The Monday Report – 18 November 2024

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US equities retreated at the end of the week. The S&P500 closed down -1.3% to round out its worst week in two months, while in Europe, the Euro Stoxx 50 fell -0.8% and the FTSE100 closed down -0.1%.

SPI futures are signaling Aussie equities will most likely follow the negative trend on Monday morning.

Bonds yields were little changed. The yield on the US 10-year bond was flat at 4.44%. Oil prices fell on weak demand from China and rising US inventories, with WTI futures down -2.4%, trading at US$67.0/bbl. Gold rose 0.6% to USD2,563.3/oz.

World Overnight
SPI Overnight	8296.00	– 26.00	– 0.31%
S&P ASX 200	8285.20	+ 61.20	0.74%
S&P500	5870.62	– 78.55	– 1.32%
Nasdaq Comp	18680.12	– 427.53	– 2.24%
DJIA	43444.99	– 305.87	– 0.70%
S&P500 VIX	16.14	+ 1.83	12.79%
US 10-year yield	4.43	+ 0.01	0.23%
USD Index	106.62	– 0.23	– 0.22%
FTSE100	8063.61	– 7.58	– 0.09%
DAX30	19210.81	– 52.89	– 0.27%

By Chris Weston, Head of Research, Pepperstone

Good morning.

With the calendar for the week ahead seemingly light on event risk, the focus falls on Q325 earnings from Nvidia and potentially Trump’s pick for US Treasury Secretary and US Trade Representative.

That said, we could feasibly see a reaction to the US November data/survey releases (i.e. conducted after the US election), which include the NY Fed services index, US S&P Global PMIs, the University of Michigan survey & the Kansas Fed manufacturing survey.

The market may give these releases additional focus, notably after Friday’s release of the NY Empire manufacturing report, which showed an impressive rise of 43 points, driven in part by a sizeable shift higher in new orders.

Importantly, the survey was conducted after the US election, suggesting businesses are seeing a positive impact on business conditions and the certainty that comes with a firm election result.

While the NY Empire survey is just one survey and from one region, we now consider if other surveys conducted after the US election, also show strong improvement from the Trump bump.

Fundamentally, we assess whether further impressive US data results in increased US inflation expectations, and reduced interest rate cut expectations which fuels further USD appreciation and large-cap equity drawdown.

As we lay out below there are markets (such as the USD pairs) that remain in a trending state, and there are markets testing range limits, and others (such as the S&P500 & NAS100) that have reversed off all-time highs, and where we see an evolving short-term change in sentiment. 

Nvidia is due to make its awaited return to the centre stage

With so much recent attention placed on US election trades and the initial discounting of Trump 2.0, Nvidia comes back firmly into the spotlight, with its Q325 earnings, and its guidance for Q425 (due Wednesday after market) expected to result in sharp moves in the post-market session.

Naturally, one would expect any volatility in Nvidia’s share price to influence the global semis space, as well as the broader S&P500 and NAS100.

For context, the options market prices an -/+8.8% move in Nvidia’s share price on the day of earnings, in line with the average (absolute) move seen on earnings over the past 8 quarters.

Expectations of a blowout number (relative to consensus expectations) seem low compared to prior reporting quarters and the analyst community feels quietly confident in their ability to model Q325 sales, earnings, and gross margins and investor positioning is also more closely aligned to prior guidance.

Global Event Risk for the Radar

Away from the event risk in the US, we get CPI prints in Japan, Canada, the UK, and Europe. PMIs are also due out in Europe, and the UK.

In China, we see the PBoC review its Medium-Lending Facility (MLF) and 1 & 5-year Prime Rate, although no changes are expected.

Central bankers go hard on getting their voice head this week, with 9 Fed, 24 ECB and 4 BoE speakers due out, although we’re unlikely to hear anything that hasn’t already been priced – so the effect on markets may be noise and offer little in the way of signal.

In Japan, Gov Ueda speaks (Monday 12:00 AEDT), while in Australia we hear from Assistant Gov Christopher Kent and Gov Bullock.

However, with the rates market comfortable in its pricing for the first cut from the RBA in May 2025, it’s unlikely we’ll be shocked at what we hear and the effects on the AUD or ASX200 should be contained.

Trading and Directional Views Markets front of mind

US500 (S&P500) While the prospect of a seasonal rally into year-end remains a strong possibility, I am turning more cautious here, with momentum shifting to the downside, with the US equity benchmark looking vulnerable for a test of the 50-day MA at 5772 and the November swing low at 5700 (5724 in S&P500 futures).

A test and a close through 5700 could accelerate the selling with long positioning further cut back, and flow-based dynamics (optionality and higher volatility) potentially leading the index lower.

That said, it’s hard to be short with conviction given the influence of Nvidia, but a heavy tape on Friday suggests the sellers may be getting more of a say. 

NAS100 NAS100 futures fell -3.4% w/w, with downside momentum building on Friday. The November lows of 19,900 defines risk for those holding longs again, it’s tactically hard to be short with Nvidia’s numbers out on Wednesday, but the set-up on the daily timeframe suggests near-term downside risk.

A push higher in the US10yr Treasury above 4.50% would also be a trigger for tactically short NAS100 trades.

USD With the USD index (DXY) gaining for six of the past seven weeks we’re seeing modestly overbought conditions marry with a progressively well-owned USD long position.

What is overbought can stay overbought, and until we see better relative buyers of US Treasuries to its G10 peers and yield differentials tighten, pullbacks in the USD should be well supported.  

Gold Found buyers last week close to $2532 (the September breakout highs) but the trend is lower and it’s hard to be long until price closes (daily) above the 5-day EMA, which has defined the trend since 6 Nov.

Consolidation in the USD could see gold trade US$2525 to US$2610 range for the week, and I’d be leaning into these levels through the week.

Spot Crude Price is clearly weak and pushes into big support levels a break of US$66.96/bbl and new YTD lows come into play.

Needs to rally early this week or the sellers will go hard on the technical break. There’s not much to like in the fundamentals or technicals at present.

On the calendar today:

-New Zealand PPI

-Japan Sep machine orders

-Eurozone Sept Trade Bal

-BHP Group ((BHP)) investor briefing – site visits Escondida and Spence

-Elders ((ELD)) earnings report

-Fleetpartners Group ((FPR)) earnings report

-New Hope Corp ((NHC)) Qtrly update

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-Wilson Asset Management and Paradice Investment Management have both withdrawn interest in acquiring Platinum Asset Management ((PTM))

-IFM Investors has increased its stake in Atlas Arteria ((ALX)) to 30% through a block trade

Spot Metals,Minerals & Energy Futures
Gold (oz)	2570.10	– 2.50	– 0.10%
Silver (oz)	30.43	– 0.18	– 0.58%
Copper (lb)	4.06	– 0.01	– 0.29%
Aluminium (lb)	1.20	+ 0.06	5.36%
Nickel (lb)	6.97	– 0.11	– 1.51%
Zinc (lb)	1.33	+ 0.01	0.44%
West Texas Crude	66.92	– 1.73	– 2.52%
Brent Crude	71.04	– 1.43	– 1.97%
Iron Ore (t)	101.63	– 0.59	– 0.58%

The Australian share market over the past thirty days

Index	15 Nov 2024	Week To Date	Month To Date (Nov)	Quarter To Date (Oct-Dec)	Year To Date (2024)
S&P ASX 200 (ex-div)	8285.20	-0.12%	1.53%	0.19%	9.15%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
APA	APA Group	Upgrade to Buy from Accumulate	Ord Minnett
BKW	Brickworks	Upgrade to Buy from Hold	Bell Potter
LIC	Lifestyle Communities	Upgrade to Hold from Sell	Bell Potter
LNW	Light & Wonder	Upgrade to Buy from Accumulate	Ord Minnett
MAD	Mader Group	Downgrade to Hold from Buy	Bell Potter
NHF	nib Holdings	Downgrade to Underperform from Neutral	Macquarie
NUF	Nufarm	Upgrade to Add from Hold	Morgans
ORI	Orica	Upgrade to Add from Hold	Morgans
		Upgrade to Buy from Hold	Ord Minnett
QBE	QBE Insurance	Upgrade to Outperform from Neutral	Macquarie
SGM	Sims	Downgrade to Neutral from Buy	Citi
STG	Straker	Downgrade to Hold from Speculative Buy	Ord Minnett
XRO	Xero	Downgrade to Hold from Accumulate	Ord Minnett

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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