On Wednesday (December 4th), the market focused on multiple key events, including the vote of no confidence in the French parliament, the release of US employment data, and the latest changes in policy expectations from major central banks. In this context, market sentiment is cautiously optimistic, with major asset classes showing a trend of differentiation.

Crude Oil: The Game between Supply Concerns and Demand Expectations

Brent crude oil recently traded at $74.12 per barrel, up 0.68% for the day; WTI crude oil rose 0.63% to $70.38 per barrel.

Yesterday, oil prices surged by over 2%, mainly due to the escalation of the geopolitical situation in the Middle East and market expectations that OPEC+may extend production cuts. The statement by the Israeli Defense Minister has raised concerns about the worsening situation between Lebanon and Israel, while the market is waiting for OPEC+to announce further extensions of existing production restrictions this week.

Meanwhile, the latest report from the Organization for Economic Cooperation and Development (OECD) shows that despite multiple challenges, global economic growth remains resilient, with an expected global GDP growth rate of around 3.3% from 2024 to 2026. This stable growth expectation provides support for oil demand.

Looking ahead, if geopolitical tensions escalate and OPEC+may continue to cut production, oil prices are expected to maintain an upward trend. However, the US non farm payroll data and Federal Reserve Chairman Powell's speech may affect short-term market expectations and create potential pressure on oil price fluctuations.

Precious Metals: Gold under Pressure from Strong US Dollar

The latest price of spot gold is 2641.36 US dollars per ounce, with a slight decrease of 0.08% during the day. The US dollar index is currently trading at 106.5011, with a 0.15% increase during the day, continuing the upward trend since the beginning of this week. The strengthening of the US dollar puts pressure on gold, while the market focuses on US employment data and Powell's evening speech. Investors are looking forward to more guidance on the future path of interest rates.

Federal Reserve Chairman Powell released a more cautious signal after the November policy meeting, reducing the market's expectation of a 25 basis point rate cut in December to around 75%. In the short term, the performance of US employment data will determine the next trend of the US dollar and gold. If ADP and non farm employment data are strong, it may further suppress gold prices; On the contrary, if the job market is significantly weak, gold is expected to have a rebound opportunity.

The US dollar and major currency pairs: exchange rate fluctuations intertwined with political risks

The latest increase of USD/JPY is 0.77% to 150.437, indicating the continued strength of the US dollar. The EUR/USD fell slightly by 0.08% to 1.0499; GBP/USD remained relatively stable at 1.2670.

The change in policy expectations of the Bank of Japan has put pressure on the yen. Recent media reports suggest that market expectations for the Bank of Japan to raise interest rates in December have cooled, dropping from 60% to 42%, leading to a decline in Japanese government bond yields and suppressing demand for the yen. Meanwhile, the relatively stable economic data in the United States further enhances the attractiveness of the US dollar.

In terms of the euro, political uncertainty in France remains a focus of attention. French lawmakers will vote on a motion of no confidence tonight, which could lead to the downfall of the current government and exacerbate the political crisis in the eurozone's second-largest economy. Although the market has sufficient expectations that the European Central Bank will soon cut interest rates by 25 basis points, the political turmoil in France may further weaken the trend of the euro.

The Australian dollar fell to a four month low of $0.6429 due to poor GDP data, indicating the pressure on the Australian economy.

The Korean won rebounded after the political turmoil gradually eased, with a latest report of 1414 Korean won, but the Bank of Korea may adopt a more relaxed policy to limit the upward space of the Korean won.

Bond market: Yield volatility reflects policy and risk expectations

The yield of 10-year French government bonds was reported at 2.903%, while the yield of 10-year German government bonds remained at 2.054%. Despite the tense political situation in France, the bond market has remained relatively stable. Investors are simultaneously paying attention to expectations of interest rate cuts by the European Central Bank and the spread of France's five-year sovereign credit default swaps (CDS), which has doubled from six months ago.

The Japanese bond market has experienced significant fluctuations due to changes in policy expectations. If the market's expectation of the Bank of Japan's conversion to an eagle rises again, there may be room for a rebound in Japanese government bond yields.

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ADP Employment Data: A Frontline Signal for Non Farm Data

ADP employment data, as a forward-looking indicator for non farm payroll reports, usually reflects the dynamics of the US labor market in advance. Although there is not always a high correlation between ADP and non farm payroll, the market still speculates on the possible trend of the non farm payroll report based on changes in ADP. In the ADP data released this time, the following highlights are worth paying attention to:

1. Has employment growth slowed down

If ADP data shows signs of slowing employment growth, it may indicate a weakening of confidence in the economic outlook among businesses. This has important reference value for whether the Federal Reserve continues to raise interest rates or is approaching a turning point in monetary policy. The current market expectation is that ADP employment in the United States will increase by 150000 in November. The previous month saw an increase of 233000.

2. Changes in salary growth rate

The performance of the salary section in the ADP report is also crucial. The slowdown in salary growth may alleviate inflationary pressures and further support the possibility of an economic soft landing. If salaries continue to maintain high growth, it may exacerbate expectations of continued tightening by the Federal Reserve.

3. Industry and regional distribution

ADP data is typically segmented by industry and region. The market will focus on whether specific industries (such as manufacturing or services) are facing more employment pressure, and whether there is a significant differentiation in regional economic performance.

Based on recent market expectations, the ADP data may provide guidance for the upcoming release of non farm payroll data. If ADP's employment performance is strong, it may enhance market confidence in the stability of non-agricultural employment; On the contrary, if the data falls short of expectations, it may have an impact on the short-term trends of the US dollar and US stocks.

The global market is at a critical moment. In the short term, US employment data and Federal Reserve policy signals will be the main drivers of the market, while the medium to long term trend still depends on the resilience of global economic growth and the direction of policies in various countries.

The oil market may continue to be affected by both geopolitical and supply-demand balance changes; The trend of the US dollar depends on the performance of US economic data; Gold seeks a balance between the US dollar and safe haven demand. Investors need to remain vigilant and closely monitor the upcoming data and policy developments.