Dow's Monday Decline, OPEC+ Caution, and Economic Cues Set the Tone for a Dynamic Trading Week | Daily Market Analysis

Key events:

• Australia - Retail Sales (MoM) (Oct)
• USA - CB Consumer Confidence (Nov)
• USA - Fed Waller Speaks
• USA - FOMC Member Bowman Speaks
• Eurozone - ECB President Lagarde Speaks
• UK - MPC Member Haskel Speaks

On Monday, the Dow experienced a decline in a subdued market, with investors hesitating to make significant stock investments pending upcoming catalysts, notably key economic data scheduled for later in the week.

The Dow Jones Industrial Average dropped by 56 points, or 0.2%, while the S&P 500 and NASDAQ Composite also saw decreases of 0.2% and 0.1%, respectively.

The energy sector had the most pronounced impact on the broader market, influenced by declining oil prices ahead of the OPEC+ meeting later in the week.

Although oil prices ended a four-week losing streak last week, caution prevailed despite reduced uncertainty regarding potential deeper oil production cuts by the Organization of Petroleum Exporting Countries and allies (OPEC+), as reported by Reuters citing an unnamed source.

The possibility of an OPEC+ output cut is seen as a measure to counterbalance the supply growth from non-OPEC sources, which has kept oil prices in check.

This week's trading outlook is heavily influenced by a plethora of economic reports, with a focus on the Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index, scheduled for Thursday. Analysts anticipate a modest 0.1% rise in the headline PCE for November, down from 0.4% in September. The core reading, excluding food and fuel costs, is expected to show a year-over-year increase of 3.5%, a decline from the previous month and the lowest since mid-2021.

Other key economic reports this week include the first revision of third-quarter GDP, the weekly jobless claims report, and the release of the Fed's Beige Book.

E-commerce stocks, such as Amazon.com Inc., Etsy, and Shopify Inc., closed higher as data revealed increased consumer spending on Black Friday, with sales reaching a record $9.8 billion, a 7.5% rise from the previous year.

Meanwhile, Asian stocks edged higher on Tuesday, with traders awaiting crucial economic readings from the US and China later in the week. Australia's ASX 200 stood out with a 0.6% gain, driven by strength in real estate and mining stocks.

In Japan, the Nikkei 225 index traded 0.2% lower as it paused after reaching 33-year highs, anticipating more economic cues, including industrial production and retail sales readings later in the week.

The Australian Dollar is extending its winning streak for the fourth consecutive session, maintaining strength despite lackluster seasonally adjusted Retail Sales data from Australia on Tuesday. The AUD/USD pair is hovering near its early August peak around the 0.6625 level, benefiting from a weakened Greenback that appears vulnerable.

Australia's Dollar received support from positive market sentiment and the announcement of a Chinese stimulus plan. Reserve Bank of Australia Governor Michele Bullock contributed to a panel discussion titled "Inflation, Financial Stability, and Employment" on Tuesday. She emphasized that the current monetary policy is on the restrictive side, suggesting that rate hikes may dampen demand, especially in the face of persistent services inflation.

The Japanese Yen strengthened to a one-week high against the US Dollar in the first half of Tuesday's trading, although it retraced some of its intraday gains to levels below 148.00. A generally positive tone in Asian equity markets played a role in undermining the safe-haven appeal of the JPY.

Gold prices experienced a slight increase in Asian trade on Tuesday, maintaining a six-month high amid growing speculation that the Federal Reserve will refrain from further interest rate hikes. The anticipation of a series of economic readings throughout the week supported safe-haven demand for the yellow metal.

The US dollar declined to three-month lows in overnight trading, boosting gold and other metal prices on expectations of no additional Fed rate hikes. However, the greenback stabilized somewhat in Asian trade, with more cues from the Federal Reserve expected later in the week.

Later on Tuesday, several Fed officials, including Christopher Waller and Michelle Bowman, are scheduled to speak, potentially providing additional insights into monetary policy before the pre-Fed meeting blackout period begins. The central bank is widely anticipated to maintain interest rates in December, with markets now seeking clues on when the bank plans to start reducing rates in 2024.

Any adjustments to the Fed’s "higher-for-longer" outlook are likely to benefit gold prices, as higher rates increase the opportunity cost of investing in bullion.