General Market Analysis | 21 December 2023
Stocks Fall of Peaks – S&P off 1.5%
US stock markets took a dive yesterday having hit record levels the day before, major indices took their biggest one-day hit in months as investors saw some corrections to what has been a stellar month for equities. The Dow Jones lost 1.27% on the day but that was outstripped by the S&P which fell 1.47% and the Nasdaq that dropped 1.5%. US Treasury yields continued to lose ground with the benchmark 10-year down 7 basis points and the rate sensitive 2-year losing nearly 10 basis points, now trading at 4.3418%. The dollar ‘bucked’ the trend, strengthening on the day especially against the pound which was hit on a much lower than expected CPI print. Oil remained bid on ratcheting tensions in the Red Sea and Gold dropped off recent highs with the stronger dollar.
Pound Under Pressure After CPI Data
The pound came under pressure in trading yesterday after CPI data shocked the market with much lower-than-expected prints. The headline CPI number came in at 3.9% year-on-year 0.4% lower than the expected 4.3% print and the yearly Core CPI number came in at 5.1% against the expected 5.6%, leading to sharp changes in expectations for the Bank of England’s next rate move. The data represents the lowest inflation rate in over two years and this should no give the go ahead for rate cuts in the new year with some calling for cuts as early as March. This should open the way for further decreases in the pound with traders looking harder at trading opportunities in the crosses rather than in cable where there are similar expectations for the Fed in terms of rate moves.
Traders Looking Ahead to More US Data Today
It is a relatively quiet day on risk event calendar today and most traders are expecting to see the downside momentum from the US session dictate the direction for the first two sessions of the day. However, there are some key data releases due in the New York session today and that could lead to some more volatility across markets. US data releases include the quarterly GDP figure alongside the weekly unemployment claims and Philly Fed Manufacturing Index which are all released at the same time as the Canadian Retail Sales data. Traders are also more than aware that as we move towards the end of the week and the Christmas holidays in many centres liquidity will start to come at more of a premium.