Asian stocks and oil dip as gold jumps before US inflation data

Sydney — Asian shares slipped on Monday before potentially market-moving inflation data from the US and Europe later this week, and a meeting of oil producers that could stop, or extend, the recent slide in prices.

One mover was gold, which climbed to $2,009 an ounce and briefly hit a six-month top of $2,017.82.

The approach of month end could also cause some caution, given the hefty gains investors are sitting on. Japan’s Nikkei eased 0.3%, but is still up 8.6% so far in November.

MSCI’s broadest index of Asia-Pacific shares outside Japan also dipped 0.3%, giving it a monthly gain of 6.4%.

Chinese blue chips lost another 1.1%, and have missed out on all the global cheer, with the market down 2% in November so far.

China’s central banks announced it will encourage financial institutions to support private companies, but was short on detail.

Euro Stoxx 50 futures eased 0.2%, while FTSE futures fell 0.1%.

S&P 500 futures eased 0.2% and Nasdaq futures lost 0.4%. The S&P 500 cash index has rallied for four consecutive weeks and is up 8.7% on the month so far, which would be its best performance since mid-2022.

The Federal Reserve’s favoured measure of inflation is due on Thursday and is expected to slow to its lowest since mid-2021, reinforcing market wagers that the next move in rates will be down.

Fed chair Jerome Powell will have a chance to push back against the doves at a Fireside Chat on Friday, and there are at least seven other Fed speakers on the docket this week.

Patience message

“A view we hold strongly is that central banks are unlikely to deliver easing in the first half of 2024 absent a threat to the expansion or financial stability,” said Bruce Kasman, head of global economics at JPMorgan.

“Indeed, this message of patience is likely to be notable in upcoming DM policy communications in response to recent financial market developments.”

European Central Bank (ECB) President Christine Lagarde has also sounded in no hurry to ease, and will have another opportunity to ram home the message at the EU parliament later on Monday.

Data on EU consumer prices for November is due on Thursday and expected to show a cooling in both the headline and core rates, which would support market pricing for cuts.

Markets priced in 80 basis points of US easing next year, and about 82 basis points for the ECB.

The chance of an easing in borrowing costs has generated a big rally in bonds, with yields on 10-year Treasuries down 36 basis points so far this month at 4.50%.

That in turn has been a drag on the dollar, which has lost 3% on a basket of major counterparts this month.

The euro was up at $1.0940 on Monday, not far from its recent four-month high of $1.0965, while the dollar softened to ¥149.23.

A run of firmer official fixes for the Chinese yuan has also weighed on the dollar against Asian currencies and the Australian dollar.

The oil market faces a tense few days before a meeting of Opec+ on November 30, a meeting that had originally been slated for Sunday but was postponed as producers struggled to find a unanimous position.

Reports suggest African oil producers are seeking higher caps for 2024, while Saudi Arabia may extend its additional 1-million barrels per day voluntary production cut, which is due to expire at end-December.

“Saudi Arabia and Opec+ faces a challenge in convincing markets that it can help keep oil markets tight in 2024,” wrote commodity analysts at CBA in a note.

“Opec+ will have to show significant supply discipline, or at least jawbone such ability, to alleviate market worries of a deep surplus in oil markets next year.”

The uncertainty erased early gains and Brent edged down 31c to $80.27 a barrel, while US crude lost 31c to $75.23 per barrel.

Reuters