Markets have started December on a weak note, struggling to break through key resistance levels, as fears of a yen carry-trade unwind resurface following BoJ Governor Ueda’s latest remarks signalling a possible rate hike as soon as this month. Despite last week’s rebound, momentum factor remains fragile in both the US and Europe. NVIDIA has decoupled from last week’s rebound in the broader Nasdaq and BTC, although it’s facing its own idiosyncratic headwinds, continues to struggle, potentially signalling fresh weakness ahead for risk assets.
The market has quickly reverted to complacency following last week’s sharp rebound. Downside skew has recorded one of its largest single-day drops of the year, with major indices trading at resistance levels. Optimism has been supported by a notable improvement in breadth, reigniting hopes for a year-end Santa rally. In terms of systematics positioning, for the meantime any further reduction in length is unlikely given markets have stabilised, while hedge fund flows return to buying the latest weakness.
In terms of key events for the week, the US NFPs that were planned for this Friday have been moved to 16 December, which means the market will focus on Wednesday’s ADP report, for which consensus forecasts jobs will grow by 50k (prev. 42k). We also get US initial jobless claims on Thursday, which are expected to rise to 220k (prev. 216k). Friday wraps up the week with the delayed September PCE print, expected to rise +0.23% MoM, keeping the YoY rate at 2.9%, alongside the University of Michigan’s consumer sentiment forecast, expected to rebound to 54 from 51.
We reiterate our latest Novo Nordisk trade idea as a potential defensive market position.