Hawks and Doves: Understanding Their Impact on Economic Policy

Economic

Summary:

Discover the roles of hawks and doves in economic policy, particularly in central banks and politics. Learn how their differing views shape interest rates, inflation, and global markets.

In the world of economics and central banking, the terms hawks and doves are often used to describe opposing viewpoints on monetary policy. These terms, rooted in historical political rhetoric, are commonly used to characterize the stance of policymakers when it comes to key issues like inflation control, interest rates, and overall economic growth. Understanding the difference between hawks and doves is essential for anyone interested in how decisions are made at the highest levels of government and finance.

In this article, we will explore the meaning behind these terms, their origins, and how hawkish and dovish policies impact economic conditions. Whether you are an investor, a student of economics, or simply curious about how economic decisions affect your daily life, understanding hawks and doves will give you a deeper insight into the forces that shape global economies.

What Are Hawks and Doves?

The terms hawk and dove are used to describe the outlook of economic policymakers, especially in central banks. These policymakers are tasked with deciding on monetary policies, including setting interest rates and influencing overall economic activity. The difference between hawks and doves lies in how they perceive inflation, unemployment, and the balance between economic growth and stability.

Hawks are policymakers who prioritize controlling inflation over economic growth. They generally advocate for higher interest rates and a tighter monetary policy to curb inflation, even if it means slowing down the economy. Hawks are typically more concerned about the dangers of inflation spiraling out of control and believe that keeping inflation in check is vital for long-term economic stability.

Doves, on the other hand, emphasize economic growth and are more likely to favor lower interest rates and a more relaxed monetary policy. Doves are more willing to tolerate higher inflation if it means stimulating the economy and reducing unemployment. They believe that economic growth should be the priority and that monetary policy should support this goal by making credit more affordable and stimulating investment.

The Origins of Hawks and Doves

The origins of the terms “hawk” and “dove” can be traced back to the Vietnam War era. During this time, hawk was used to describe those who supported a more aggressive approach to the war, favoring military intervention. Conversely, doves were those who advocated for a more peaceful, diplomatic approach, favoring negotiations and the cessation of the war.

Over time, these terms found their way into the realm of economic policy. In the context of central banking, the terms began to reflect different attitudes toward inflation and economic growth. Hawks were seen as those who would take a tough stance against inflation, while doves were viewed as those more focused on achieving economic growth, even at the cost of higher inflation.

The Impact of Hawks and Doves on Monetary Policy

The outlook of hawks and doves has a significant influence on central banks’ decisions, especially when it comes to setting interest rates. Let’s examine how their views affect the economy.

1. Hawks and Interest Rates

Hawks typically argue that raising interest rates is necessary to control inflation. By increasing the cost of borrowing, higher interest rates can slow down consumer spending and business investment, which in turn helps to reduce inflationary pressures.

For example, when inflation is rising above the target set by a central bank (often around 2%), hawkish policymakers may advocate for higher interest rates to cool off the economy. This is especially true when the economy is growing rapidly and there are concerns that inflation could spiral out of control.

While hawkish policies can help stabilize prices, they can also lead to higher borrowing costs for consumers and businesses. This could result in slower economic growth and potentially higher unemployment if businesses cut back on hiring or expansion due to more expensive loans.

2. Doves and Interest Rates

In contrast, doves often support lowering interest rates to encourage economic activity. Lower interest rates make borrowing cheaper, which can stimulate consumer spending and business investment. This is especially important during periods of economic downturns or recession, when demand for goods and services is low.

Dovish policymakers are more likely to keep interest rates low for extended periods to foster economic growth and reduce unemployment. They argue that a strong economy with low unemployment is more important than keeping inflation under control in the short term, particularly when inflation is not yet a major concern.

However, prolonged low interest rates can lead to asset bubbles in markets like real estate and stocks, and may eventually cause inflation to rise if demand outstrips supply. Dovish policies also risk creating excessive debt as borrowing becomes too easy, which can have negative long-term effects on the economy.

The Role of Hawks and Doves in Central Banks

The most well-known examples of hawks and doves are found within central banks, particularly the Federal Reserve in the United States and the European Central Bank. These institutions are responsible for setting monetary policy and adjusting interest rates to manage economic conditions.

Hawks in central banks are more likely to support policies that focus on price stability. They tend to favor interest rate hikes when inflation rises above target, arguing that price stability is necessary for a healthy economy in the long run.

Doves in central banks, however, are more inclined to prioritize economic growth and employment. They might favor low interest rates or quantitative easing measures to stimulate economic activity, especially during periods of low inflation or recession.

The Federal Open Market Committee (FOMC), which sets U.S. interest rates, is often divided between hawks and doves. For example, during periods of economic expansion, hawkish members might push for rate hikes to prevent inflation, while dovish members may argue for keeping rates low to foster more job creation and growth.

How Hawks and Doves Affect Financial Markets

The balance between hawkish and dovish stances in central banks can create volatility in financial markets, especially when interest rate decisions are expected. Here’s how it impacts various asset classes:

Stock Markets: Generally, hawks can lead to volatility in stock markets, as higher interest rates increase borrowing costs and reduce profitability for companies. Dovish policies, on the other hand, often lead to a more favorable environment for stocks, as low interest rates encourage investment.

Bonds: Higher interest rates typically lead to lower bond prices, especially for long-term bonds. This is because new bonds issued at higher rates make existing bonds with lower rates less attractive. Doves are likely to keep interest rates lower for longer, which tends to support bond prices.

Currency Markets: Hawks may lead to a stronger currency because higher interest rates tend to attract foreign investment. Doves, with their focus on growth, may lead to a weaker currency if low rates reduce the appeal of holding assets in that currency.

Conclusion: The Balance Between Hawks and Doves

Hawks and doves represent two different approaches to managing the economy, each with its advantages and risks. While hawks focus on controlling inflation and ensuring long-term stability, doves prioritize economic growth and reducing unemployment. The delicate balance between these viewpoints shapes the monetary policies that impact everything from inflation rates to job creation and financial markets.

Understanding the roles of hawks and doves in economic policy is crucial for anyone seeking to navigate the complex world of finance and investment. As central banks around the world continue to make decisions based on these differing viewpoints, their influence on global economies will remain a key factor in shaping the future of finance.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Glendon

Economic

In the world of financial markets, index trading has emerged as a popular strategy for investors seeking exposure to broad market trends without the complexities of picking individual stocks. Index trading allows participants to speculate on the performance of a basket of securities that represent a particular sector, region, or market.

Whether you're a beginner or an experienced trader, understanding index trading can unlock opportunities to diversify your portfolio, hedge against risks, and take advantage of global market movements. In this article, we’ll cover everything you need to know about index trading, including its benefits, strategies, and key indices to watch.

What Is Index Trading?

Index trading involves trading financial instruments, such as index funds, futures, or contracts for difference (CFDs), based on the performance of a specific market index. A market index measures the performance of a group of stocks, often from a particular sector, market, or economy.

For example, the S&P 500 tracks the top 500 companies in the United States, while the FTSE 100 represents the 100 largest companies listed on the London Stock Exchange. By trading indices, investors can gain exposure to the performance of these groups of stocks without buying the individual shares.

How Does Index Trading Work?

Index trading doesn’t involve owning the underlying stocks in the index. Instead, traders use instruments such as CFDs, futures, or exchange-traded funds (ETFs) to speculate on the index's price movement.

Here’s how it works:

Speculation: Traders predict whether the index's value will rise or fall.

Leveraged Trading: Many instruments, such as CFDs, allow traders to use leverage, amplifying potential gains (or losses).

Profit or Loss: If the market moves in the trader's predicted direction, they profit; otherwise, they incur a loss.

For example, if you believe the NASDAQ 100 will rise due to strong tech sector performance, you might open a long position. Conversely, if you anticipate a market downturn, you could take a short position.

Benefits of Index Trading

1. Diversification

Index trading offers exposure to a broad range of companies, sectors, or economies, reducing the risk associated with investing in a single stock.

2. Cost-Effective

Since you don’t have to buy individual stocks, index trading can be a more affordable way to invest in the market.

3. Flexibility

Indices can be traded across different timeframes, making them suitable for day traders, swing traders, and long-term investors alike.

4. Leverage Opportunities

Many brokers offer leverage on index trading, enabling you to trade larger positions with a smaller initial investment.

5. Hedging Against Risks

Index trading can serve as a hedge against risks in a portfolio. For instance, if you hold multiple U.S. stocks, shorting the S&P 500 can offset potential losses during a market downturn.

Popular Indices for Trading

1. S&P 500 (USA)

Tracks the top 500 companies in the U.S. and is widely regarded as a barometer of the U.S. economy.

2. NASDAQ 100 (USA)

Focuses on 100 of the largest non-financial companies, primarily in the tech sector.

3. FTSE 100 (UK)

Includes the 100 largest companies listed on the London Stock Exchange, representing the UK economy.

4. DAX 40 (Germany)

Represents the 40 largest companies on the Frankfurt Stock Exchange, making it a key index for European markets.

5. Nikkei 225 (Japan)

Tracks the performance of 225 large Japanese companies across various sectors.

6. Hang Seng Index (Hong Kong)

Monitors the largest companies in Hong Kong and serves as a proxy for the Chinese economy.

Strategies for Successful Index Trading

1. Trend Following

Identify long-term or short-term trends in the index and trade in the direction of the trend. Technical indicators such as moving averages can help.

2. Range Trading

Trade indices within a defined range of support and resistance levels, buying at support and selling at resistance.

3. News and Events Trading

Indices are sensitive to macroeconomic news and events. Stay updated on interest rate changes, employment data, and geopolitical developments.

4. Hedging

Use indices to hedge against risks in your existing portfolio, especially during periods of market uncertainty.

5. Scalping

Make multiple trades within a single day to profit from small price movements.

Risks Involved in Index Trading

Leverage Risks

While leverage can amplify gains, it also magnifies losses, potentially exceeding your initial investment.

Market Volatility

Indices can be highly volatile, especially during periods of economic uncertainty or major geopolitical events.

Overtrading

Constantly entering and exiting trades can lead to high transaction costs and emotional stress.

Systematic Risks

Indices represent broad market performance, making them vulnerable to systemic risks like recessions or global financial crises.

Tips for Beginners

Understand the Index: Research the composition and factors influencing the index you wish to trade.

Start Small: Use a demo account or trade with minimal capital initially.

Use Stop-Loss Orders: Protect your capital by setting stop-loss levels to limit potential losses.

Stay Informed: Follow economic news, central bank policies, and market trends.

Diversify Your Portfolio: Avoid putting all your capital into one index or strategy.

Conclusion

Index trading is a versatile and accessible way to participate in global financial markets. By understanding how indices work and employing sound trading strategies, you can take advantage of market trends, diversify your investments, and hedge against risks. However, like any form of trading, it requires knowledge, discipline, and risk management to succeed.

Whether you are a novice looking to get started or an experienced trader seeking to expand your strategies, index trading offers a world of opportunities that align with your financial goals.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

President-elect Donald Trump will likely issue an executive order on his first day in office to designate Bitcoin as a United States reserve asset, according to Jack Mallers, founder and CEO of Strike.

A 200K Bitcoin buy order is coming in January 2025?

In a podcast interview with YouTuber Tim Pool, Mallers said that Trump could rely on provisions within a so-called “Dollar Stabilization Act,” which grants him considerable authority to protect the US dollar.

“There’s potential to use a day-one executive order to purchase Bitcoin,” Mallers said, adding:

“It wouldn't be the size and scale of 1 million coins but it would be a significant position."

The Bitcoin Act of 2024, introduced by pro-crypto Senator Cynthia Lummis in July, proposes that the Treasury and Federal Reserve purchase 200,000 BTC annually over five years, accumulating 1 million Bitcoin BTC$104,526.

The reserve would be held for at least 20 years, thereby taking 5% of Bitcoin’s total supply (of 21 million tokens) from circulation.

These speculations have resulted in some lofty new BTC price targets for 2025 and beyond.

Bitcoin price may hit $800,000 by 2025’s end

According to Perianne Boring, founder of The Digital Chamber, Bitcoin’s capped supply could lead to significant price appreciation, especially if Trump successfully implements many of his proposed crypto policies.

“If Donald Trump is successful in putting forth a lot of the proposals that he’s proposed to the [crypto] community, the sky is the limit because Bitcoin has a fixed supply,” Boring said in an interview with Fox Business.

She pointed to the stock-to-flow model, which forecasts Bitcoin’s price to exceed $800,000 by the end of 2025. Such a surge would push Bitcoin’s market capitalization to around $15 trillion, up from its current valuation of over $2 trillion.

PlanB, the creator of the stock-to-flow model, predicts Bitcoin to average around a $500,000 valuation across 2025. However, he said that the price may go as high as $1 million.

BlackRock suggests 1-2% portfolio allocation to Bitcoin

The stock-to-flow model’s Bitcoin price prediction hinges on the assumption that demand for BTC will continue to increase.

The US Treasury, theoretically accumulating 200,000 BTC each year, reinforces the idea of stronger demand since it’ll likely force other countries to consider strategic Bitcoin reserves of their own.

BlackRock, which manages over $10 trillion worth of assets, is already recommending investors allocate 1-2% of their portfolios to Bitcoin.

“We see a case for investors with suitable governance and risk tolerance to include Bitcoin in a multi-asset portfolio,” four senior executives, including Samara Cohen, chief investment officer of ETFs, and Paul Henderson, senior portfolio strategist of BlackRock Investment Institute, said in a report published Dec. 12.

To put this into perspective, the total global reserve assets are valued at about $900 trillion. A 2% allocation to Bitcoin from this pool would theoretically drive the cryptocurrency’s price to around $900,000 per unit.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Warren Takunda

Economic

The Euro to Dollar exchange rate (EUR/USD) firmed above the key 1.0450 horizontal support line after S&P Global's Services PMI rose to 41.4 in December from 49.5 in November. The consensus expected another 49.5 reading; a PMI above 50 represents growth for the sector.

The headline points to an unexpected consumer resilience, which can underpin the Eurozone economy while providing a much-needed positive surprise for the euro.

However, EUR/USD upside will be limited as the remainder of the PMI report pointed to ongoing challenges facing Europe.

The Manufacturing PMI stayed at 45.2, which is deep in contractionary territory, whereas the consensus looked for improvement (45.3).

The Composite PMI, which balances these data to arrive at a more representative gauge of the wider economy, read at 49.5, which is above November's 48.5.

S&P Global says output was scaled back amid sustained reductions in new orders and the pace of job cuts was the fastest in four years as companies responded to a drop in workloads by lowering their staffing levels.

This is a relevant finding for the European Central Bank (ECB), which thinks falling employment will lower wages, which will, in turn, lower inflationary pressures.

Investment bank EUR/USD consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. Featuring the median, mean, high and low points forecasted by over 30 investment banks.

The ECB cut interest rates by 25 basis points last week, citing economic weakness and growing confidence that inflation was back under control.

These PMI data will, on balance, reinforce the message and keep the door ajar to further cuts at the ECB in 2025.

"These data will strengthen ECB policymakers’ view that further interest rate cuts are needed. There doesn’t yet seem to be much appetite for 50bp rate cuts, but that could change if the data remain very weak. And even if the Bank continues to move in 25bp steps, we think it will lower rates a bit further than investors currently expect," says Jack Allen-Reynolds, Deputy Chief Euro-zone Economist.

Should the ECB 'outcut' the Federal Reserve and Bank of England, then the Euro will likely remain under pressure against the Dollar and Pound.

However, the ECB confirmed it is not on autopilot and will still respond to the incoming data. Caution is warranted as the PMI report said inflation rates of both input costs and output prices quickened at the end of the year, with charges rising at a pace that remained above the series average.

The Eurozone's economic malaise remains centred on falls in its two largest economies, Germany and France. Both remained in contraction during December, with rates of decline easing only slightly from the previous month.

In contrast, the rest of the Eurozone posted a solid increase in output at the year's end, with the expansion rate reaching a six-month high.

Euro-Dollar looks set to be supported above 1.0450 this week, with further gains possible, potentially taking in 1.0580. Much will also depend on Wednesday's Federal Reserve policy decision, where an interest rate cut is anticipated.

The cut is 'in the price' of the Dollar, but markets will be interested in hearing how the Fed communicates that it will forgo another cut in January.

Messaging will be important, but we don't think there will be enough said or done to break the 1.0450-1.06 range that is being cemented in Euro-Dollar's shorter-term charts.

Source: Poundsterlinglive

To stay updated on all economic events of today, please check out our Economic calendar

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SAXO

Economic

Central Bank

The Federal Reserve is widely expected to deliver a 25 basis-points (bps) rate cut this week, reducing the target range for the federal funds rate to 4.25-4.50%. With the Fed's moves becoming more data-driven, investors will be paying close attention to the tone of Chair Powell’s post-meeting remarks and the updated Summary of Economic Projections (SEP), especially the dot plot, which provides insights into the rate path for 2025 and beyond.

Rate Cut This Week: A 'Hawkish' Cut?

The Fed Funds futures show a 95% probability of a 25bps rate cut at the December meeting, following a similar move in November. This could come on the back of:

Labor Market Softening: The unemployment rate has edged higher to 4.2% in November, while labor force participation declined. This slowdown in job market strength could justify additional rate cuts to prevent excessive labor market slack.

Easing Shelter Inflation: While the last mile of inflation has been proving sticky, there was a sense of relief in housing inflation in the latest update. Shelter costs, a key driver of inflation, have started to ease as new rental leases are renegotiated. Since shelter has been a sticky component of inflation, any relief here strengthens the case for rate cuts.

While the rate cut is almost fully priced in, the market will be watching for any signals of a "hawkish cut." This means that while the Fed is easing policy, it could signal caution about the pace of future cuts, either through the committee’s updated dot plot or via Chair Powell’s press conference.

2025 Rate Path: Will the Fed Pause?

There’s growing chatter about the Fed possibly skipping a rate cut in January 2025, signaling a potential pause in the easing cycle. Why might this happen?

Sticky Inflation: While shelter inflation is easing, other components of inflation remain persistent, complicating the Fed's ability to justify an aggressive pace of cuts.

Resilient Economy: Recent economic data has shown surprising resilience, which may prompt the Fed to take a more measured approach in cutting rates further.

Trump-flation Risks: With the new Trump administration likely to focus on trade tariffs early on after taking office on January 20, there is risk that it could create upside risks to inflation, which could make the Fed more cautious about future cuts.

Fed Preview: Rate Cut on Deck, But With 2025 Caution_1

The dot plot, which reflects each FOMC member’s rate expectations, will be critical for market sentiment as it gives insights into the Fed members’ thinking. The dots for 2025, 2026, and 2027 will provide clues on how aggressively the Fed sees rates coming down.

2025 Outlook: The previous dot plot indicated four rate cuts (100bps) for 2025, but this could be revised to just three or even two cuts as inflation risks remain elevated. Consensus expects 2025 dot to move to 3.625% from 3.375%, signalling a baseline view of three rate cuts next year. If the 2025 dot moved to 3.875%, signalling just two rate cuts next year, that will be a considerable hawkish surprise for the market.

Longer-Term Rates: Projections for 2026 could also shift to two cuts, reflecting a slower normalization path. Consensus expects end-2026 rate to be at 3.125% from 2.875% projected by the dot plot in September.

Terminal Rate: The "long-run" neutral rate could also tick higher to 3% from 2.875% in September, reflecting a structurally higher interest rate environment.

Updated Economic Forecasts: The SEP is likely to be revised to show higher 2024 core PCE inflation from 2.6% in September, lower unemployment from 4.4%, and stronger GDP growth projections for 2024.

Fed Preview: Rate Cut on Deck, But With 2025 Caution_2

Market Implications and Portfolio Strategies

Equity Market Reaction: Markets have priced in the 25bps cut, but if the Fed signals fewer cuts in 2025, risk assets like equities may see renewed volatility. A hawkish tone could put downward pressure on equity valuations, especially growth stocks that are more sensitive to higher rates. Other interest rate-sensitive sectors, such as homebuilders and small-caps, could also face headwinds. Investors may consider rotating into defensive sectors like utilities and consumer staples if the Fed signals a slower pace of cuts.

Fixed Income Positioning: If the dot plot hints at a higher terminal rate or fewer cuts in 2025, the yield curve could bear flatten, with short-term yields rising relative to longer-term yields. This could expose short-duration bonds to downside risk as yields rise.

FX Strategy: A hawkish rate cut could be USD-supportive, driving demand for the dollar. While there’s potential for a short-term pullback in USD due to year-end seasonality and stretched positioning, any dips may be seen as a buying opportunity. The Trump administration’s potential pro-dollar policies, such as heightened tariff talks, could support the USD in 2025. Meanwhile, Japanese yen faces downside risks if US 10-year yields jump higher, and tariff threats could weigh on the Chinese yuan, euro, and Australian dollar heading into 2025.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Stocks

Shares retreated Monday in Asia after China reported lackluster economic indicators for November, while bitcoin surged to fresh highs, topping $106,000.

Oil prices fell and U.S. futures were little changed.

Bitcoin was trading at $104,948 early Monday, up 3.4% but down from an earlier high of $106,495.

The price of the cryptocurrency has surged since the election in November given U.S. President-elect Donald Trump’s bitcoin-friendly stance. Trump signaled a lighter regulatory approach to digital currencies with his choice of crypto advocate Paul Atkins to be the next chair of the Securities and Exchange Commission. Bitcoin was trading below $70,000 before the Nov. 5 election.

A report Monday showed Chinese retail sales slowed in November, while growth in factory output was flat and home sales declined. The report said the economy and employment were stable, but noted a complicated “external environment,” reflecting unease over the outlook in coming months once U.S. President-elect Donald Trump takes office, potentially delivering on promises to sharply hike tariffs on imports from China.

Japan’s Nikkei 225 index edged 0.1% lower, to 39,438.74, while the Hang Seng in Hong Kong lost 0.8% to 19,821.24.The Shanghai Composite index was almost unchanged, at 3,390.91.

South Korea’s Kospi lost 0.3% to 2,486.47 as South Korean law enforcement authorities were pushing to summon impeached President Yoon Suk Yeol for questioning over his short-lived martial law decree and the Constitutional Court met to discuss whether to remove him from office or reinstate him.

Taiwan’s Taiex edged 0.1% higher, while the Sensex in India fell 0.4%. Thailand’s SET dropped 0.9%.

On Friday, major stock indexes on Wall Street drifted to a mixed finish Friday, capping a rare bumpy week for the market.

The S&P 500 ended essentially flat, down less than 0.1% at 6,051.09. The benchmark index posted a loss for the week, its first after three straight weekly gains.

The Dow Jones Industrial Average slipped 0.2% to 43,828.06, while the Nasdaq composite rose 0.1% to 19,926.72, ending just below the record high it set on Wednesday.

There were more than twice as many decliners than gainers on the New York Stock Exchange.

Gains in technology stocks helped temper losses in communication services, financials and other sectors of the market.

Broadcom surged 24.4% for the biggest gain in the S&P 500 after the semiconductor company beat Wall Street’s profit targets and gave a glowing forecast, highlighting its artificial intelligence products. The company also raised its dividend.

But some tech stocks were a drag on the market. Nvidia fell 2.2%, Meta Platforms dropped 1.7% and Google parent Alphabet slid 1.1%.

Among the market’s other decliners were Airbnb, which fell 4.7% for the biggest loss in the S&P 500, and Charles Schwab, which closed 4% lower.

Furniture and housewares company RH, formerly known as Restoration Hardware, surged 17% after raising its forecast for revenue growth for the year.

Wall Street’s rally stalled this week amid mixed economic reports and ahead of the Federal Reserve’s last meeting of the year. The central bank is widely expected to cut interest rates for a third time since September when it meets this week.

Expectations of a series of rate cuts has driven the S&P 500 to 57 all-time highs so far this year.

The Fed has been lowering its benchmark interest rate after aggressively hiking rates to tame inflation. It raised rates from near-zero in early 2022 to a two-decade high by the middle of 2023. Inflation eased under pressure from higher interest rates, nearly to the central bank’s 2% target.

The economy, including consumer spending and employment, held strong despite the squeeze from inflation and high borrowing costs. A slowing job market, though, has helped push a long-awaited reversal of the Fed’s policy.

In other dealings early Monday, U.S. benchmark crude oil lost 47 cents to $70.82 per barrel. Brent crude, the international standard, lost 36 cents to $74.13 per barrel.

The U.S. dollar fell to 153.62 Japanese yen from 153.71 yen. The euro rose to $1.0516 from $1.0491.

Source: AP

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ING

Economic

Commodity

Energy – China’s apparent oil demand declines

The latest industrial output data from China shows that refiners reduced activity in November. Crude processed in the month fell to the lowest in five months at around 14.3m b/d as some processors shut plants for seasonal maintenance. As per the recent data from Mysteel OilChem, five state-owned plants were shut for seasonal maintenance last month. This includes Sinopec Fujian Refining & Chemical Co., which has an annual refining capacity of 12mt. Meanwhile, apparent domestic demand was also weaker, falling by around 2.1% year-on-year to a little more than 14m b/d. Cumulative apparent demand fell by 3.3% YoY to 14m b/d over the first 11 months of the year.

The latest data from Baker Hughes shows that the number of active US oil rigs remained unchanged over the week at 482, after rising by five in the preceding week. The total rig count (oil and gas combined) also remains steady at 589 over the reporting week. Primary Vision’s frac spread count, which gives an idea of completion activity, decreased by three over the week to 217.

Weekly positioning data from the Commodity Futures Trading Commission (CFTC) shows that managed money net long position in NYMEX WTI dropped after rising for two consecutive weeks. Money managers trimmed net longs in NYMEX WTI by 12,448 lots over the week to 103,986 lots as of 10 December 2024. On the other hand, exchange data shows that speculators have built fresh longs of 5,349 lots in ICE Brent over the last week, leaving them with 162,273 lots of net long position. The persistent concerns around the Russia-Ukraine war along with the probability of fresh US sanctions on Russian crude have been keeping the speculative interest in energy commodities high.

In products, net bullish bets for gasoline jumped to their highest level since mid-April 2024. Speculators boosted the net longs for gasoline by 6,546 lots (after reporting declines for two straight weeks) to 73,037 lots for the week ending 10 December 2024. There are suggestions that the gasoline supply could tighten next year due to the planned refinery outages and closures. LyondellBasell’s Houston refinery is set to close by the end of the first quarter and will start idling as early as January. The refinery processes about 264k b/d.

Metals – Chinese aluminium production hits record highs

The National Bureau of Statistics (NBS) numbers released this morning show that Chinese monthly primary aluminium production rose 3.6% YoY to reach a record of 3.7mt in November as rising overseas export demand helped the metal output stay elevated. Along with that, record alumina prices also helped the nationwide production of the lightweight metal to remain high despite reports of some smelters reducing output. Cumulatively, output rose 4.6% YoY to 40.2mt over the first 11 months of the year. Among other metals, monthly crude steel production fell 4.3% month-on-month to 78.4mt last month primarily due to tighter margins and seasonally weakening downstream steel consumption. Meanwhile, cumulative output fell 2.7% YoY to 929.2mt in the January-November 2024 period.

According to media reports, Japanese aluminium buyers were offered a premium of US$228/t (the highest premium since 2015) for the first quarter of 2025, up from US$175/t (+30% quarter-on-quarter) this quarter. However, it is slightly lower than the initial offers of US$230-260/t. The increase in premiums reflects expectations of tighter supply in Asia after China cancelled a 13% tax rebate on aluminium products from 1 December 2024.

In mine supply, Peru’s latest official numbers showed that copper output in the country fell 1.3% YoY to 237kt in October. It is reported that cumulative output loses from mines like Cerro Verde, and Quellaveco’s primarily contributed to Peru’s overall production decline in October. Cumulatively, production declined 0.7% YoY to 2.23mt for the first 10 months of the year.

Meanwhile, weekly data from Shanghai Futures Exchange (ShFE) shows that inventories for base metals remained mixed over the last week. Aluminium weekly stocks fell by 9,875 tonnes for a seventh consecutive week to 214,501 tonnes as of last Friday, the lowest since 10 May 2024. Copper inventories decreased by 13,199 tonnes (-13.5% week-on-week) for the eighth week straight to 84,557 tonnes (the lowest since 2 February 2024), while zinc inventories declined by 2,317 tonnes (-4.4% WoW) for a fourth consecutive week to 50,666 tonnes (the lowest since 9 February 2024) at the end of last week. In contrast, weekly inventories for lead and nickel rose by 8.3% and 1.7% respectively.

The latest positioning data from the CFTC shows that speculators increased their net longs of COMEX copper by 1,460 lots for a second consecutive week to 12,635 lots as of 10 December. In precious metals, managed money net longs in COMEX gold increased by 18,792 lots for the third week straight to 220,189 lots over the last reporting week. The move was fuelled by rising gross longs by 17,826 lots to 236,267 lots for the reporting week. Similarly, speculators increased net longs of silver by 5,792 lots for a second consecutive week to 30,685 lots over the last Tuesday.

Agriculture – China’s grain production estimates at record highs

Recent estimates from the National Bureau of Statistics show that China grain production could rise 1.6% YoY to a record high of 706.5mt for 2024. The above includes the corn production estimate of 294.9mt (+2.1% YoY), while the wheat production forecast stood at 140.1mt (+2.6% YoY) for the above-mentioned period. The rise in production estimates could be largely attributed to the favourable weather conditions for the grain crops in major producing regions, despite some regions experiencing floods, droughts and other disasters.

The latest estimates from the Western Australia Grain Association show that wheat harvest from the country’s top wheat-producing state could rise to 10.83mt for the 2024/25 season, above its previous estimates of 10.33mt. Overall grain production estimates have been revised higher and there is still a week or two of harvest remaining in some regions.

The latest CFTC data shows that money managers decreased their net bearish bets in CBOT soybean by 13,897 lots for a second week straight over the last week, leaving them with a net short position of 58,320 lots as of 10 December 2024. The move was predominantly driven by falling gross shorts by 12,166 lots. Similarly, speculators decreased their net short in CBOT wheat by 2,607 lots after reporting gains for four consecutive weeks to 66,779 lots as of last Tuesday. The move was led by falling short positions with gross shorts decreasing by 3,481 lots to 149,272 lots. Meanwhile, net speculative long positions in CBOT corn rose significantly by 77,670 lots after declining for two consecutive weeks to 165,890 lots (the most bullish bets since 21 February 2023) over the last reporting week, following an increase in gross longs by 53,471 lots to 327,099 lots.

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Hawks and Doves: Understanding Their Impact on Economic Policy

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1. S&P 500 (USA)

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3. FTSE 100 (UK)

4. DAX 40 (Germany)

5. Nikkei 225 (Japan)

6. Hang Seng Index (Hong Kong)

Strategies for Successful Index Trading

1. Trend Following

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Trump May Use Bitcoin as US Reserve Asset on 'Day One' — How High Will BTC Price Go?

A 200K Bitcoin buy order is coming in January 2025?

Bitcoin price may hit $800,000 by 2025’s end

BlackRock suggests 1-2% portfolio allocation to Bitcoin

Source: Cointelegraph

Euro to Dollar Exchange Rate Short-term Outlook Firms On Eurozone PMI Surprise

Source: Poundsterlinglive

Fed Preview: Rate Cut on Deck, But With 2025 Caution

Rate Cut This Week: A 'Hawkish' Cut?

2025 Rate Path: Will the Fed Pause?

Market Implications and Portfolio Strategies

Stock Market Today: Asian Shares Fall as China Reports Lackluster Data, While Bitcoin Hits New Highs

Source: AP

The Commodities Feed: Rangebound Crude

Energy – China’s apparent oil demand declines

Metals – Chinese aluminium production hits record highs

Agriculture – China’s grain production estimates at record highs

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