• Canada Q3 GDP +1.0% vs +1.0% expected
• JPMorgan now sees the ECB cutting rates by 50 basis points in December
• US equity close: Big finish to a great month
• December forex seasonals: What’s hot, cold and gold in the month of December

Markets:

• JPY leads, USD lags
• US 10-year yields down 6 bps to 4.18%
• S&P 500 up 0.6%
• Gold up $13 to 2653
• WTI crude oil down $0.57 to $68.00

Markets were surprisingly lively for a de facto US holiday. Bids were strong in risk assets, which got help from a report saying US restrictions on chip exports may not be as strict. At the same time, softer eurozone inflation numbers might have fuelled a broader bid in bonds.

The Canadian GDP report also underscored a picture of a slowing global economy with rates that are needlessly high.

At the same time, it’s tough to square slowing growth in Europe and Canada with stronger currencies against the US dollar. Many are pointing to month end as the source of the Treasury bid and USD softness. Others point to the pick of Scott Bessent or fresh rumors about Chinese stimulus.

We will get answers about the turn of the calendar on Monday and I will be keeping a close eye on USD/JPY, as it appears to be embarking on the same kind of dramatic breakdown that we saw in the summer. That eventually spread to risk assets so some caution is warranted, though US economic data hasn’t shown many cracks yet.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

I love it when the month ends on a Friday, it’s so tidy. And there was plenty of love to go around in markets in November following the US election.

Closing changes:

• S&P 500: +0.6%
• Nasdaq Comp: +0.8%
• DJIA: +0.4%
• Russell 2000: +0.65%
• Toronto TSX Comp: +0.3% (note that the TSX doesn’t close until 4 pm ET)

On the week:

• S&P 500: +1.1%
• Nasdaq Comp: +1.1%
• DJIA: +1.4%
• Russell 2000: +1.5% (finally breaks the 2021 weekly closing high but not the intraday high)
• Toronto TSX Comp: +0.7%

On the month:

• S&P 500: +5.8%
• Nasdaq Comp: +6.2%
• Russell 2000: +11.2%
• Toronto TSX Comp: +6.1%

The big winner for November? Bitcoin, which rose 38%.

As for the Russell 2000, virtually all the gains were made on election day and the day after. Eyes will be on it next week.

This article was written by Adam Button at www.forexlive.com.

The hours of November trading are ticking down but jingle bells are ringing in the distance. That means that December trading is on the way and it’s the most wonderful time of the year for bulls.

Risk assets tend to do well in December but for stocks, the period late in the month (after Christmas) tends to be strongest. That’s particularly true in poor years as tax-loss selling hits in the first 20 days of the month. That’s certainly not the case in 2024 as it’s been a banner year for equities.

Since 1950, December has been the strongest month for the S&P 500, averaging a gain of 1.2%, though that effect has diminished in the last 25 years.

Here are some seasonals to watch:

1) Gold

I have written about gold seasonal strength in December-January for 15 years and it’s rarely let me down. It’s one of the best seasonal trends in any market, anywhere. Gold is finishing November near $2650 in what’s the first negative month since June, when it was down a single dollar. To find any kind of meaningful decline before this month, you need to go all the way back to September 2023. It’s been a remarkable run for gold and the trend is your friend.

2) Dollar weakness

December is the worst month for the dollar this century. The Dollar Index declined in six of the past seven years in December with the lone exception being a tiny decline in 2021. That’s an impressive statistic given the dollar bull market we’ve been in. The recent pullback in the dollar has been a bit of a mystery but part of the solution could be the front-running of year-end repatriation flows. In terms of fundamentals, the focus will be on whether the Fed cuts on December 18 — my bet is they will.

3) Euro strength

This isn’t a surprise given the weakness in the dollar index but it’s worth emphasizing given how hated the euro is right now. I’m sympathetic to the euro bears and a 50 basis point cut in December would certainly give them firepower. That said, the euro is hated so there might be room for a relief rally. If so, anything close to 1.10 would be a tempting spot to sell.

4) Kiwi the winner

December is the best month of the year for the New Zealand dollar as the summer sun shines in the southern hemisphere. The RBNZ this week delivered a less-aggressive rate cut than feared and that might hint at a stronger economy. In any case, there is also some technical backing here as NZD/USD has helped above the 2023 lows.

5) International stocks

It’s worth noting that while the S&P 500 has done well in December, international stocks tend to outperform. It’s a particularly strong month for Chinese stocks, which have struggled to maintain gains since late September. The Japanese Nikkei 225 is also a standout performer.

Note that many of the seasonals trends in December (including stocks) tend to reverse in January so consider taking profits late in the month.

Here is a recap of the November seasonals, which fared well.

This article was written by Adam Button at www.forexlive.com.

The headline from today’s Canadian GDP report is that growth declined on a per-capita basis for the sixth consecutive quarter. In addition, monthly GDP data showed just 0.1% m/m growth in September and October.

CIBC writes:

„While growth in the Canadian economy slowed to a crawl in Q3, that was broadly anticipated and was mainly driven
by inventories and net trade. Domestic demand growth was much more solid and similar to the prior quarter. More
concerning for the Bank of Canada will be the monthly data that showed the quarter ending with a whimper rather
than the expected bang, leaving early tracking for Q4 well below the October MPR projection. Because of that, today’s
data are somewhat supportive of a 50bp cut at the next meeting, rather than a smaller 25bp reduction, although next
week’s employment figures will be just as important in making the final decision.“

RBC continues to see a 50 bps cut but will also be watching Friday’s jobs report closely ahead of the December 11 BOC decision:

„The
GDP numbers should help to reinforce that interest rates are higher than
they need to be to maintain inflation sustainably at a 2% rate. The BoC
will also be watching next week’s labour market data closely, but our own
base-case assumption is for another 50 basis point cut to the overnight
rate in December.“

At the moment, the BOC is projecting 2% GDP growth in Q4 but that’s likely to be scaled down and the central bank may also take a more-cautious approach for 2025, given Canadian government forecasts for a declining population.

This article was written by Adam Button at www.forexlive.com.

The largest 250 trading firms are set to make a total of $32 billion from trading of Group-of-10
rates and $16.7 billion from currencies, according to data collected by
Coalition Greenwich and reported by Bloomberg. Those are declines of 17% and 9% compared to last year, respectively and the lowest since 2021.

I’m surprised by the decline given the volatility in fixed income and the yen.

This article was written by Adam Button at www.forexlive.com.