Market Update 11/11/2024

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U.S. equities extended their gains to close the week, supported by strong consumer sentiment data and continued reaction to Trump’s election victory. On Friday, S&P 500 closed 0.4% higher after briefly surpassing 6000 mark for the first time in the earlier session, a year ago this was trading sub-4500. In Europe, the Euro Stoxx 50 and FTSE 100 ended down 1.0% and 0.8%, respectively, as markets reacted to disappointment over China’s stimulus package. The yield on the U.S. 10-year Treasury fell 2.1 bps to 4.30%.

The University of Michigan’s consumer sentiment index increased from 70.5 to 73.0 in November, surpassing the expected 71.0 and reaching its highest level since April. Within the survey, inflation expectations were mixed: the one-year outlook decreased slightly from 2.7% to 2.6%, while the five-year outlook edged up from 3.0% to 3.1%.

On Friday, China’s announcement on fiscal easing fell short of market expectations. While China provided a 10 trillion yuan ($1.4 trillion) relief package to support heavily indebted local governments, it did not unveil any new stimulus measures. This led to a weaker yuan, which in turn affected the NZD and AUD, as well as Chinese equities. Industrial prices dropped as well, impacting most metals on the LME and lowering iron ore prices. Million Dollar question – Will there be a Trade War post Donald Trump’s inauguration?

The USD remains in focus after the Fed adjusted its statement, removing language that suggested increased confidence in reaching its inflation target. During his press conference, Chair Jerome Powell avoided specifying a timeline for potential rate cuts. Looking further ahead, inflation expectations are rising as investors speculate that Trump’s tariff stance could increase price pressures. While it’s unclear if and how these tariffs will be enforced, the anticipation alone could keep the USD strong in the months ahead.

NZDUSD ended the week close to its starting point, just below 0.5970. After holding above 0.6000 in the NZ trading session, I expected it to maintain that level. However, strong US consumer sentiment has pushed the USD back to typical post-election levels. Key support sits at 0.5960 and 0.5935, with resistance at 0.5990 and 0.6020.

NZDAUD edged higher on Friday, finishing the week near 0.9065. While trading ranges remain steady, interest rate differences may eventually influence the pair, leading me to anticipate a potential downside test, likely around the RBNZ announcement. For now, the outlook remains stable. Support levels are at 0.9025 and 0.8990, with resistance at 0.9100 and 0.9137.

NZDEUR Since Trump’s victory, EUR remains under pressure, a trend likely to continue in the near term, especially as markets anticipate a further rate cut in Europe this year, while the Fed is expected to hold steady. Key support levels are 0.5590 and 0.5535, with resistance at 0.5585 & 0.5609.

The economic schedule for today is light, though the RBNZ’s inflation expectations report at 3:00 pm NZT may attract some attention. Later this week, the key releases will include U.S. inflation data on Wednesday night, Australian employment figures on Thursday, and U.S. retail sales on Friday night. Markets will also be closely watching Trump’s major Cabinet appointments, with particular interest in who will fill the roles of U.S. Trade Representative, Treasury Secretary, and Secretary of State.

Here are the latest mid-market rates: