Breakfast Bites - Gold breaks 2000 again

Rise and shine everyone.

Even after delivering fantastic numbers, the market seems disappointed with Nvidia. Revenue for the quarter came in at $18B vs. $16B est. and EPS at $4.02 vs. $3.37, with improving gross margins. They’ve guided to revenue of $20B for the next quarter and supposedly people want higher. Bar was very high into the print and there was nothing particularly incremental for the earnings power debate, which disappointed some. The stock traded down after earnings but has recovered this morning in the pre-market.

With that, US equities are now trading higher. Yields are pulling back from the pre-market highs, with the yield curve inverting again to -0.50%. The US Dollar Index is largely flat.

Gold continues to have an excellent rally, crossing $2000/oz yesterday, and lingering above that mark today. Oil is pulling back on expectations of a larger stock build when EIA releases their stock report later today.

Bitcoin pulled back yesterday on the news that the CEO of Binance, “CZ”, will plead guilty to money laundering charges in the US. It’s recovered some of its losses in today’s trading.

Asia and Australia

• Asian equities ended mixed Wednesday with volumes beginning to tail off ahead of holidays. Among the gainers were Japan's main boards, Singapore and South Korea, the latter only by a handful of points. Taiwan ran out of steam and India is extending early losses. Greater China was lower as Shenzhen underperformed notably and Hong Kong finished flat. Australia also closed flat.

• Chinese government advisers will recommend economic growth targets for next year, amid efforts to generate job growth and keep long-term development goals on track. Five out of seven polled said they favored a target of around 5%, matching this year's goal. Forecasts from various banks are still tracking growth at below 4.5% for China in 2024. Goldman sees growth coming in at 4.8%.

• Country Garden is one of the developers on China’s 50-company list for receiving financial aid. This is a good sign that China is finally considering backing failing developers who are largely state-owned.

• The BoJ is lightening asset purchases as policy normalization expectations grow. When the BoJ removed their hard cap on the YCC during their last meeting, this is exactly what we point to. With the flexibility they now have, they can balance asset purchases ahead of Q1 purchases from the banks, insurers and pension funds. They announced JPY525B in 5-10y zone, lower than the JPY575B in the prior operation and this marks the second straight week of reductions. This prompted a bounce in 10y yields from a two-and-a-half month low 0.690%.

• Reserve Bank of India’s Governor believes moderation in India's core inflation is noteworthy but headline inflation remains vulnerable to food price shocks added expects agri sector to remain stable despite uneven monsoon this year.Bank still focused on 4.0% inflation target and, while softer core inflation shows monetary policy is working, it still needs to be actively disinflationary. The RBI has been on a hawkish hold at 6.5% since February 2023.

Europe, Middle East, Africa

• European markets rallied on the open, after a lower close on Tuesday.

• Famous oil trader Pierre Andurand says OPEC+ may need to consider deeper cuts as the US increases production. Seasonally supply tends to be higher this time of the year but, we’re also seeing additional production from the Permian basin. The question will be whether these levels are sustainable enough to consider a deeper production cut by Saudi Arabia.

• ECB President Lagarde and Executive Board member Schnabel continued the pushback against rate-cut bets. Lagarde said that while supply disruptions and energy prices eased, labour markets still adjusting and wages rising.

• This past few weeks have wreaked havoc on short-sellers. The FT reported that hedge fund short sellers have suffered almost $43B in losses, particularly impacting those betting against technology, healthcare, and consumer discretionary sectors. Bloomberg data showing Barclays' most shorted stocks in Europe basket has climbed 9.9% over the past three weeks, leaving it on track for its biggest monthly gain in at least 10 years.

In case you missed it, we wrote a longer note yesterday on our view in Europe and current positioning.

The Americas

• Canada’s headline CPI came in cooler than expected at 3.2% YoY vs. 3.2% consensus and down from 3.8% in September. Services inflation however, accelerated to 4.6% from 3.9% driven by travel rent and property taxes. Rental prices rose at a faster rate in October, up 8.2% y/y compared with 7.3% in September. Canadian equities finished lower Tuesday, near worst levels.

• The Fed’s meeting minutes showed us nothing alarming except that they are still worried about upside surprises in inflation and that they will proceed carefully. The higher for longer messaging remains and rate cuts were not discussed. Since then however, we have received a better than expected inflation report and until Dec we have two more inflation reports and an employment report to consider whether the Fed will announce the pause or not. The market however, is quite sure that there will be no further hikes.

• Jeff Bezos is expected to be “aggressive” in selling more shares of Amazon. Bezos may sell as many as 8 million to 10 million shares, which would amount to roughly $1 billion worth of stock. This comes after Bezos last week unloaded about $240 million worth of Amazon shares.

• BoFA’s head of equity strategy, Savita Subramanian put out a note saying they expect the S&P 500 to reach 5000 by year-end 2024. That seems so far away right now but, not altogether impossible. I read the note and there are some good valid arguments but, it may not necessarily play out the way they expect it to. Then again, we never thought we’d be ending 2023 at the 4500 level with the way the Fed has hiked. I don’t always agree with BoFA’s view but, never say never.

Excerpt from BoFAs note:

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(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)