US Wrap…  SPX: +0.39% NDX: +0.85% INDU +0.43% ESA: +0.05%

US markets kicked off the new week on the front foot after a choppy start to the trading session, as investors brace for key economic data and the Fed’s last interest rate decision for 2023. Monday’s gains on the S&P 500 index seem to have largely reversed Friday’s losses with industrials and consumer staples sectors leading the way higher. Market participants will be focusing on the November CPI data which is set for release later today ahead of the Fed’s rate decision. The prints are likely to reinforce expectations that Jay Powell will acknowledge both progress made on inflation as well as the risks of stubborn price pressures. Strategists continue to see a constructive outlook for US stocks through the end of the year and into 2024. Citi analysts are looking for “further S&P 500 upside in the year ahead,” and expect to finish 2024 around 5100, a roughly 11% gain from current levels.

Asia Morning…  HSI +0.85%, NKY +0.10%, SHCOMP +0.08%, ASX +0.50% KOSPI +0.46%

Asian markets nudged higher led by a recovery in HK shares amid a report that a key meeting of Chinese economic and political leaders is underway. A gauge of Chinese listed stocks in HK was headed for its 1st gain in 4 sessions after Reuters reported on the Central Economic Work Conference, where officials are expected to discuss monetary and fiscal policies for next year. The meeting will likely indicate a more proactive role for fiscal policy, including more front-loading of funding and strengthening implementation to improve policy efficacy, according to Bloomberg economics. HS Tech is trading +1.45% with Tencent +0.52%.

Commodity action… Base metals edge higher with iron ore leading the space higher trading >1% firmer. Copper also enjoying gains following a solid session in US equities overnight and a softening in the USD. Precious Metals also enjoying gains with Palladium leading the way higher in the PGM space. Oil edged higher as an attack on a tanker in the Red Sea raised fears of disruptions to shipping dues to the Israel-Hamas war. Brent traded above $76 a barrel after a vessel was struck by a missile from Houthi-controlled territory in Yemen, the US military said.

Market events:  

• Macro-economic Data: Japan PPI 0.3% YoY vs MktE 0.1% YoY. Japan PPI MoM 0.2% vs MktE 0.2%. UK Jobless Claims change @ 09:00. SA Mining Production @ 11:30. SA Manufacturing Production @ 13:00. US CPI @ 15:30. 

Themes for the day:

The European Central Bank’s window to begin phasing out its last active crisis tool.  Rapidly retreating inflation is feeding expectations that interest rates will be lowered as early as March — well before officials currently plan to start winding down the €1.7 trillion ($1.8 trillion) of bonds bought under the pandemic-era PEPP initiative. Without a change to that timetable, the end of PEPP reinvestments — a tightening step — would almost certainly come in the midst of a rate-cutting cycle. Exercise caution in Euro zone bond trading and any bond proxies as we head into Q1 2024