Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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December 4, 2023

Inflation train has left the station

Macro & Overnight

Investors ignored Powell’s Friday speech, indicating that the Fed remains prepared to raise rates. With falling bond yields and a weaker dollar, markets believe the inflation train has left the station, and the next train due is a recession. Regardless of their hawkish tones, investors no longer believe the central banks’ higher-for-longer rhetoric as rate cut expectations are now priced in for H1 2024.

The longer rates remain at current levels, the greater the recession probability. This concern is reflected in lower oil prices despite a backdrop of increasing Middle East conflict.

However, fears of rapidly lower interest rates risk inflation and financial repression. And higher prices for gold and Bitcoin reflect these concerns.

The Bitcoin price action has become significantly more “risk-off” since the regional banking crisis. The price has now doubled since March and is up 140% YTD.

This week’s US macroeconomic news includes ISM services data and JOLT job openings tomorrow, followed by nonfarm payrolls on Friday.

Weaker jobs data will further fuel recessionary fears and drive rate expectations lower. A bullish set-up for the Santa equity rally, but raises the spectre of recession in 2024.

UK Company News

It is a typically quiet Monday for UK company news, with nothing to highlight today. 

Prognosticator 

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