Chapter 2 December 4th Financial News
[Quick Facts]
1. Gold opened up $75 on Monday morning.
2. Timiraos: Fed's rate hikes are probably over, but officials are reluctant to say so.
3. Powell pushes back on rate-cut bets, but markets push back harder.
4. Russia plans to raise diesel exports in December.
5. Brazil will join OPEC+, but won't limit oil output.
[News Details]
Gold opened up $75 on Monday morning
Gold opened up $75 or about 3.54% on Monday morning to a new high of $2146.79, and it currently has fallen back to around $2091.23. For reasons, first, the Israeli army attacked the Gaza Strip after the breakdown of the temporary truce, so the market is increasingly worried about the expansion of the Middle East war, thus shoring up the gold price. Second, although Fed's Jerome Powell tried to push back on rate-cut bets in his speech last Friday, weak U.S. economic data and declining inflation made the market push back harder, boosting gold.
Timiraos: Fed's rate hikes are probably over, but officials are reluctant to say so
The Wall Street Journal's reporter Nick Timiraos shared his latest research last Friday, December 1, local time, that he believes that the Federal Reserve's interest rate hikes are probably over, but officials are reluctant to say so. Federal Reserve officials are increasingly confident that they don't need to keep raising interest rates to defeat inflation. But they aren't satisfied enough to declare an end to hikes - let alone to start a discussion about lowering rates, Timiraos wrote. Looking ahead to the December policy meeting, Timiraos expected the central bank to keep its benchmark rate unchanged for a third consecutive time at between 5.25% and 5.5%, and to reiterate that it would be more likely to hike than to cut rates afterward.
Powell pushes back on rate-cut bets, but markets push back harder
It's too early to discuss a rate cut, and the Fed is prepared to tighten monetary policy further if it becomes appropriate to do so.
Inflation has come down, but core inflation is still too high. To achieve the inflation target, the recent core progress must continue. We are on track to "avoid severe job losses while bringing inflation back down toward 2%".
The Fed's monetary policy is at a restrictive level to contain the economy, so the right thing to do is to let the data tell us what's going on and whether the Fed's tightening is sufficient or whether the Fed needs to do more. So far, the Fed is advancing cautiously as the risks of insufficient and excessive tightening are becoming more balanced.
Powell tried to push back on interest rate-cut bets, but markets believe the Fed is done raising rates and will soon cut them.
The CME FedWatch tool shows a less than 3% probability of another Fed rate hike, and an over 60% probability of the first rate cut by March 2024, which was 30% before Powell's speech.
Russia plans to raise diesel exports in December
Russia plans to boost overseas diesel supplies from its major western ports in December by over a quarter after the government eased further export restrictions and Black Sea storms pushed back November loadings of the fuel. Including some batches from Belarus, Russia plans to export a total of 2.83 million metric tons of fuel from its main Black Sea and Baltic ports in December. Calculated from Kpler's historical data, it is about 681,000 barrels per day, 28% higher than last month's exports. December's port flows will also be the highest since July, the data showed.
Brazil will join OPEC+, but won't limit oil output
Brazil is expected to join the OPEC+ group in January next year but it will not participate in the group's production cuts, said Paul Prates, chief executive of Petrobras, Brazil's national oil company. The organization's surprise announcement on Thursday that Brazil would join OPEC+ immediately raised doubts about whether Brazil would cut production after the OPEC+ countries agreed to voluntarily cut output by nearly 2 million barrels a day early next year. Paul Prates said, "We would never be part of an organization that imposes (production) quotas to Brazil, Petrobras is a publicly-traded company and we cannot have quotas." "Brazil would start participating in the meetings as some kind of observer member, which I think is really nice," Prates said. He expects Brazil to formally accept the invitation in June.
[Focus of the Day]
UTC+8 15:30 Switzerland CPI (Nov)
UTC+8 16:45 ECB Vice President Guindos Speaks
UTC+8 22:00 ECB President Lagarde Speaks
UTC+8 23:00 U.S. Factory Orders MoM (Oct)
TBD The Bank of Japan holds the first long-term monetary policy review seminar
