ASX 200 to rise, gold stocks jump as yields skid + Is the rally running out of steam?

ASX 200 futures are trading 15 points higher, up 0.21% as of 8:30 am AEDT.

S&P 500 SESSION CHART

MARKETS

• Major US benchmarks finished slightly higher, down from best levels
• S&P 500’s intraday range over the last two trading days has been the narrowest since December 2019, according to Bespoke Investment Group
• US bond yields continued to ease across the curve, the 2-year yield sold off 15 bps to the lowest levels since July 2023
• US Dollar Index extends its losing streak to four, marks lowest close since August 2023
• Gold prices continue to rally, now up 12% since early October and on par with previous peaks in May 2023, March 2022 and August 2020
• Market strategists warn that contrarian the positioning and sentiment tailwind has faded, corporate buyback activity is near its peak
• One options trader positioning for 250 bps of Fed cuts in 2024 (Bloomberg)
• Strategists optimistic on S&P 500 in 2024 with potential top of 5,000 (Bloomberg)
• Citi says S&P 500's best on record November rally running out of steam (Bloomberg)

STOCKS

• Several high-profile IPOs are in the pipeline for 2024 including eCommerce company Shein, social media site Reddit, Kim Kardasian-backed Skims and Microsoft-backed cloud company Rubrik (Bloomberg)
• PPD Holdings, the parent of Pinduoduo and Temo, reported a 94% year-on-year jump in revenue in the third quarter (CNBC)
• Affirm shares surge after Jefferies upgraded the stock to Hold from Underperform (CNBC)

CENTRAL BANKS

• Global central banks brace for uncertain future as inflation era persists (Bloomberg)
• Fed’s Waller says if inflation goes down, there is no reason to insist interest rates remain “really high” and the Fed’s response should be to lower rates (Bloomberg)
• BoE leads central bank chorus on need for restrictive policy (Reuters)
• PBOC, Chinese authorities urge banks to boost lending to private sector (Nikkei)
• PBOC bank pledges to support domestic demand (Reuters)
• PBOC ramps up liquidity to rein in surge in short-term rates (Nikkei)
• ECB's Lagarde mulls early end to bound purchases to accelerate balance sheet reduction (FT)

GEOPOLITICS

• Israel and Hamas extend truce by two days (Bloomberg)
• US warns Israel over southern Gaza offensive, must not worsen refugee crisis (FT)

ECONOMY

• Cyber Monday sales forecast to hit to record (FT)
• US consumer confidence rebounds more than expected in November (Reuters)
• US gasoline prices have fallen for 60-straight days (Bloomberg)
• Japan's underlying inflation measures mostly ease, but data still support BOJ case for normalising monetary stimulus (Reuters)
• GfK German consumer sentiment barely higher heading into holiday season (Reuters)
• Eurozone M3 money supply growth continues to contract, down 1.0% in October (Reuters)
  
  

Is the Rally Running out of Steam?

The S&P 500 has been relatively unchanged in the past four sessions while the ASX 200 is down around 1.3% from its November 15 peak. Here's some food for thought as the market begins to digest the recent run up:

• An exceptionally strong November: It's pretty rare for the S&P 500 to rally more than 8% in any given month. Since 1950, there have only been 30. Of which only 4 have been in November. Historical returns suggest strong momentum into following months but exceptionally strong Novembers tend to deliver mixed forward returns.
• Seasonality trends S&P 500: December is one of the best performing months for global markets. But it tends to start slow. The S&P 500 has averaged a 0.21% drop on the first day of December over the last 22 years.
• Seasonality trends ASX 200: Since 1992, December 1-14 has historically returned an average -0.1% for the ASX 200. But between December 14-31, the market has historically gone on a 15-day winning streak to return around 3.5%.

A few sentiment and positioning indicators have started to hit contrarian sell signals. This includes:

• AAII Investor Sentiment Survey: Bears have fallen to the lowest levels since August and hovering the lower end of range over the past 4-5 years.
• Goldman Sachs CTA positioning: From one extreme to another, CTAs are very long US equities again.

Sectors to Watch: Gold

Just a quick one on gold – Which is on a four-day winning streak to US$2,040 an ounce. This triggered a strong response for gold equities, with the VanEck Gold Miners ETF up 4.8% to a near 4-month high. Let's see if we see some follow through strength for local goldies on Wednesday.