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Less hawkish Fed Powell fuels risk appetite

2 December 2022

US stocks have rallied after Federal Reserve Chair Jerome signalled that the Federal Reserve would likely slow the pace of rate hikes as of next month. His comments commented on expectations for a 50 basis point hike in December after four 75 basis point hikes. He added that interest rates could end higher than expected in September, which was 4.65%, and suggested that they could stay higher for longer. While the Fed is prepared to slow hikes, the fight against inflation is far from over. Core PCE data will be in focus today, and the Fed’s preferred inflation gauge is expected to cool to 5% in October, down from 5.1%. Cooler than forecast core PCE could help stocks extend the rally. 

Where might the S&P500 price head to?

The S&P500 has surged over the 200 sma for the first time since April, and looks set the test the year-long falling trendline resistance. A break above here would be significant as it would be the first time it trades above the trendline this year. Beyond her resistance could be seen at 4155, the September high, ahead of 4325, the August high. On the downside, immediate support can be seen at the 200 sma at 4040. A break below here brings 3940, the two-month rising trendline support, and the weekly low into focus ahead of 3950 and the 50 sma at 3810,

BTC/USD rises to a 2-week high

BTC/USD and other cryptocurrencies cheered the prospect of a less hawkish Federal Reserve. BTC/USD has risen over 1.4% across the past 24 hours, reaching 17.1k, a 2-week high. The macro backdrop supports Bitcoin as investors continue digesting the collapse of FTX and contagion within the industry. News that Brazil has passed a law legalising Bitcoin as a payment form also supports the cryptocurrency. This is not the same as El Salvador, where Bitcoin was made legal tender, but it is the next best thing. However, there are also signs that the blockchain technology is not living up to the commercial viability that was hoped. IBM and Maersk announced that TradeLens, the blockchain-based transparent ledger expected to improve processing and customer clearance, will be wound down next year after not reaching the financial expectations set.

Oil rises as inventories drop

Oil prices are pausing after rising over 6% across the past three days. Oil prices have been boosted by optimism surrounding a Chinese recovery, the weaker USD, and by concerns over tight supply.US crude stockpiles dropped almost 13 million barrels, the largest decline since 2019. Meanwhile, US oil output rose 2.4% to the highest level since the pandemic. According to the EIA Russian, crude oil output could fall by 2 million barrels per day by the end of Q1 next year. The Russian oil price cap comes into play at the start of next week. Attention will start turning to the OPEC+ meeting, where the oil cartel is not widely expected to adjust output given that they have changed the meeting to a virtual meeting.


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