The financial markets are already getting ready for a new week of trading. The most impactful factor on investor sentiment will remain key economic indicators and market movements. We are expecting the first reading of November’s Consumer Price Index (CPI) on Tuesday. We expect this report to continue providing necessary context on inflation trends to inform the likely impact on Federal Reserve policy. At the same time, OPEC+ decided to halt planned increases in production, sending oil prices up nearly 2%. Reimagine the euro as an emoji! It closed last week just above $1.16 against the dollar, and investors are closely watching for signs of breaking through important resistance levels.
On top of all of these changes, analysts are expecting that the Federal Reserve will lower interest rates on December 12th. This decision comes against the backdrop of continued strength in U.S. manufacturing and services sectors. Indeed, while equity markets have been perking up, cryptocurrencies have crumpled, with the worst of these suffering most—Bitcoin has plunged back below $90,000. This article takes a look at some of the major economic signals and market trends that investors will want to keep an eye on this week.
Upcoming Economic Indicators
The release of the very first reading for November’s CPI is among the most highly-anticipated events this week. Set to be released on Tuesday, this report should give us an early look at any inflationary pressures the economy is facing. Consensus economists forecast both headline and core annual CPI to stay the course at 2.1% and 2.4%, respectively. These figures are incredibly important. The Federal Reserve is furrowing its brow at them as they get ready for their next meeting.
Core Personal Consumption Expenditures (PCE) index, which is the Fed’s preferred inflation measure, is being closely watched. This data is frequently cited as the Fed’s preferred measure of inflation. It will be one of the last big economic releases before the much awaited rate cut meeting next week. With an 80% probability of a rate cut unless inflation data indicates a significant reduction, market participants are keen to understand how these indicators will influence monetary policy.
Along with inflation metrics, analysts are hopeful about U.S. economic performance. They see a very robust rebound from the manufacturing and service sector surveys. This robust growth would be another great sign bolstering the booming confidence in the U.S. economy. Investors are keenly focused on these measurements as they judge market conditions heading into the Fed’s September meeting.
Market Reactions and Trends
OPEC+ reassured everyone this week that they will implement no new production increases in the new year. Consequently, oil prices have jumped by almost 2%. This decision comes amid ongoing discussions about global supply and demand dynamics, and it reflects the organization’s strategy to stabilize prices in an uncertain market. Consequently, traders are closely watching energy stocks and related sectors for possible investment opportunities.
At the same time, European stocks have held up remarkably well, thanks mainly to banking, defense and renewable sectors. Notably, indices such as the FTSE 100, DAX, CAC 40, and Eurostoxx 50 have outperformed both the Nasdaq 100 and S&P 500 on a currency-adjusted basis. This trend speaks to a larger phenomenon of changing market dynamics as European markets remain an area of focus for investors amidst a more volatile U.S. equity environment.
Just as remarkable, on Friday, shares of Intel skyrocketed by 10%. That increase came on the heels of an analyst report suggesting that Intel would be the biggest supplier of chips for Apple. This expansion marks a growing investor confidence in Intel’s long-term promise as it deepens relationships with the nation’s biggest technology partners.
Cryptocurrency and Precious Metals
It’s been a pretty rough week for cryptos. Bitcoin has been on a downward trend, dropping over 5% on Monday, dipping back under the $90,000 on Tuesday. This downturn, once again, causes one to question the market confidence in digital assets, especially with advancing regulatory scrutiny globally.
Gold prices have recovered, sailing back above $4,200 per ounce. As investors scramble for safe-haven assets during times of economic uncertainty, gold continues to be a go-to for those looking to diversify their portfolio. The diverging fortunes of cryptos and PMs highlight the speculative boom and bust nature that has gripped financial markets in 2020 and beyond.
Though traders are moving to digest these developments, they now must continue digesting how economic indicators more broadly will shape market psychology moving forward. The interplay between inflation data, central bank policies, and geopolitical factors will remain critical as investors position themselves for potential opportunities.