Morning Wrap: ASX 200 to rise, gold stocks jump as yields skid + Is the rally running out of steam?

The S&P 500 rallied back into positive territory in the last 30 minutes of trade, the US dollar and bond yields continue to sell off, several high-profile IPOs are in the pipeline for 2024, Fed Governor Waller says there's no reason to keep rates high if inflation falls towards target and the all-important Australia Monthly CPI print is due at 11:30 am today.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 faded from session highs to close around breakeven (Source: TradingView)

MARKETS

• Major US benchmarks finished slightly higher, down from best levels

• S&P 500’s intraday range over the last two trading days has been the narrowest since December 2019, according to Bespoke Investment Group

• US bond yields continued to ease across the curve, the 2-year yield sold off 15 bps to the lowest levels since July 2023

• US Dollar Index extends its losing streak to four, marks lowest close since August 2023

• Gold prices continue to rally, now up 12% since early October and on par with previous peaks in May 2023, March 2022 and August 2020

• Market strategists warn that contrarian the positioning and sentiment tailwind has faded, corporate buyback activity is near its peak

• One options trader positioning for 250 bps of Fed cuts in 2024 (Bloomberg)

• Strategists optimistic on S&P 500 in 2024 with potential top of 5,000 (Bloomberg)

• Citi says S&P 500's best on record November rally running out of steam (Bloomberg)

STOCKS

• Several high-profile IPOs are in the pipeline for 2024 including eCommerce company Shein, social media site Reddit, Kim Kardasian-backed Skims and Microsoft-backed cloud company Rubrik (Bloomberg)

• PPD Holdings, the parent of Pinduoduo and Temo, reported a 94% year-on-year jump in revenue in the third quarter (CNBC)

• Affirm shares surge after Jefferies upgraded the stock to Hold from Underperform (CNBC)

CENTRAL BANKS

• Global central banks brace for uncertain future as inflation era persists (Bloomberg)

• Fed’s Waller says if inflation goes down, there is no reason to insist interest rates remain “really high” and the Fed’s response should be to lower rates (Bloomberg)

• BoE leads central bank chorus on need for restrictive policy (Reuters)

• PBOC, Chinese authorities urge banks to boost lending to private sector (Nikkei)

• PBOC bank pledges to support domestic demand (Reuters)

• PBOC ramps up liquidity to rein in surge in short-term rates (Nikkei)

• ECB's Lagarde mulls early end to bound purchases to accelerate balance sheet reduction (FT)

GEOPOLITICS

• Israel and Hamas extend truce by two days (Bloomberg)

• US warns Israel over southern Gaza offensive, must not worsen refugee crisis (FT)

ECONOMY

• Cyber Monday sales forecast to hit to record (FT)

• US consumer confidence rebounds more than expected in November (Reuters)

• US gasoline prices have fallen for 60-straight days (Bloomberg)

• Japan's underlying inflation measures mostly ease, but data still support BOJ case for normalising monetary stimulus (Reuters)

• GfK German consumer sentiment barely higher heading into holiday season (Reuters)

• Eurozone M3 money supply growth continues to contract, down 1.0% in October (Reuters)

Is the Rally Running out of Steam?

The S&P 500 has been relatively unchanged in the past four sessions while the ASX 200 is down around 1.3% from its November 15 peak. Here's some food for thought as the market begins to digest the recent run up:

• An exceptionally strong November: It's pretty rare for the S&P 500 to rally more than 8% in any given month. Since 1950, there have only been 30. Of which only 4 have been in November. Historical returns suggest strong momentum into following months but exceptionally strong Novembers tend to deliver mixed forward returns.

• Seasonality trends S&P 500: December is one of the best performing months for global markets. But it tends to start slow. The S&P 500 has averaged a 0.21% drop on the first day of December over the last 22 years.

• Seasonality trends ASX 200: Since 1992, December 1-14 has historically returned an average -0.1% for the ASX 200. But between December 14-31, the market has historically gone on a 15-day winning streak to return around 3.5%.

A few sentiment and positioning indicators have started to hit contrarian sell signals. This includes:

• AAII Investor Sentiment Survey: Bears have fallen to the lowest levels since August and hovering the lower end of range over the past 4-5 years.

• Goldman Sachs CTA positioning: From one extreme to another, CTAs are very long US equities again.

Source: Goldman Sachs

Sectors to Watch: Gold

Just a quick one on gold – Which is on a four-day winning streak to US$2,040 an ounce. This triggered a strong response for gold equities, with the VanEck Gold Miners ETF up 4.8% to a near 4-month high. Let's see if we see some follow through strength for local goldies on Wednesday.

VanEck Gold Miners ETF daily chart (Source: TradingView)

Australia's Monthly CPI Print

Hi! Hans here making a rare Wednesday appearance. We have an important inflation read out at 11:30 am AEDT –  The Monthly Inflation Indicator for October.

It's not an all-encompassing print but it has become a tool in the RBA's decision-making process around interest rates. Here is your preview:

• Consensus forecast: 5.2% headline year-on-year, according to a Bloomberg survey

• Highest forecast: Market Economics' Stephen Koukoulas at 5.5%.

• Lowest forecast: HSBC's Paul Bloxham at 4.9%.

• Inflation was at 5.6% in September

An upside surprise, even marginally, could add at least one more rate hike to the rates curve. Equally, a downside surprise ,even marginally, could reinforce the global disinflation narrative and send equities far north.

ASX corporate actions occurring today:

• Trading ex-div: Infratil (IFT) – $0.05, Graincorp (GNC) – $0.30, 360 Capital Mortgage REIT (TCF) – $0.03, Liberty Financial Group (LFG) – $0.12, Newmont Corp (NEM) – $0.42, KKR Credit Income Fund (KKC) – $0.01 

• Dividends paid: HomeCo Daily Needs REIT (HDN) – $0.02, HealthCo Healthcare and Wellness REIT (HCW) – $0.02 

• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australia Construction Work (Q3)

• 11:30 am: Australia Monthly CPI Indicator (Oct)

• 12:00 am: Germany Inflation (Nov)

• 12:30 am: US GDP (Q3)