Daily Dose of financial insights for investors and traders; Fed signals likely downshift, China eases some restrictions. Santa rally?

Daily Dose of financial insights for investors and traders; Fed signals likely downshift, China eases some restrictions. Santa rally?

Jessica Amir
Market Strategist

Summary:  Jerome Powell signals downshift likely next month; stocks surge. Dow Jones enters bull market. ASX200 is a sneeze off its record all time high. Focus is on commodity companies with China easing some restrictions and retailers ahead of potential festive season rally. We cover the three key areas of equities to be across and the stocks you might like to watch, with some already up 80% from their fresh lows

What’s happening in markets?

The US; Fed Chair Jerome Powell signaled the Fed will likely not be as aggressive next month, and only hike by 50 bps (0.5%), however he suggested the hiking cycle is far from over to slow inflation. He said the Fed will need "substantially more evidence" to ensure prices are moderating, with the path ahead for inflation remaining highly uncertain. However, amid the somewhat dovish pivot, Bond traders coiled back their peak rate expectations to below 5%, and that resulted in treasury yields falling; the 10-year yield fell 11 bps to 3.63%, pushing the dollar down against the entire G-10 basket. As a result, the S&P 500 rose 3.1% to a two-month high, while it notched its longest monthly winning streak since August 2021. The Dow Jones 30, rose 2.2% and entered a bull market, after collectively rising 20% from its September low. Gold spiked more than 1%, with most commodities rallying up supported by the US dollar falling. Crude oil rose 2.9% to $80.44 - getting an extra boost on forward looking optimism that China is encouraging vaccinations, while at the same time the International Energy Agency (IEA) said it expects Russian crude production to fall by some 2 million barrels of oil per day by the end of the first quarter next year. However gains were capped in oil as OPEC+ is due to hold its December 4 meeting and reports swirled that OPEC is not really likely to shift its policy.

In Australia, the ASX200 (ASXSP200.1) is 3% away from its record high

The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead while one key province in China has eased restrictions. The Fed’s somewhat pivot has pressured the US dollar (with the US dollar index down 5.4% from its peak). This is also supporting commodity prices higher, as well as the forward looking optimism on China. Locally, equites also appear supported as monthly inflation data came out weaker than expected yesterday - which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to.(remember the RBA previously mentioned food and energy prices would rise – we didn’t see that reflected in yesterday’s data, but it will likely be reflected in the quarterly CPI read due out next year).

Three considerations and investment areas to watch 

Firstly, consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector

  • In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%.
  • So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply.

Secondly, watch those companies that could benefit from rate hikes not being as aggressive, and from the festive season spending

  • It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping. As we’ve also been reporting, it’s worth watching retailers like perhaps JBH, HVN, Premier Investments (PMV), given they will likely benefit from Xmas shopping revenue rising.
  • Also, travel and tourism companies will be on watch with travel-services spending likely to continue to gain momentum.
  • Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July.
  • We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However we think although the travel and tourism sector, especially airlines, will likely see a pick up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures.

And thirdly, as well, keep an eye on companies making the news

  • Australia’s biggest oil companies will be a focus with the oil price likely to pick up next year. Woodside (WDS) today announced it sees operating cashflow at around $7-9 billion in the next five years.
  • BHP (BHP) is also in a focus with its CEO saying steel demand from China will grow next year. Mike Henry sees China’s economy only experience a short-term slowdown before returning to a long-term growth.
  • Lastly, other companies to watch include those lockdown stalwarts that aren’t doing so well, like Domino’s Pizza (DMP) with the company planning to raise $165 million in capital. Domino’s operates in Australia, NZ, France, Belgium and Asia. Domino’s Pizza shares are down 56% from their covid high. But the market thinks the business could see a turn around in revenue growth next year and the year after. So if you are a long-term investor, that’s food for thought.
For a weekly look at what to watch in markets - tune into our Spotlight.

For a global look at markets – tune into our Podcast.



The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.