Gold slid on the progress of the Gaza war ceasefire; Dow surged

·         Overall US core PCE inflation was on the softer side and in line with expectations; the Fed may continue to be on wait & watch stance in 2024

On Thursday, Wall Street Futures stumbled from a softer-than-expected GDP high on hawkish Fed talks. Techs also dragged as the Biden admin has slowed the issuance of licenses to AI chipmakers such as Nvidia and AMD for large-scale AI accelerator shipments to the Middle East including Saudi Arabia. Additionally, Gold slipped on hopes of an imminent Gaza war ceasefire after Hamas said: “We are ready to reach a complete agreement including comprehensive hostages/prisoners exchange deal if Israel stops war on Gaza”.

On Friday Gold briefly got some boost from around 2340 to 2360 in line with estimates of US core PCE inflation data, but soon stumbled to almost 2320 after U.S. President Biden urged Hamas to accept a new Gaza war ceasefire proposed by Israel.

Full text of Biden’s speech on Gaza war ceasefire:

“I want to give an update on my efforts to end the crisis in Gaza. For the past several months, my negotiators of foreign policy, the intelligence community, and the like have been relentlessly focused not just on a ceasefire that would eve- — that would inevitably be fragile and temporary but on a durable end to the war. That’s been the focus: a durable end to this war. One that brings all the hostages home, ensures Israel’s security, creates a better “day after” in Gaza without Hamas in power, and sets the stage for a political settlement that provides a better future for Israelis and Palestinians alike.

 Now, after intensive diplomacy carried out by my team and my many conversations with leaders of Israel, Qatar, Egypt, and other Middle Eastern countries, Israel has offered — Israel has offered a comprehensive new proposal. It’s a roadmap to an enduring ceasefire and the release of all hostages. This proposal has been transmitted by Qatar to Hamas. Today, I want to lay out its terms for the American citizens and the world. This new proposal has three phases — three.

The first phase would last for six weeks.  Here’s what it would include: a complete ceasefire; a withdrawal of Israeli forces from all populated areas of Gaza; a release of several hostages — including women, the elderly, and the wounded — in exchange for the release of hundreds of Palestinian prisoners. Some American hostages would be released at this stage, and we want them home. Additionally, some remains of hostages who have been killed would be returned to their families, bringing some degree of closure to their terrible grief. Palestinians — civilians — would return to their homes and neighborhoods in all areas of Gaza, including in the north. Humanitarian assistance would surge with 600 trucks carrying aid into Gaza every single day.

With a ceasefire, that aid could be safely and effectively distributed to all who need it.  Hundreds of thousands of temporary shelters, including housing units, would be delivered by the international community. All of that and more would begin immediately — immediately. During the six weeks of phase one, Israel and Hamas would negotiate the necessary arrangements to get to phase two, which is a permanent end to hostilities. Now, I’ll be straight with you.  There are a number of details to negotiate to move from phase one to phase two.  Israel will want to make sure its interests are protected.

But the proposal says if the negotiations take longer than six weeks for phase one, the ceasefire will continue as long as negotiations continue. And the United States, Egypt, and Qatar would work to ensure negotiations keep going — all agreements — all agreements — until all the agreements are reached and phase two can begin. 

 Then phase two: There would be an exchange for the release of all remaining living hostages, including male soldiers; Israeli forces would withdraw from Gaza; and as long as Hamas lives up to its commitments, a temporary ceasefire would become, in the words of the Israeli proposal, “the cessation of hostilities permanently,” end of quote: “Cessation of hostilities permanently.”

Finally, in phase three, a major reconstruction plan for Gaza would commence.  And any final remains of hostages who have been killed would be returned to their families.

 That’s the offer that’s now on the table and what we’ve been asking for.  It’s what we need. The people of Israel should know they can make this offer without any further risk to their security because they’ve devastated Hamas forces over the past eight months. At this point, Hamas no longer is capable of carrying out another October 7th, which — is one of the Israelis’ main objectives in this war and, quite frankly, a righteous one.

I know there are those in Israel who will not agree with this plan and will call for the war to continue indefinitely.  Some are even in the government coalition.  And they’ve made it clear: They want to occupy Gaza, they want to keep fighting for years, and the hostages are not a priority to them.

 Well, I’ve urged the leadership in Israel to stand behind this deal, despite whatever pressure comes. And to the people of Israel, let me say this. As someone who had a lifelong commitment to Israel, as the only American president who has ever gone to Israel in a time of war, as someone who just sent the U.S. forces to directly defend Israel when it was attacked by Iran, I ask you to take a step back and think what will happen if this moment is lost.

We can’t lose this moment.  Indefinite war in pursuit of an unidentified notion of “total victory” will not bring Israel in — will not bring down — bog down — will only bog down Israel in Gaza, draining the economic, military, and human- — and human resources, and furthering Israel’s isolation in the world. That will not bring hostages home.  That will not bring an enduring defeat to Hamas. That will not bring Israel lasting security.

 But a comprehensive approach that starts with this deal will bring hostages home and will lead to a more secure Israel.  And once a ceasefire and hostage deal is concluded, it unlocks the possibility of a great deal more progress, including — including calm along Israel’s northern border with Lebanon. The United States will help forge a diplomatic resolution, one that ensures Israel’s security and allows people to safely return to their homes without fear of being attacked.

With a deal, a rebuilding of Gaza will begin [with] Arab nations and the international community, along with Palestinian and Israeli leaders, to get it done in a manner that does not allow Hamas to re-arm. The United States will work with our partners to rebuild homes, schools, and hospitals in Gaza to help repair communities that were destroyed in the chaos of war.

And with this deal, Israel could become more deeply integrated into the region, including — it’s no surprise to you all — including a potential historic normalization agreement with Saudi Arabia.  Israel could be part of a regional security network to counter the threat posed by Iran. All of this progress would make Israel more secure, with Israeli families no longer living in the shadow of a terrorist attack.

And all of this would create the conditions for a different future and a better future for the Palestinian people, one of self-determination, dignity, security, and freedom. This path is available once the deal is struck. Israel will always have the right to defend itself against the threats to its security and to bring those responsible for October 7th to justice.  And the United States will always ensure that Israel has what it needs to defend itself.

If Hamas fails to fulfill its commitments under the deal, Israel can resume military operations.  But Egypt and Qatar have assured me and they are continuing to work to ensure that Hamas doesn’t do that.  And the United States will help ensure that Israel lives up to their obligations as well.  That’s what this deal says.  That’s what it says.  And we’ll do our part. This is truly a decisive moment. Israel has made their proposal. Hamas says it wants a ceasefire. This deal is an opportunity to prove whether they mean it. Hamas needs to take the deal.

For months, people all over the world have called for a ceasefire.  Now it’s time to raise your voices and demand that Hamas come to the table, agree to this deal, and end this war that they began. Of course, there will be differences in the specific details that need to be worked out.  That’s natural.  If Hamas comes to negotiate ready to deal, then Israel negotiations must be given a mandate, and the necessary flexibility to close that deal.

The past eight months have marked heartbreaking pain: the pain of those whose loved ones were slaughtered by Hamas terrorists on October 7th; hostages and their families waiting in anguish; ordinary Israelis whose lives were forever marked by the shattering event of Hamas’s sexual violence and ruthless brutality. And the Palestinian people have endured sheer hell in this war.  Too many innocent people have been killed, including thousands of children.  Far too many have been badly wounded.

 We all saw the terrible images from the deadly fire in Rafah earlier this week following an Israeli strike against — targeting Hamas.  And even as we work to surge assistance to Gaza, with 1,800 trucks delivering supplies these last five days — 1,800 — the humanitarian crisis remains. I know this is a subject on which people in this country feel deep, passionate convictions.  And so do I.  This has been one of the hardest, most complicated problems in the world.  There’s nothing easy about this — nothing easy about it.

 Through it all, though, the United States has worked relentlessly to support Israelis’ security, to get humanitarian supplies into Gaza, and to get a ceasefire and a hostage deal to bring this war to an end. Yesterday, with this new initiative, we’ve taken an important step in that direction. And I want to level with you today as to where we are and what might be possible.  But I need your help.  Everyone who wants peace now must raise their voices and let the leaders know they should take this deal; work to make it real, make it lasting; and forge a better future out of the tragic terror attack and war. It’s time to begin this new stage, for the hostages to come home, for Israel to be secure, and for the suffering to stop.  It’s time for this war to end and for the day after to begin.”

On Thursday Hamas said it would not take part in more negotiations during ‘ongoing aggression’ but is ready for a ‘complete agreement’, including an exchange of all captives and prisoners, if Israel stops the war. Earlier Gaza war ceasefire talks mediated by Egypt, Qatar, the US, and others have repeatedly stalled, and both sides have blamed the other for the lack of progress. Israel has continued to maintain that the war will not end until the terrorist organization (Hamas) has been dismantled and all the hostages returned.

On Friday, Hamas said in its official statement that the latest ceasefire proposal put forward by President Biden is positive:

·         We view US President Biden's latest proposal for a ceasefire as 'positive'

·         Hamas affirms its readiness to deal positively with any proposal that offers a permanent ceasefire, complete withdrawal of Israeli forces from Gaza, reconstruction of the strip, return of displaced, and a serious prisoner/hostage exchange

·         The movement affirms its position of readiness to deal positively and constructively with any proposal based on a permanent ceasefire, complete withdrawal from the Gaza Strip, reconstruction, the return of the displaced to all their places of residence, and the completion of a serious prisoner exchange deal if the occupation declares its explicit commitment to that

·         Hamas looks positively on the remarks in US President Joe Biden’s speech today, and his call for a permanent ceasefire, withdrawal of occupation forces from the Gaza Strip, reconstruction, and prisoner exchange

·         Hamas wants the return of the displaced to their homes throughout Gaza and complete a serious prisoner-exchange deal if the occupation (Israel) explicitly commits to that

·         We consider this American position and the regional and international convictions of the need to put an end to the war on Gaza to be a result of the legendary steadfastness of our people and their courageous resistance

Earlier Hamas was reportedly reluctant to accept US approved latest ceasefire proposal at face value:

·         Biden’s hostage deal proposal doesn’t indicate ‘guarantees’ for end of Gaza war

·         Biden’s proposal did not indicate guarantees for a complete cessation of the war nor guarantees for withdrawal from the Gaza Strip

·         Hamas is open to all ideas and proposals and its position is based on a complete cessation of the war and Israeli withdrawal from the Gaza Strip

On Friday, Israeli PM Netanyahu emphasized that the Gaza war won't end until Israel's goals are met; Israeli PMO has issued an official statement:

·         The prime minister authorized the negotiating team to present a plan for achieving the war objectives, including the return of all our hostages and the elimination of Hamas’ military and governmental capabilities

·         The exact outline proposed by Israel, including the conditional transition from stage to stage, allows Israel to maintain these principles

·         The Israeli government is united in the desire to return our hostages as soon as possible and is working to achieve this goal

On Friday, Biden also clarified about his electoral rival Trump’s criminal cases:

“Donald Trump was given every opportunity to defend himself. It was a state case, not a federal case.  And it was heard by a jury of 12 citizens — 12 Americans, 12 people like you.  Like millions of Americans who served on juries, this jury was chosen the same way every jury in America is chosen.  It was a process that Donald Trump’s attorney was part of.

The jury heard five weeks of evidence — five weeks.  After careful deliberation, the jury reached a unanimous verdict.  They found Donald Trump guilty on all 34 felony counts.  Now he’ll be given the opportunity, as he should, to appeal that decision just like everyone else has that opportunity. That’s how the American system of justice works.

And it’s reckless, it’s dangerous, and it’s irresponsible for anyone to say this was rigged just because they don’t like the verdict. Our justice system has endured for nearly 250 years, and it is the cornerstone of America — our justice system. The justice system should be respected, and we should never allow anyone to tear it down.  It’s as simple as that. That’s America.  That’s who we are.  And that’s who we’ll always be, God willing.”

Overall, ahead of the Nov’24 election, Biden is now under pressure from not only the US public/voters, especially from younger ones and some of his party colleagues (Democrats) as well as opposition Republicans including opponent Trump. Although Trump is now slightly behind Biden’s approval rating of around 40% amid his conviction in the 2020 election campaign finance misappropriation issues, Biden may still lose the election to Trump if he is finally able to contest because of Israel, inflation, illegal/legal immigration, and other issues. Thus Biden is now trying his best for a durable Gaza war ceasefire, which may also help to keep oil down ahead of the election.

On Friday, some focus of the market was on U.S. Core PCE inflation for April, the Fed’s preferred gauze to measure underlying inflation trends. The BEA flash data showed U.S. annual (y/y) core PCE inflation (at 2017 constant prices; SA) for April remained unchanged at +2.8% from +2.8% both in March and February, in line with the market expectations of +2.8% and lowest since Mar’21 (three years).

On a sequential (m/m) basis (seasonally adjusted at 2017 constant prices) the U.S. core PCE inflation eased to +0.2% in April from +0.3% in the last two months (March and February), above market expectations of +0.3%; January’s +0.5% sequential rate was highest in last one year (since Feb’23), while the post-COVID sequential rate was +0.6%.

In April, the U.S. super core PCE service inflation ex Housing/Shelter, the current focus of the Fed also eased to +3.4% from +3.5% sequentially, while the sequential rate also eased to almost +0.1% from +0.4% in the previous month.

Also, PCE service inflation eased to +3.9% in Apr’24 from +4.0% sequentially.

The Fed is now also watching Dallas Fed Trimmed Mean Inflation, which was +2.9% in Apr’24 against +3.0% sequentially.

Overall, after the latest revisions, the average core PCE inflation for 2023 was now around +4.1%, while the same for core CPI inflation was +4.8%, and an average of core inflation (PCE+ CPI) is around +4.5%. The Fed usually goes by a 6M rolling average of core PCE + core CPI inflation for any important policy move. As per the new series (2017 constant prices), the 6M rolling average core PCE inflation is now around +2.9%, while the 6M rolling average of U.S. core CPI inflation is now around +3.8%; i.e. 6M rolling average of US core inflation (CPI+PCE) is now around +3.4%, still far above Fed’s +2.0% targets.

Fed needs an average sequential core PCE inflation rate of around +0.15% on a sustainable basis for its +2.0% core PCE inflation targets. But it was still hovering around +0.26% for the last 6 months, while jumped +0.50% even in Jan’24. That’s why Powell repeatedly pointed out Fed is not confident enough still now for the disinflation process. Although there was a rapid disinflation rate in H2CY23, the same may have now stalled in Q1CY24 and thus Fed will look at Q2CY24 data; i.e. overall H1CY24 data for any policy rate cut decision in H2CY24.

Moreover, several US Senators/Congress members, both Democrats and Republicans are not very happy (ahead of the Nov’24 election) about still elevated inflation compared to pre-COVID levels (by at least +20%) and insisting that Fed/Powell should focus on core CPI inflation rather than core PCE inflation, which is around 1% lower most of the times due to composition/weightage issue.

Powell also publicly acknowledged to a Senator in the last hearing/testimony (Mar’24) that US Congress officially mandated the Fed to maintain price stability mandate as +2% headline inflation (CPI), not PCE, which is always the lowest among various inflation gauzes. Powell pointed out that the Fed is now actually targeting core CPI inflation due to lower volatility (ex-food and fuel), which is still higher than headline CPI. Overall, core PCE inflation is now a lagging inflation indicator, and does not impact the market meaningfully as the market already has an idea/estimate about the level after core CPI and PPI data, released almost 2-weeks ago.

Conclusions: Fed may continue to be in ‘wait & watch’ mode; may not cut even in Dec’24 and may also revise June dot-plots

The 6M rolling average of US core inflation (PCE+CPI) was around +3.4% in Apr’24. Ideally, the Fed may start cutting rates from Sep’24 if the 6M rolling average of core inflation (PCE+CPI) indeed eases further to +3.0% by June’24 (H1CY24). The Fed wants to keep the real/neutral rate around +1.0% in the longer term (assuming a +3.0% terminal repo rate and +2.0% core inflation).

But in the meantime, till the Fed is confident enough that core inflation is going down to around 2.00% on a sustainable basis, the Fed may maintain the real rate at around present restrictive levels of 2.00% (assuming the present repo rate of 5.50% and 6M rolling average core inflation around 3.50%). Fed needs a +2.00% restrictive real rate for some time to produce sufficient slack in the economy, so that core inflation falls to +2.0% target on a sustainable basis.

As per Taylor’s rule, for the US:

Recommended policy repo rate (I) = A+B+(C-D)*(E-B)

=1.50+2.00+ (2.60-2.00)*(4.50.00-2.00) =1.00+2+ (0.60*2.50) = 3.00+1.50=4.50% (By Dec’24)

Here:

A=desired real interest rate=1.50; B= inflation target =2.00; C= Actual real GDP growth rate for CY23=2.6; D= Real GDP growth rate target/potential=2.00; E= average core (CPI+PCE) inflation for CY23=4.50%

But the Fed may blink on rate cuts in H2CY24 just before the US election to avoid any political controversy:

Ahead of the Nov’24 U.S. Presidential election, White House/Biden and also Fed/Powell are more concerned about elevated inflation rather than the healthy labor market; prices of essential goods & services are still significantly higher (around +20%) than pre-COVID levels, which is creating some anti-incumbency wave among the general public (voters) against Biden admin (Democrats) due to relatively higher cost of living. Thus Fed is now giving more priority to price stability than employment (which is still healthy- hovering below the 4% red line) and is not ready to cut rates early as it may again cause higher inflation just ahead of the November election.

Fed may have cut from Septenber’24, which will ensure no inflation spike just ahead of the Nov’24 election (as any rate action usually takes 6-12 months to transmit in the real economy, while boosting up both Wall Street and also Main Street (investors/traders/voters). But the Fed/White House may not take such rate cut risk as the Fed has to prepare the market fully at least 2-3 months in advance for such rate cuts and bond yield/overall financial condition will get easier/loser and may boost inflation again just ahead of Nov’24 election. Fed hiked rate last on 26th July’23 and hold since Aug’23 and may continue to be on hold till at least July’24, or even Dec’24 i.e. around 12-18 months for more/full transmission of its +5.25% cumulative rate hikes effect into the real economy.

Overall, the Fed’s mandate is to ensure price stability (2% core inflation), and maximum employment (below 4% unemployment rate) along with financial/Wall Street stability as well as lower borrowing costs for the government. As the US is now paying almost 15% of its tax revenue as interest on debt, the Fed will now not allow the 10Y US bond yield above 4.76-5.00% at any cost (against present levels of average core CPI around +4.0%). Fed has to also ensure Wall Street stability by keeping SPX-500 TTM PE around 25 rather than lower/mean levels around 20.

Ahead of the Nov’24 US Presidential election, as seen in the Mar’24 Congressional testimony, Fed/Powell is under huge pressure from opposition Republican lawmakers to support Biden & Co (Democrats) in boosting the election prospect by facilitating rate cuts just before the Nov’24 election. Thus Fed may not go for any rate cuts till Nov’24 or even Dec’24 to show that it’s politically independent/neutral.

Average US inflation is now higher by over 20% from pre-COVID (Jan’20) levels, while under normal conditions, it should be around +8%; higher cost of living is creating some anti-incumbent wave against Biden admin before Nov’24 election; thus both White House and Fed are now prioritizing to keep inflation under control and not ready to risk of higher inflation by cutting rates just ahead of the election

Ideally,  in normal times (without any general election), the Fed should have cuts of -75 bps cumulatively in September, November, and December’24 for +4.75% repo rates from the present +5.50%. But after recent remarks by various Fed policymakers, it seems that the Fed may not cut thrice in 2024 from Sep’24 and may cut only once (symbolic) in Dec’24 or may not cut at all in 2024.

The market is now expecting 3 to 1 rate cuts in 2024, while some Fed policymakers are now arguing for lesser rate cuts of 1-2 rate cuts or even no rate cuts at all. Looking ahead, the Fed may not cut rates at all in 2024 considering the slower rate of disinflation, and political issues ahead of the Nov’24 election. Also, the reduction of Fed B/S from around $8.97T to around $6.60T by Dec’25 (projected); i.e. around $2.50T (~$2.37T) reduction over 2.5-3.00 years is equivalent to a rate hike of around +50 bps (higher 2Y bond yield).

Fed had boosted its B/S from around $3.86T in late September’2019 (after the QT tantrum) to around $8.97T in Apr’22; i.e. over $5T in a matter of 32 months (@0.16T/M) to fight previous QT and COVID induced financial crisis.; but in the process may have also caused huge inflationary pressure along with the deluge of COVID fiscal stimulus and direct fund transfer.

Fed’s mandate is now 2% price stability (core inflation), below 4% unemployment rate, and below 4.75-5.00% US 10Y bond yield to ensure lower borrowing costs for the government and overall financial stability. Fed, as well as ECB, BOE, and BOC, are now struggling to keep bond yields at their preferred range despite non-stop jawboning; perhaps they are talking too much too early and thus FX market is not being influenced by them significantly, the moving in a narrow range.

At present, in its last (Mar’24) SEP/dot-plots, the Fed projected -75 bps rate cuts each in 2024, 2025, and 2026 and -50 bps rate cuts in 2027 for a terminal neutral repo rate +2.75% against pre-COVID neutral repo rate +2.50%.

Looking ahead, in its June dot plots, the Fed May revise rate cut projections. Now various Fed policymakers are arguing for a slightly higher terminal repo rate at +3.00% against projected core CPI of +2.00%; i.e. neutral real rate at +1.00%. Thus depending upon the actual trajectory of core CPI, the Fed may cut -100 bps each in 2025, 2026, and -50 bps in 2027 for a terminal neutral repo rate of +3.00% from the present +5.50%.

Another scenario: Fed may also cut -50 bps in Dec’24 and -25 bps in Jan’25 after the Nov’24 US election to compensate for H2CY24 rate cuts (for election), if average core inflation indeed goes below 3% by Dec’24 and to avoid any hard landing feeling, if Wall Street plunge (for keeping rates too high for too long).

Fed will continue the QT at a reduced rate of around 40B/M till Dec’25 for a B/S size of around $6.60-6.50T (around 22% of estimated US nominal GDP of around $30T by CY26). Fed may continue the QT (even at an officially slower pace) and rate cuts at the same time despite being contradictory. Fed may say (like BOC) that as long as the policy rate is in the restrictive zone (say 1.50-2.00% above average core inflation), the Fed may continue both rate cuts and QT to reduce overall restrictiveness. When the policy rate moves into a neutral/stimulative zone, say 50 bps above average core inflation, then the Fed may go for more rate cuts and close the QT. Overall, Fed rate cuts along with QT (even at a slow pace) may be less dovish than pure/only rate cuts as QT is also equivalent to rate hikes to some extent.

All other major G20 Central Banks including ECB, BOE, BOC, RBI, and even PBOC may be compelled to follow the Fed’s real rate action to keep present policy differential with the Fed. As USD, is the primary global reserve/trade currency, any meaningful negative divergence with the Fed will result in higher imported inflation, everything being equal; for example, if the ECB indeed goes for 50-75 bps rate cuts in H2CY24, while the Fed is still on hold, then EURUSD may slip further towards parity (1.0000), which will result in higher imported inflation as the EU is dependent quite heavily on imported goods, foods, and fuel/commodities.

In this way, no major G20 Central Bank will take such rate action/cuts alone as there is a routine/regular coordination/consultation between all major central banks for a coordinated/synchronized policy action to avoid disorderly FX movement. The Fed also not seeking a very strong USD as it would eventually affect US export competitiveness. Thus all major central banks are now focusing on maintaining proper balance and coordination with the Fed, whatever may be the domestic inflation/economic narrative/jawboning; they can’t afford to diverge too much against the Fed.

Like in India, the US Presidential election in Nov’24 may be also acting as a big/moderate fiscal stimulus amid huge election spending, which may likely boost inflation again or prevent the disinflation process, making the Fed’s job harder to cut rates even in Dec’24. Moreover, the Biden admin is spending huge for the US private defense industry in the name of aid to Ukraine and even Israel and will also actively participate in the reconstruction process of both Gaza and Ukraine when the war finally stops.

Although the US Treasury may have some control of certain FX assets and also the Gold reserves of Russia, Ukraine and even Israel, the deluge of deficit/fiscal spending, debt and money printing is also boosting overall inflation. In 2024, the U.K., Canada and also various other developed economies are going for general election, and economic issues such as elevated inflation/higher cost of living will be one of the major issues. For example, U.K. PM Sunak suddenly called for an early general election in July after a recent softening in inflation data. But all these elections spending will also act as some fiscal spending and will not help the present disinflation pace. Thus Fed as well as ECB, BOE, BOC and even RBI should feel less confident about going for any rate cuts in H2CY24.

Thus almost all major G20 Central Banks including ECB, BOE, BOC, RBI, and even PBOC may not cut rates in 2024 if Fed remains on hold; no central bank will go against the Fed irrespective of any narrative/rhetorics and make LCU weaker against USD, causing higher imported/total/core inflation in the process; all central banks led by Fed will continue the 24/7 jawboning to keep bond yields under control (indirect YCC like BOJ) and a vibrant financial/money/FX market, ensuring robust employment globally!

Market impact:

On Friday, Wall Street Futures, bonds, and Gold got some brief boost on hopes of an early Fed pivot after a softer US core PCE inflation report but stumbled soon as the overall disinflation process may not be fast enough for the Fed to get enough confidence to cut the rate cut cycle even by Dec’24. But Wall Street Futures again surged on hopes & hypes of an early ceasefire in the Gaza war after US President Biden offered a feasible ceasefire plan so that both sides (Israel-Hamas) could have a face-saving exit. Subsequently Gold and Silver tumbled further as months of elevated geopolitical risks eased to some extent, although it remains to be seen the actual action & reaction. Blue Chip DJ 40 jumped over +550 points (+1.50%), while tech-savvy NQ-100 closed almost flat in the last 30 mins of trading after being red most of the session; broader SPX-500 surged +0.80%.

On Friday, Wall Street was boosted by almost all major sectors led by energy, real estate, utilities, consumer staples, healthcare, banks & financials, industrials, communication services and consumer discretionary, while dragged by selected techs. Script-wise, Wall Street was boosted by Salesforce, United Health, Dow Inc, Nordstrom, (upbeat report card/guidance), Boeing, McDonald’s, Chevron, Intel, Walt Disney, Verizon, 3M, Home Depot, Nike, JPM, Amgen, Goldman Sachs, Walmart, P&G, IBM and Apple, while dragged by Amazon, Dell (lower than expected AI server backlog) and Caterpillar.

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

Whatever may be the narrative, technically Dow Future (38821) has to sustain over 39100 for any recovery to 39200//39300-39400*/39700 and 39800/40200-40350*/40500 and may further rally to 40600-40700/41000 and even 42000-42700 in the coming days; otherwise, sustaining below 39000-38900 may further fall to 38750/38550-38450/38250 and 38100/37900*-37600/37400 in the coming days.

Similarly, NQ-100 Future (18592) has to sustain over 18700 for a further recovery to 18800/189000-19000/ 19100 and a further rally to 19200-19450/19775 and 20000/20200 in the coming days; otherwise, sustaining below 18600 may again fall to 18400/18100-18000/17700 and 17600/17500-17300/17150 in the coming days.

Also, technically Gold (XAU/USD: 2340) has to sustain over 2330 for any recovery to 2355/2365*-2375/2385 and further rally to 2400/2425-2435/2455* and 2475-2500; otherwise sustaining below 2325, may further fall to 2315/2300-2290/2275* and further to 2245/2230-2220/2180 and 2155/2115-2085/2045 in the coming days.