Giving Thanks
The Other Side of the Planet:
U.S. equity futures are down about -.5% this morning on concerns that Chinese protests will slow the global economy further.
Over the weekend, demonstrations broke out in mainland China as citizens have grown frustrated with Beijing’s zero-Covid policy.
Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world’s second-biggest economy was on its way to reopening.
Last week, the S&P 500 rallied +1.5%. Its loss year to date now sits at -15.5%. The Dow Jones, which is price-weighted and more value tilted, has declined only -3.7% on the year. The Tech heavy Nasdaq is still down almost -28% year to date.
Interest rates rallied last week sending the 10-year yield down -15 bps to 3.68%.
A weaker China is also weighing on oil prices, with WTI down more than 3% to under $74, the lowest level this year, down from about $124 in March, and now down year over year.
The price per barrel has lost 14.6% since November began, putting it on track for its worst month since November 2021, when it dropped 20.8%.
Economic data and Federal Reserve watchers will have a busy week. Fed Chairman Powell speaks on Wednesday.
Powell is expected to leave the door open for a smaller 50 bp move on December 14, while also trying to avoid fanning financial conditions higher by underscoring that slower doesn’t mean lower. It’s doubtful he will tone down his hawkish rhetoric. While inflation appears to have peaked and Fed policy is now restrictive, the economy appears to be doing ok and the labor market remains tight.
Powell is expected to leave the door open for rate tapering and a lighter 50 bp move on December 14th. He will also try to avoid fanning financial conditions higher by underscoring that slower doesn’t mean lower.
It’s doubtful he will tone down his hawkish rhetoric. While inflation appears to have peaked and policy is now restrictive, the economy appears to be holding up well and the labor market remains tight.
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