JASPER’S MARKET SQUAWK 12-10-2023

FOMC Mins Confirm Softer Fed Stance

The shorter end of the curve ticked up following a higher-than-expected PPI but flattened out after the FOMC minutes revealed cautiousness and less hawkishness than in September.

Chart: GOLD

Key Factors for Today

• Nasdaq Soars for the 4th Consecutive Day, Boosted by Weakening Dollar
• WTI Crude Prices Plummet 3.15% Following Massive API Build Report
• Gold Rally Supported by Shift from ‘How High’ to ‘How Long’ Narrative
• ECB Members Express Diverging Views on Peak Rates

Nasdaq Posts 4-Day Streak on Softening Dollar

The US PPI for September beat expectations at 0.5% from 0.3% expected, showing higher costs for energy products and foods but a slowdown from last month. The greenback advanced on the hotter report, but minutes from September’s FOMC appeared less hawkish, closing the session flat. US equities tracked higher for the 4th day in a row despite a surprise UAW streak at Ford’s Louisville Plant. Nasdaq rose 0.85% to 15275, eying 15420 unless it loses 15150.

WTI Plunges 3.15% After Huge API Build Report

The API reported a crude build of 12.9M barrels for last week, way past an expected decline of 500K. Gasoline inventories also increased more than an expected drop to 800K barrels by 3.6M barrels, with lower refinery run rates seen contributing to the build. Raising concerns about slowing US fuel demand hurt WTI despite Exxon Mobil acquiring Pioneer Natural Resources in a $59.5 billion all-stock deal to become the largest producer in the largest US oilfield. $80 is expected support lower, with resistance seen at $84.70/bbl.

Gold Rally Supported From “How Long” Narrative

The FOMC minutes showed that several policymakers started making a case for a policy shift from “how high” to “how long” instead, with the 3-month short end of the curve and the Dollar’s flatness allowing gold to continue its safe-haven rally. Its price rose to $1875 an ounce, from a low of $1860 Tuesday, and it sees increasing demand early Thursday to $1880. $1885/oz is strong resistance ahead.

ECB Members Point to Different Peak Rates

Dutch central bank chief Klaas Knot said at a conference in Marrakech that policy is “in a good place”, but the bank remains vigilant and ready to restart hiking if needed. Conversely, the Head of Spain’s central bank, Pablo Hernandez de Cos, suggested that rates may stay on hold for some time before potential cuts, pointing to peak rates. EUR/USD ended somewhat flat but on positive footing for the 6th straight session. Holding its grip above $1.06 may encourage additional gains towards $1.0655.

On The Docket

• UK GDP
• ECB Meeting Accounts
• US CPI Inflation
• Initial Jobless Claims
• EIA Crude Oil Stock Change
• Fed Bostic Speech
• OPEC Monthly Report

FX 1-Day Relative Performance (USD)

• Aussie up by 0.07% while Kiwi 0.14% in red
• Euro and Pound 0.12% and 0.07% higher
• Yen up by 0.05%, Franc also up by 0.14%
• Canadian Dollar 0.04% in green zone
• Gold 0.29% higher, Silver leads at 0.82%
• Crude and Brent down by 0.46% and 0.3%
• Natural gas futures up by mere 0.12%