Markets Update Wednesday 24/11/2021 – Minutes

Frankfurt – 24/11/2021

Minutes

On the New York Stock Exchange, investors kept a low profile despite a plethora of new economic data. The overall activity was meagre before the holiday break. The US markets will be shut tomorrow for the Thanksgiving holiday. Things will get exciting on the following bridge day, Friday. This so-called “Black Friday” is considered the official start of the Christmas business, the most vital sales period in consumer-heavy America.

The Fed’s Monetary Policy Committee members discussed a faster pace of tapering its bond purchases at their latest meeting. “Some participants favoured a somewhat faster pace of cuts that would lead to an earlier completion of purchases,” the minutes of the Fed’s 2-3 November meeting, released this evening, state.

At this meeting, the US Federal Reserve had begun to curb its multi-billion-dollar bond purchases. The previous volume of $120 billion per month was reduced by $15 billion per month. If this pace is maintained, the purchases will expire in June 2022. However, some members called for a higher monthly volume. This would make it possible to react earlier to growing inflation risks with interest rate changes. These have recently increased significantly.

US Markets at a glance

The Dow Jones fell slightly at the start of trading and was ultimately able to catch up with the previous day’s close. It exited trading with a minimal minus of 0.03 per cent at 35,804.38 points. The tech index NASDAQ Composite opened in the loss zone but was finally able to close up 0.44 per cent to 15,845.23 points.

In the evening, the US Federal Reserve presented its latest minutes, which investors eagerly awaited. The minutes revealed that some members of the Fed would have preferred a faster reduction of the multi-billion bond purchases to be able to react to rising inflation with earlier interest rate steps. In addition, numerous economic data had already been published in the pre-market. GDP in the third quarter was minimally lower than previously expected. 

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Strong attention was paid today to better-than-expected data from the US labour market. While this showed that the US economy is back on the road to recovery, it also fuelled investor concerns that the Federal Reserve (Fed) could raise interest rates sooner than previously thought.

Far East Markets at a glance

The stock markets in the Far East also ended Wednesday’s trading unevenly. In Japan, the Nikkei index fell sharply after Tuesday’s holiday break: the stock market barometer lost 1.80 per cent to 2,886.69 points.

Meanwhile, the Shanghai stock exchange ended a marginal 0.10 per cent higher at 3,592.70 points. Similarly, the Hang Seng Index gained a minimal 0.02 per cent to 24,656.79 points.

The fact that the re-nomination of US Federal Reserve President Jerome Powell could lead to a more rapid tightening of monetary policy continued to harm the markets in the Far East. This became particularly clear with a view to the Tokyo stock exchange, where the market was only making up for the negative development after Tuesday’s holiday there.

Oil stocks performed positively on Wednesday due to rising oil prices, although the USA and other countries had tapped their strategic oil reserves.

European Markets at a glance

The European stock exchanges were little changed in Wednesday trading. The EuroSTOXX 50 rose minimally at the start but could not defend its gains intraday and closed 0.18 per cent weaker at 4,276.25 points.

The mood among German investors turned, and the DAX 40 thus moved further away from the 16,000-point mark. In late trading, however, the leading index managed to pull away from its daily lows, ultimately ending the day only 0.37 per cent weaker at 15,878.39 points. The TecDAX gained marginally at the start but slipped into red territory later on and eventually closed 0.7 per cent lower at 3,826.61 points.

In the run-up to the Fed minutes in the evening, investors in Europe still had some economic data to digest. In addition, investors were concerned about oil prices after US President Joe Biden waved through a release of oil reserves, but this had little impact on oil prices. 

Investors took a wait-and-see approach ahead of a series of economic data releases, starting with the ifo business climate survey, which filled the mid-week agenda. 

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Forex, gold, oil and crypto

Given weak economic data from the eurozone, the spectre of corona and the prospect of interest rate hikes in the USA, the euro continued to weaken on the foreign exchange market. In US trading, the euro recently struggled with the 1.1200 dollar mark, which had already fallen below during the day. 

The tapping of oil reserves by the USA in agreement with other countries did not initially have the desired effect on the markets. Oil prices were only moderately weaker on Wednesday, even after the release of 50 million barrels from the strategic reserves. North Sea Brent was up 40 cents at $82.71, while WTI oil was up 37 cents at $78.89.

The price for a troy ounce of gold slipped further today but finally closed around yesterday’s closing level at around $1,785. 

The cryptocurrency market was trending very mixed today. While so-called metaverse projects continued to soar, many projects with the highest market caps consolidated or even fell sharply. Bitcoin ultimately lost 0.6 per cent to $57,100, Ethereum dropped 1.6 per cent to $4,250, Binance Coin was stable at around $590, Solana fell sharply by over 7 per cent to $205, Cardano lost 4.8 per cent to $1.67, and XRP declined by 3 per cent to $1.03. On the other hand, Decentraland (MANA) shot up 28 per cent to $5.2, The Sandbox exploded by over 38 per cent to $7.45, and ENJIN rose 17 per cent to $4.50.    

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Economic data

As expected, the business climate in Germany deteriorated in November due to both a poorer assessment of the business situation and more pessimistic business expectations. The business climate index surveyed by the Munich-based ifo Institute fell to 96.5 (October: 97.7) points. Economists had forecast a decline to 96.4 points.

US economic growth slowed in the third quarter, roughly as expected. As the Bureau of Economic Analyses (Bea) reported in a second release, price-adjusted gross domestic product increased at an annualised rate of 2.1 per cent from the previous quarter, following a 6.7 per cent gain in the second quarter. Economists had forecast 2.2 per cent annualised growth. The first release had reported 2.0 per cent.

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New orders for durable goods in the USA came in weaker than expected in October, mainly due to a decline in orders in the transportation sector. Orders fell by 0.5 per cent compared to the previous month. versus a 0.3 per cent increase expected. The last month’s decline was revised to 0.4 (preliminary: 0.3) per cent.

The number of initial claims for US unemployment benefits fell to its lowest level since 1969 in the week ending 20 November 2021. Compared to the previous week, claims fell by 71,000 to 199,000, according to the US Department of Labour. On 15 November 1969, the figure had been 197,000. Analysts interviewed by Dow Jones Newswires had predicted a decline to 260,000. For the previous week, the figure was revised upwards to 270,000 from the original 268,000.

US consumer sentiment dipped slightly less than expected in November, with inflation expectations rising. The University of Michigan index of US consumer sentiment fell to 67.4 in the month-end survey from 71.7 at the end of October versus 66.8 expected. 

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