Early Morning Call: US dollar basket tests support after PCE data and ahead of NFPs

Equity market overview

Indices in the APAC region traded lower this morning, with stock in Japan leading the losses.

Yesterday US equity markets were little changed. The US Dollar Basket is testing August support, after PCE data gave further indication yesterday that inflation may have peaked in the US. PCE price index rose by 6% year-on-year (YoY) in November, after 6.3% the previous month. Core PCE price index rose by 0.2% month-on-month (MoM), after 0.5% rise in October and missing expectations of 0.3% gain.

The fall of the dollar boosted precious metals. Gold is hovering around $,1800, and silver trades at a seven-month high.

The dollar will be tested again later today, at the release of non-farm payrolls (NFPs) for the month of November. Economists expect on average 200,000 job creations which would be their lowest level since December 2020. The unemployment rate is expected to remain at 3.7%, and average hourly earnings should rise by 0.3% MoM, 4.6% YoY.

Germany posted a trade surplus of €6.9 billion in October, as imports fell more than exports in October. At 10am, we await producer price index in the Eurozone. Economists expect a 2% fall in October compared to September, and a rise of 31.5% YoY.

Elsewhere on the equity markets, HSBC is once again making the headlines. After selling its operations in Canada, announcing the closure of 114 branches in the UK, and the review of its retail activity in New Zealand, the bank is cutting as many as 15% of its senior operations managers worldwide, according to Reuters.

HSBC CEO, Noel Quinn, said yesterday the bank has identified $1.7 billion of extra cost cuts it will make next year.

Ryanair says it transported 11.2 million passengers in November, a 10% rise YoY. Load factor rose by five percentage points to 92%.

Commodities

The European Union (EU) is getting closer to a deal on the Russian oil price cap. According to diplomats and a document seen by Reuters, governments tentatively agreed on Thursday to a $60 a barrel price cap on Russian seaborne oil. The agreement will still need approval from all EU governments.

Poland, which had pushed for the cap to be as low as possible, has not yet confirmed if it will support the deal.

Later today, we expect the weekly Baker Hughes oil rig count. Last week, the survey showed that total rig count rose by two to 784. The number of oil rigs in operation rose by four to 627, with the number of active gas rigs down two to 157.