Dow Jones The Dow Jones is trading just under new multi-month high and moving within a narrow range for the second straight day, in a holiday-thinned market. Traders were mainly on hold for Thanksgiving, but closely watch major retailers on Black Friday, amid the fact that inflation remains high and threats of possible recession next year. The Dow keeps overall strong bullish stance and extends October’s massive gains, sparked by better than expected earnings season and additionally boosted by signals that the Fed would ease its aggressive stance in tightening its monetary policy. Monthly bullish engulfing in October strongly underpinned the action this month, keeping the index on track for the second straight monthly rally, as acceleration from 28638 (Oct 3 correction low) so far retraced over 61.8% of 36830/28638 pullback. Firm bullish structure is also seen on weekly chart, as Dow resumed steep advance after pausing last week, with weekly close above former top at 34244 (Aug 16) would add to bullish signals. Daily studies are overbought and bullish momentum is fading that may set scope for some corrective action, which should be limited and expected to provide better buying opportunities. Rising 10DMA (33876) marks initial support which should ideally contain, with deeper pullback to stall on approach to 33340 33188 (rising 20DMA/Nov 17 trough) and keep bulls intact. Res: 34757; 34897; 35277; 35409. Sup: 34127; 33876; 33753; 33341.

Happy Thanksgiving to any of our US followers! I have some holiday-related stats to quiz you on to get the episode started this week. Then from a market perspective, I cover what information we learned from the latest FOMC minutes, why the UK is set to be one of the worst performers in the G20 over the next two years, and what caused volatility in the oil market this week.

Flash PMI’s for November turned out to be a mixed bag. US data disappointed as the manufacturing PMI dropped to 47.6 from 50.4 and service PMI pushed lower as well to 46.1 from 47.8. It is broadly in line with our view that the US economy is heading into a mild recession in early 2023. Investments still look resilient as durable goods orders were decent in October. However, leading indicators suggest investments will slow down soon. For once the picture was a little more positive in the euro area as both PMI manufacturing and service were better than expected. The German ifo business confidence also surprised to the upside rising to 86.3 from 84.5. Despite the improvement the indicators are still at low levels and point to a euro area recession. But on the margin it is positive and fits with our view that the recession will not be deep, although it could be protracted as we have yet to feel the full effects of the sharp rise in bond yields and ECB policy rates. The PMI’s also showed easing price pressures and a further normalisation of delivery times, which is a further sign that goods price inflation is in the process of normalising on the back of a sharp drop in freight rates, easing supply chain problems and lower commodity prices. Oil prices turned lower again this week to USD85 per barrel, a decline of USD35 per barrel from the peak in June. Despite easing pressures, inflation will likely stay elevated for some time as some industries have yet to pass through previous price hikes and wage inflation are pushed up by tight labour markets. With more signs of easing price pressures in the medium term, central banks increasingly consider to lower the pace of hikes. Minutes from the recent Fed meeting and Fed speeches suggest a majority within the Fed lean towards lowering the size of Fed hikes to 50bp from 75bp. However, we still have another jobs report and inflation print ahead of the meeting on 14 December, which will be key for the size of the rate hike. The ECB may also move to a 50bp pace but it depends a lot on how next week’s inflation for November turns out. Another high print would likely trigger a 75bp hike on the 15 December meeting, but our baseline scenario is a 50bp rate increase. In China tweaks to the zero-covid policy led to more widespread outbreaks triggering restrictions in more than a third of China’s provinces. China could be facing a chaotic winter as it is hard to contain covid without reacting fast and forceful. Unless, they are willing to live with more spread of the virus, the result could eventually be harsh lockdowns during the winter to knock down the covid waves. Our baseline is that China will not open up fully until summer next year. But uncertainty prevails around which strategy China is going to follow after they took the first steps towards leaving the zero-covid policy. Stock markets got a lift this week from the softer tone from central banks and easing price pressures, which also pushed bond yields lower. EUR/USD has also seen a lift on the back of better risk sentiment and markets pricing a central bank pivot. Next week focus turns to US payrolls and Euro inflation. We expect US job growth to decline from 261k to a still decent 220k (consensus 200k). We look for euro inflation to rise to 10.8% y/y from 10.6% y/y but that core inflation holds steady at 5.0% y/y. Download The Full Weekly Focus

It's official: The most eagerly awaited economic report of this month, if not this year was released on Wednesday and showed the U.S central bank favors slowing down the pace of interest rate hikes to mitigate risks of overtightening. Minutes from the FOMC Monetary Policy Meeting earlier this month revealed several officials backed the need to slow the pace of rate hikes – signalling a pivot to smaller interest rate increases from as early as December. This adds weight to expectations the central bank will raise rates by 50 basis points next month, finally ending a run of super-sized 75 basis point hikes. In another revelation, some committee members expressed concern about risks to the global economy should the Fed continue to press forward at the same aggressive pace. Several Fed officials signalled that their assessment of the risks of a recession had grown to almost 50-50. That was the first such warning since the central bank began raising rates aggressively in March, bringing their target benchmark rate to a range of 3.75% to 4%. Whichever way you look at it, one thing is clear. This is the start of a more different and dovish narrative from the Fed, which ultimately presents an extremely bullish backdrop for commodity prices ahead. Since the beginning of this year, a long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have repeatedly described commodities as their "preferred asset class over the next decade". And now we could be about to see why! Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

After the Thanksgiving downtime that generated some further weakness for the greenback, investors will be looking for fresh direction from the barrage of US economic data that will be dominating the agenda in the coming week. The latest payrolls report will be the main attraction along with PCE inflation readings. CPI data out of Australia, the Eurozone and Switzerland as well as Canadian GDP numbers will be important too, while OPEC’s monthly decision will be another one to watch amid speculation of an output increase.

US non-farm payrolls – 02/12 – despite concerns about the strength of the US economy the labour market, has thus far continued to hold up well, with weekly jobless claims currently averaging around 225k per week. In October non-farm payrolls came in at 261k, while the September jobs number was up to 315k. Slightly more disappointingly was the fact that the unemployment rate edged up to 3.7%, while wage growth slowed to 4.7% from 5%. The report also served to indicate that there was little sign of a wage price spiral despite still high levels of vacancies. If anything, we are now starting to see in the current earnings season reports that the big tech companies are letting people go in their thousands. Amazon for example has announced the loss of over 10k jobs worldwide with more to come, while Meta recently announced 11k. Twitter has also seen people leave the business, some of them voluntarily because they don’t want to work for new owner Elon Musk. While not all these job losses are likely to be in the US there does appear to be a trend starting to build, although it is likely to take some time to filter through given that vacancy rates are still high. It’s also important to remember hiring trends tend to pick up in the lead up to Thanksgiving and the Christmas period on the back of temporary hires. Expectations for November payrolls is for 200k, down from 261k, which would be the lowest number this year. The unemployment rate is expected to tick higher to 3.8%, by virtue of a higher participation rate, while wage growth is forecast to remain subdued at 4.7% EU CPI (Nov) – 30/11 – there is increasing evidence that we might be getting close to peak inflation if the direction of travel of energy prices is any guide. Thus far in Europe we’ve seen little evidence of that with headline CPI jumping to 10.6% in October, up from 10% in September. In October we saw a sudden drop in German PPI numbers on a monthly basis by -4.2%, pulling the annualised number down from a record high of 45.8% to 34.5%. If this is indeed a leading indicator for headline CPI, and the weather doesn’t get too cold in the coming weeks then there is a chance that while the headline numbers could well remain high for some time, they could start to slowly fall back. Core prices are over half the level of the headline numbers at 5%, and with the ECB increasingly concerned about tightening too aggressively, some signs of softer CPI could well offer a compelling narrative for the ECB to hike by 50bps or even less when they meet next week.     US PCE Core Deflator (Oct) – 01/12 – there’s been little evidence thus far that US consumer spending is showing signs of slowing, while the Fed’s preferred measure of inflation, the PCE Core Deflator has thus far continued to edge higher. With core prices still showing underlying resilience there is little incentive the Federal Reserve to hold back from its currently hawkish monetary policy posture. This is despite headline CPI peaking at 9.1% In June. In September PCE Core Deflator edged up to 5.1% from 4.9% in August, although it is still below its February peaks of 5.4%. Nonetheless if we start to see signs that we are starting to turn lower then we could well see the US dollar come under further pressure building on the recent declines that we’ve seen since the peaks of late September. easyJet FY22 – 29/11 – 2022 was supposed to be the year that the UK travel sector saw a semblance of a return to normal service after the disruption caused by Covid. If only life was so simple with rising energy prices caused by the Russian invasion of Ukraine, as well as large scale travel disruption through the summer months, which prompted widespread cancellations and delays and timetable recalibrations. It is true that the aviation sector has had to deal with a myriad of challenges however some of these have been self-inflicted. Letting too many people go when lockdowns cut off their revenue flow, as well as industrial action has meant a summer of long delays, cancellations and excessive waits for luggage for some travellers. In October the easyJet share price hit ten-year lows and while we’ve seen a modest recovery since then the airline is still expected to post a full year loss of between £170m and £190m, which includes incremental disruption costs of £75m, mainly from the operational issues experienced in Q3, and FX costs of £64m. In Q4 easyJet operated at 88% of its 2019 capacity which was below expectations of 90%, while revenue is expected to increase to £2.5bn,...