Wall Street surged on strong US bond auction and MSFT boost

On Friday, Wall Street Futures were almost flat amid hopes of an early Fed cut and lingering uncertainty about the Gaza war trajectory/pause/ceasefire. Fed’s hawkish jawboning about the possibility of another hike also affected Wall Street Futures and Gold. But oil recovered from Thursday’s plunge after an FT report that OPEC+ may consider a -1 mbpd production cut at the next scheduled meeting on 26th November.

But on Saturday, the OPEC Chief crossed/denied the Friday FT article that OPEC+ weighs further oil production cuts as anger mounts over Gaza: “I haven’t heard of any additional OPEC+ reductions being discussed at this time.”  Subsequently, oil stumbled to some extent. But recovered again after Goldman Sachs predicted a deeper cut: “-- model suggests OPEC+ could make deeper cuts when they meet on November 26”.

 Again oil slips from around 78.40 to close around 77.40 after a report that the UAE is allowed to increase the supply of oil under terms of the current deal, will increase its output target to 3.075 mbpd in January, or around 135K barrels per day more than it pumped. USE won the concession at the group's most recent meeting in June, arguing that long-standing production limits failed to account for capacity additions made in recent years.

In any way, the UAE could raise oil production regardless of OPEC+ decision. Oil was also boosted by increasing attacks of Iran-aligned Houthi rebels of Yemen, which seized a cargo ship linked to an Israeli company bound for India in the Red Sea Sunday. But Iran also denied any role in the seizure of ships by Houthis. The White House does not expect Arab states to weaponize oil for the Gaza/Israel war excuse. On Monday, the UAE Energy Minister also noted: “There is no short-term oil impact from the current conflict.” Oil was also boosted as both OPEC and the IEA revised their oil demand forecasts higher.

On the weekend, there was renewed hope of a Gaza war ceasefire after a WAPO report, indicating an imminent pause for 3-5 days and subsequent release of hostages. Also, there was Biden an op-ed article, which argued that Revitalized Palestinian authority, not Israel or Hamas should ultimately govern Gaza and the West Bank. Biden also reiterated for humanitarian pauses in the Gaza war. But late Sunday, Israel's PM Netanyahu denied the possibility of any imminent ceasefire deal: “There is no deal for hostages at this point”.

On the other side, Palestinian Authority (PA) President Abbas made a speech on Saturday night wherein he directly addressed U.S. President Biden. He said it was incumbent for the American president to immediately intervene and stop what he said was the ongoing Israeli genocide of the Palestinian people. Overall, the PA public now largely felt abandoned by the West despite the ongoing ‘horror movie’, while most of the Israeli public is also not satisfied with Netanyahu admin in handling the situation.

There are now some reliable police reports in the Israel media that Hamas had not planned originally to attack the international music festival specifically on 7th October. However, they have planned to attack some border villages/towns and break through Israel’s high-security barrier – which includes radar system and underground sensors – and attacked military posts and villages in southern Israel, before the Music Festival massacre- killing 1,200 people, mostly civilians. ‘

The Israeli report also found that most of the festival goers had managed to leave the event by the time Hamas showed up and the massacre began. The large majority of people who were at the event managed to flee following the decision to disperse the event four minutes after the 1st rocket attack by Hamas. The Israeli police investigation also found that an Israeli military helicopter opened fire on the assailants but also hit some people attending the festival in the process/crossfire.

Many Israelis are now saying they felt abandoned on October 7, and they were saying that now they’re being abandoned once again by PM Netanyahu and his war cabinet and not receiving more information on what’s happening in the negotiations in terms of their loved ones (hostages). Overall, many Israeli people are now saying they can’t trust those who are in charge (PM Netanyahu and his war cabinet). Similarly, Biden’s approval rating is also now at around record low mainly because he handled the Gaza war fiasco.

Now leaders of Qatar, Jordan, Palestine (PA), Saudi Arabia, Egypt, Turkey, Indonesia, Nigeria, the Arab League, and the Organization of Islamic Cooperation (OIC) are visiting China for the Gaza war pause/ceasefire as the credibility of the U.S. is at stake. China has strong ties with Israel along with the trust of the Palestinians and weight in the international system.

In a way, as per a late Sunday report; although there is significant progress in the Gaza war pause talks on captives but nothing finalized yet. Following a meeting of the Israeli war cabinet on Sunday, a source told the Israeli Broadcasting Authority that children and women were expected to be released in exchange for a ceasefire of several days and for the release of female and minor detainees from Israeli prisons. The release would take place in phases during the halt in hostilities, it said. The length of the ceasefire would be determined by the number of captives to be released. The report comes after Qatar’s PM Thani said only minor changes remain for a final deal.

Late Monday, as per the latest media report Israeli cabinet may be now ready to reach a deal over captives/hostages. Israeli war cabinet discussed on Sunday its willingness to move forward with negotiations over the release of captives held in Gaza, and wants to send a message to Qatar – which has been mediating between Israel and Hamas – that it is ready to reach a deal.

The report mentions the specifics of a deal that has already been reported by various media outlets, involving the release of 50 women and children held in Gaza, in exchange for a temporary ceasefire and the release of Palestinian prisoners. Media reports have indicated that the released Palestinians would also be women and children. Israel’s Channel 12 said that despite Israel’s attempts to push for the release of more captives, Hamas leader Sinwar has refused to budge. The report added that there was no agreement yet on whether Israeli drones would stop flying during any ceasefire, as Hamas has demanded.

This report came after White House spokesperson Kirby said Monday:

·         We’re closer than we’ve ever been on a captive release deal

·         Washington is hopeful a deal can be reached but nothing is finalized as there’s still work to be done, and nothing is done until it’s all done, so we’re going to keep working on this

·         President Biden’s administration is calling for international law to be respected in Gaza and an increase in humanitarian assistance to the enclave, including through humanitarian pauses in the fighting

Later Biden also confirmed: Biden: “I believe a hostage deal is near”.

But still, the U.S. has not called for a complete ceasefire in Gaza. Some reports in WAPO/others said, quoting U.S. and Qatar officials, actively involved in talks with Hamas:

·         We’re talking about pausing the fighting for a few days so we can get the hostages out--- It’s not a ceasefire

·         US officials were hopeful the deal would see at least a five-day pause in fighting and allow an initial number of at least 50 women and children captives to be released

Meanwhile, the International Red Cross (ICRC) president Spoljaric met with the Hamas leader in Qatar and said:

·         The visit to Qatar, the main interlocutor in negotiations to try to secure the release of captives held in Gaza, was part of its direct discussions with all sides to improve respect for international humanitarian law

·         Spoljaric has also met multiple times in recent weeks with families of hostages held in Gaza as well as senior Israeli and Palestinian leaders

·         It does not take part in negotiations leading to the release of hostages but as a neutral humanitarian intermediary and remains ready to facilitate any future agreements on a release

It may be noted that Israel and humanitarian groups have repeatedly called for the ICRC to be given access to captives being held by Hamas and other groups in Gaza.

Elsewhere, Hamas officials accused Israel of stalling over a ceasefire, echoing reports that the details of how the ceasefire will be implemented are the main stumbling blocks for the deal at the moment:

·         Israel is stalling over ceasefire

·         A ceasefire must be fully implemented for a captive deal to be agreed

·         One of the stipulations of the negotiations with Israel was returning the conditions Palestinians face in Israeli prisons to what it was before October 7

On Monday, Fed’s Barkin said:

·         I expect a much more normal set of growth numbers in the future

·         Inflation does seem to be settling but the job is not done

·         I continue to view inflation as stubborn, which feeds the higher-for-longer approach

·         Higher for longer depends on how the economy evolves

·         My business contacts on the ground report they are still raising prices faster than before the pandemic

·         Overall and core inflation numbers are coming down nicely, but a lot of that is for goods, not core services

·         I'm focusing on inflation to decide on rate moves

·         It's not a big time for offering forward guidance, will respond to data

On Monday, the U.S. Treasury Secretary Yellen said:

·         We're making progress on inflation with a strong labor market

·         The Biden Admin is making investments that will improve conditions in many parts of the country

·         We're making considerable progress in bringing inflation down

·         We do have concerns about issues with privacy and social media; this is a matter that has not yet been resolved

·         I discussed issues concerning China's investments in the US with Chinese counterpart

·         The US and China recognize they have the opportunity to work together after the Biden-Xi meeting

Market wrap:

On early Monday, Wall Street Futures and gold were almost flat amid the lingering Gaza war trajectory, but surged in late-hours trade after some easing of US bond yields amid a blockbuster auction of US20Y TSY/bonds for $16B ahead of the Thanksgiving holidays, usually dull days for TSY auction/demand. Also, techs helped led by Microsoft after the company hired former OpenAI chief Sam Altman to lead a new AI advanced research team. Also, 100 other odd OpenAI employees/engineers are now ready to switch to Microsoft if the Open AI board does not resign. Nvidia jumped ahead of earnings on hopes of blockbuster numbers, while Boeing soared after an analyst upgrade. On Monday, blue chip DJ-30 surged around +0.60%, broader SPX-500 JUMPED +0.76%, while tech-heavy Nasdaq soared +1.24%.

On Monday, Wall Street was boosted by techs, communication services, real estate, healthcare, consumer discretionary, banks & financials, industrials, materials, and energy, while dragged by utilities, and consumer staples.

Technical trading levels: DJ-30, NQ-100 Future and Gold

Whatever the narrative, technically Dow Future (35221), now has to sustain over 35200 for a further rally to 35350/35500-35650/35850 in the coming days; on the other side, sustaining below 35150, Dow Future may again fall to 34800/34650-34120/34000 and 33700/33200-33000/32400 in the coming days.

Similarly, NQ-100 Future (16088), now has to sustain over 16100 for a further rally; otherwise sustaining below 16050, may again fall to around 16100-14140 in the coming days.

Also, technically Gold (XAU/USD: 1978) now has to sustain over 1985 for any further rally to 2000/2003-2008/2012 and 2063-2085 for a further rally to 2022/2038-2055/2085; otherwise sustaining below 1980-1965, may further fall to 1955/1932-1923 and 1908/1904-1895/1885 and 1850/1810 in the coming days (if there was a Gaza war ceasefire).

Similarly, Oil (77.60) now has to sustain over 79.00 for a further rally to 82.50/84.50-90.50/95.50; otherwise sustaining below 78.50, may again fall to 74.00-72.00 in the coming days.