fed's soft-landing consideration.
Since we already have the NFP numbers and the Fed meeting, for the rest of the month, market participants will mostly be watching economic data, including US inflation and Fed speakers, to be able to guess what we can expect from the last FOMC meeting of the year. Generally, we anticipate US inflation to increase much slower, by only 0.1% in October. Economic data may also show weaker production, a softer housing market, and reduced consumer confidence. This suggests that despite the bankers' emphasis on fighting inflation, we see a lower likelihood of another interest rate hike at the next Federal Reserve meeting. These estimates and expectations could create favorable conditions for the stock markets, while the US dollar will likely experience sideways movement around the 105 mark.
On the data front, we will have Consumer inflation data on the 14th, Producer inflation on the 15th, Trade data, Industrial Production, and the Philadelphia Fed Manufacturing Index (16th), Housing data (17th and 21st), Durable Goods Orders (22end), Market PMIs (24th), New Home Sales (27th), CB Consumer Confidence (28th), GDP numbers (29th), and finally the consumer income and spending on the last day of November.
Europe and UK
While we are at the height of despair in the Eurozone, some positive news is coming out of the UK. Along with the reduction of European consumption power, weaker global economic growth and lower demand from their trading partners increase the pressures on the Eurozone economy. On top of all these challenges, we are getting closer to winter and higher home energy demand and prices, which again can slow down the process of deflation. Fear of an aggressive return of inflation will maintain the European Central Bank's contractionary policies. Still, as growth is expected to slow over the coming quarters, we do not expect to see another rate hike as well.
In early November, weaker PMI numbers reminded us not to expect too much from this month, while the unemployment rate also increased to 6.5%. The European Commission will publish the Eurozone economic outlook on Monday, November 13, which should give us a brighter outlook for the rest of the year.
Looking at the calendar, we have German and Eurozone ZEW Economic Sentiment, current condition numbers, and GDP data on November 14, European Central Bank Non-monetary Policy Meeting and Industrial Production (15th), Eurozone Inflation numbers (17th), European manufacturing, Service and Composite PMIs (23rd), German GDP and Ifo Business climate (24th), Retail Sales, Inflation, GDP and labor market data from the most European countries at the last two days of November. We cannot expect meaningful progress in the coming data, which means that despite some progress at the beginning of the month, the Euro will continue its general weakness of the past months.
The Bank of England did not change its interest rate in the UK at the November 2 meeting. PMI data show some progress in the British economy so far, while inflation fell to 6.7% in September and is expected to fall further to 4.8% in October. We should not forget that GDP data also had better-than-expected results for Q3 and September. These data say that we can be more satisfied with the economic outlook in the UK, which is positive for the Sterling and London Stock markets. As traders, we should remember to watch the economic data closely. For the rest of November, we have Consumer and Producer Price Indexes (15th) and Retail Sales on November 17.
Asia and Oceania
In Asia, Japan has a better condition than others, while in China, despite the recent whispers about more stimulus, investors are worried about the construction and housing markets. Bank of Japan continues its ultra-easy policies, and still, there is no sign of change, which helped the economy to grow despite weaker domestic demand. In China, we still expect the 5% expected GDP growth to be achievable, but for the next year, it is under question. Moreover, in line with more fiscal stimulus, Chinese stock markets need some stabilization in the property sector to forget the recent slide exacerbated by relatively weak domestic demand. For November, we do not see any specific changes in data, but the prospect of improvement is relative, especially with getting closer to New Year celebrations and holidays.
In Australia, the RBA increased the rates to control the recently increased inflation, but we have to admit that it was a risky bet. Higher demand before the New Year can help the economy continue its slight progress in recent months; we can be optimistic. However, tighter conditions can suppress recent slight economic growth.
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