Headlines

* Wall Street edges lower ahead of Powell remarks, jobs report

* Cyber Monday sets sales record as shoppers splurge on toys, electronics

* Eurozone inflation poised to slow as peak is seen near or even passed

* US dollar rises for a third day amid uncertainty over US monetary policy

FX: USD made more modest gains and closed near its highs for the day. The DXY stalled ahead of 107 before some notable risk events. US Treasury yields moved back up to 3.75% on Chinese reopening hopes and rising oil prices.

EUR/USD is nursing losses after softer-than-expected German and Spanish inflation data.  Focus switches to the incoming Eurozone figures released this morning. GBP/USD is sat near yesterday’s low and below 1.20. The BoE Governor Bailey recently noted that the gilt market is not back to normal. He also stated that the shock to real incomes is pushing the UK into a recession. USD/JPY remained steady near its recent lows but above 138.

The antipodeans steadied, benefitting from a softer dollar. Mixed data releases included weaker monthly CPI numbers which may take the hawkish pressure off the RBA. Gold remained relatively subdued and rangebound. Traders await Powell’s remarks and key US data releases.

Stocks: US equities closed a mixed bag as the Dow edged up by three points at 33,852. The S&P500 ended lower by 0.16% and the Nasdaq lost 0.73% as both indices closed down for a third straight day. Defensives outperformed cyclicals with gains in energy and materials companies.

Asian stocks have eventually traded higher into month end. But gains have been capped by the relatively quiet Wall Street handover and disappointing Chinese PMI data.  The Hang Seng gains were meagre as the potential easing of Covid controls did battle with PMI numbers slipping further into contraction. US equity futures are very modestly in the green. European equity futures are positive after the cash market closed flat yesterday.

Day Ahead – Powell Speech in focus

Fed Chair Powell will be on the wires later today (18:30 GMT) discussing the economic outlook and labour markets. This has the potential to be market-moving guidance just before the Fed’s blackout period. Despite the downside miss in the October CPI report, expectations are for Powell to reiterate the key messages from the November FOMC press conference. This attempted to shift the emphasis away from a downshift in December and towards the Fed’s broader tightening campaign.

It’s unlikely Powell will push back on pricing of a 50bp hike in December. Even hawkish voters like Waller and Mester have indicated their openness to the slower increase. Attention will also be on whether he repeats the language that it is “very premature” to contemplate pausing and that tightening has “a ways to go”. The Fed may be concerned about the recent easing in financial conditions. This could lead to some support for the dollar in the near term if we hear some pushback against this.

Chart of the Day – Dax pauses for breath

The German Dax stock index remains over 20% above its recent lows. This has triggered claims of a bull market from market participants. In contrast, the US benchmark S&P500 index is only up around 12% from its October lows. Sentiment has been lifted by hopes that the pace of ECB tightening will slow. The region’s energy crunch has so far avoided the worst of outcomes. This is due to filled natural gas reserves and more efficient energy usage.

But headwinds are ever present with a recession looming. High energy prices will be passed onto consumers and weigh on private consumption. Today’s Eurozone CPI data is expected to ease. Technically, the Dax didn’t quite make the June high at 14,709. Gains were capped by a Fib level (61.8%) of this year’s downtrend at 14,581. Near-term resistance sits at last week’s high at 14,571. Support is 14,149. The midway level of this year’s downtrend resides at 14,076.