By Michael Brown, Senior Research Strategist at Pepperstone
DIGEST – Trade was turgid on Friday, amid thin conditions owing not just to Thanksgiving, but also the CME halting operations for much of the day. This week, focus falls on PMIs & eurozone inflation figures.
WHERE WE STAND – Here we are then, ladies and gents; ‘silly season’ is well & truly upon us, as we hurry down the 3-week long home stretch of 2025.
Back to Friday, though, and what was probably one of the strangest trading days that I can remember.
I reference, of course, the CME outage that took place, with the exchange forced to halt trading in all products as a result of a cooling issue in their data centres. Quite why there was no working redundancy or resiliency measures on that front is one that I’ll leave the experts to ponder, however having the exchange offline, and markets halted, for half the trading day did make for a rather odd end to the week.
Thankfully, news flow was very light indeed, and the data docket completely barren, meaning that besides utterly dismal liquidity, and fairly wide spreads across the FX space, the CME issue was more of an annoyance, than a systemic problem. In fact, if this sort of thing had to happen, then the day after Thanksgiving is probably the best day for it to occur, given that the trading day was already likely to be a very subdued one.
In any case, by the time the CME got things back up and running just after lunch here in London, I think most participants had already given up for the day. At least judging by the pitiful volumes that we saw through the remainder of the session, it seemed that everyone (rightly!) used the outage as an excuse to get the weekend underway early.
That said, while little happened on Friday, it still proved to be a very strong week indeed in the equity space, with the S&P 500 and Nasdaq 100 both chalking up their best weeks since May. Quite clearly, the ‘path of least resistance’ continues to lead to the upside, with the market continuing to be propelled by strong earnings growth, a solid underlying economy, returning enthusiasm around the AI theme, a looser monetary backdrop, and a calmer tone on the trade front. I still find it hard to build a convincing equity bear case right now, and as such would expect further gains into year-end, viewing any dips as buying opportunities.
Elsewhere, the biggest movers on Friday were in the precious metals space, with silver printing fresh record highs, and gold chalking up its best week in a month, with spot reclaiming the $4,200/oz mark.
Retail demand is still clearly very healthy here, as is demand from reserve allocators seeking increased diversification, while those Friday gains are also likely to encourage short-term momentum buyers to enter the fray once again. It is usually the case that one record high begets a few more, and that seems likely to ring true for silver, while gold now looks primed to mount a renewed ascent at the $4,400/oz record that we printed earlier in the year.
Certainly, those moves in the metals complex were considerably more exciting than the turgid trade that we saw in the FX and FI arenas, where things were very choppy, and equally indecisive, as the week wrapped up. I’m not sure we learned much from Friday’s session, though I remain minded to buy the dip in the buck, not only as the US economy continue to outperform DM peers, but also as a bit of a bet on the chance of a hawkish surprise at the December FOMC meeting – which seems plausible as a concession to the hawks, given the knife-edge nature of the decision.
Finally, I must mention the Budget, again.
It transpires, after an unprecedented open letter from the OBR was published on Friday breaking down the figures sent to the Treasury in each of the six forecast rounds, that there was no massive ‘black hole’ in the public finances, nor were there any material revisions through the forecasting process. As such, Chancellor Reeves’s pre-Budget comments, including the ‘emergency fiscal narrative reset’ press conference that was seen as laying the groundwork for an income tax hike, are as clear an example as it’s possible to get of the Chancellor misleading the public, and markets, about the true state of the public purse.
If Reeves had any credibility left, it is now gone; if Reeves had any trust left, it is now gone; and, if Reeves had any integrity left, then that’s gone too. For UK markets, though, this clearly represents yet another political shambles, and another downside risk that must be discounted, raising the likelihood that last week’s Gilt rally fizzles out sooner rather than later.
LOOK AHEAD – There are just three ‘proper’ trading weeks of the year to go, but the docket for the week ahead is probably the least exciting of the three.
Given the November US jobs report has been delayed until later in the month, participants will have to make do with a plethora of PMI surveys, the ADP employment figures, and the latest ‘flash’ eurozone CPI figures to potentially provoke some degree of excitement.
Failing that, there are again plenty of central bank speakers, including from both ends of the hawk-dove spectrum at the BoE in the form of external MPC members Dhingra and Mann. We are due to hear from some FOMC officials too, including Chair Powell, however with the pre-meeting ‘blackout’ now in effect there will be no comments on the policy outlook.