Many Global Leading Indicators Along with Downbeat Christmas Sales Expectations Revive Recession Talks

Soaring prices push U.S. homebuyers out of the market. Existing home sales in the U.S. saw its longest series of declines since 1999 after falling for the ninth consecutive time this year, down 5.9% in October. Data from the U.S. National Association of Realtors showed home resales dropping to a 4.43 million seasonally adjusted annual rate, from 4.71 million in September. Sales were 28.4% lower from October 2021. Earlier last week, new home construction data fell to its lowest since 2020 while homebuilder sentiment has slipped every month in 2022, also on its lowest string of declines since 1985, according to Bloomberg News. Research from the Dallas Fed earlier last week also suggested U.S. home prices could plummet by as much as 20%.

The index of the U.S. Economic leading indicators fell 0.8% against the consensus estimate of a drop by just 0.4%. This is not the best news ahead of Black Friday, particularly for companies like Amazon.com, Inc. (AMZN). In the wake of the upcoming Black Friday investors are worried it may not be necessarily as outstanding as many are betting based on the recent Walmart (WMT), Home Depot (HD) and Macy’s (M) results.

On Fx front, the dollar was up 0.9% against Japan’s yen at 141.67, its highest since Nov. 11. The British pound and the euro both fell by 0.8% each, edging off from last week’s 18-week highs. China’s yuan eased to a 10-day low against the dollar earlier today (read more below about today’s news from China).

The slowdown in the global economy led to negative consequences for companies in the fourth quarter. Thus, in their recent research piece, Goldman Sachs analysts have downgraded corporate sector profit margins to multi-year lows. Despite the dovish speeches of some representatives of the Fed, they say that the dollar would no longer as actively appreciate against other currencies as before, aren’t a given fact. Europe's slide into recession (for additional data read below), the stagflationary spiral in the UK, and the growing number of bankruptcies in developing countries may lead to another wave of risk-off in the market. And to the return of the U.S. Dollar Index, DXY, again to 110 levels.

The COP27 climate summit concluded on Sunday with an agreement to set up a fund that would offer financial assistance to developing countries affected by climate disasters. Some participating nations attempted to block talks over climate-related financing for several years in the aftermath of Covid-19 emissions plunge and fearing the steep costs nations might have to pay for their roles in causing climate change. The summit also reaffirmed a commitment to limit global temperatures from rising 1.5 degrees Celsius above pre-industrial levels, although some countries reportedly felt pressured to compromise on stricter commitments to make way for the passing of the loss and damage fund. Parties also settled on using the term “phasedown” instead of “phase-out” of coal use, despite some delegates calling for the immediate end of coal, oil, and natural gas burning.

Meanwhile, the Old Continent will see another batch of economic updates, including those on consumer confidence in the Eurozone, services and manufacturing sectors in the euro area, Britain, and Germany, as well as on the latter country's gross domestic product (GDP).

As of noon CET, the German DAX is trading 0.59% lower as Puma SE (PUM.DE) fell by 1.01%. The British FTSE 100 declined by just 0.07%, with Halma PLC (HLMA.L) plunging by 1.66%. The French CAC 40 decreased by 0.2% as Teleperformance SE (TEP.PA) dipped by 2.18%. ECB could put brakes on economic expansion to fight inflation. Interest rates could potentially soar to restrictive levels as the ECB continues to battle record inflation in the eurozone. “We expect to raise rates further – and withdrawing accommodation may not be enough,” ECB President, Christine Lagarde said in a conference last Friday. The central bank has increased rates at the fastest pace since its establishment, with its benchmarks now sitting at 2% since July in order to tackle the raging inflation which in October was 10.7% – considerably above the bank’s inflation target of 2%. Some comments on Friday, however, signalled a potential slowdown of rate rises following two consecutive 75-bps hikes. As the stance of monetary policy tightens further, it will become more likely that the pace of (rate) increases will slow," Dutch central bank Governor and ECB governing council member Klaas Knot said.

Data from the Office for National Statistics Friday showed UK retail sales rose higher than expected in October, but remained below pre-pandemic levels. Retail sales volume was up 0.6% in October, following a 1.5% decline in September. Economists polled by Reuters were expecting a 0.3% rise. Some analysts are looking at October's gain in retail sales as a potential one-off, with businesses likely to face difficult Christmas sales due to rising inflation and the drop in real wages. Meanwhile, consumer confidence slightly improved but remains near record-low levels, according to data from market research firm GfK. The firm’s monthly consumer confidence index went up to -44 in November from -47 the previous month, still close to the all-time low of -49 in September.

Coronavirus outbreaks across China are a setback to hopes for an easing of strict pandemic restrictions, one reason cited for a 10% slide in oil prices last week and today’s lackluster opening in European stocks. Beijing’s most populous district urged residents to stay at home on Monday as the city’s Covid-19 case numbers rose, while at least one district in Guangzhou was locked down for five days. Meanwhile, the People's Bank of China decided to leave key interest rates unchanged, with the one-year Loan Prime Rate (LPR) at 3.65% and the five-year rate at 4.30%.

The Nikkei 225 managed to trim losses and end on a positive note by 0.16%, while the Kospi Composite fell by 1.02%. Hong Kong’s Hang Seng plunged 1.87% at the close, as the Australian S&P/ASX 200 decreased by 0.17%. The Shanghai Composite declined by 0.39% concurrently.