Before the bell: Calm day expected as US celebrates Thanksgiving
Equity markets were relatively quiet yesterday as some dealers banked their profits from the ground that was gained earlier in the week.
“The mood in the markets was assisted by the growing feeling that there will be a smooth had over of power from President Trump to President-elect, Joe Biden,” David Madden, market analyst at CMC Markets UK, tells Morning Wire this morning. “We have yet to hear whether Mr Trump concedes but it is looking like he will go quietly.”
It was reported that Biden wants to offer the Treasury Secretary role to former Fed boss, Janet Yellen. While in charge of the US central bank, Yellen oversaw the return of higher interest rates, and Madden said it was carried out “in a timely and measured fashion.”
US closed today
The US stock market will remain closed today as the country celebrates Thanksgiving. Some US-based traders and investors will be taking Friday off too. Yesterday, there was a sense that some dealers were winding down for the week, even though the NYSE will be open for limited trading on Friday. “Any of the financial markets that are open today will probably experience low volatility,” Madden said.
Yesterday, there was a large batch of US economic indicators posted, partially because of the holiday today. The jobless claims report increased from 748,000 to 778,000 – the highest reading in five weeks. Personal income and consumption for October were -0.7% and 0.5% respectively. Both readings showed declines on the month and undershot economists’ forecasts. The core PCE reading is the Fed’s preferred measure of inflation, and it slipped from 1.6% to 1.4% in October.
“In August, the Fed said they would allow inflation run to run above 2% for ‘some time’, but it is going in the opposite direction. The reports point to a tapering off in economic activity,” Madden said.
Fed meeting
The minutes from the early November Fed meeting were posted last night. “Traders got the impression the central bank might look to give further support to the economy by altering its asset purchases – either by increasing the level of asset purchases or buying longer dated bonds,” Madden said.
Jerome Powell, the head of the Fed, said it still has a lot of ‘ammunition’ in reserve to help the economy. Despite the mildly dovish nature of the update, the Dow Jones and the S&P 500 finished slightly lower last night as traders were content to square up their books ahead of the holiday. “The NASDAQ 100 hit its highest level in over two weeks, but then again tech stocks have underperformed lately,” Madden noted.
Equity markets in Asia are showing small gains and European indices are tipped to open a little higher.
Oil enjoyed another rally yesterday and it hit its highest level since early March. Early next week OPEC+ will announce its production plans for early 2021.
“There is increasing speculation that the existing production cut of 7.7m barrels per day (bpd) will be maintained into early 2021. The original plan was to ease up on the output cuts to 5.7 million bpd. Oil has been moving higher lately on account of the optimism surrounding the potential coronavirus vaccine stories too,” Madden concluded.