Economic institutions lowered their forecasts for German GDP. Oil updates highs again

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 0.20%, while the S&P 500 Index (US500) added 0.02%. The NASDAQ Technology Index (US100) closed positive by 0.22% on Wednesday.

The Dow Jones Industrials (US30) fell to a 3-month low. The broad market moved to the downside yesterday after bond yields resumed their upward trend, with the 10-year German bond yield rising to a new 12-year high. Stocks initially headed higher after bond yields fell amid dovish comments from Minneapolis Fed President Kashkari, who said the government shutdown and a prolonged strike by automakers may require less action from the Fed. Stocks also gained support after Democratic and Republican leaders in the Senate on Tuesday night agreed on a plan to keep the government open through mid-November and provide $6 billion in aid to Ukraine.

According to the Mortgage Bankers Association (MBA), US mortgage applications fell by 1.3% for the week ended September 22 from the previous week. The subindex of home purchase applications fell by 1.5%, and the subindex of refinance applications fell by 0.9%. The average 30-year fixed-rate mortgage rose by 10 bps to 7.1%, the highest rate in 22 years. US new capital goods orders rose by 0.9% m/m in August, beating expectations of 0.1% m/m and the most substantial increase in 7 months.

Markets factor in a 24% probability that the FOMC will raise the interest rate by 25 bps at the next FOMC meeting on November 1 and a 47% probability that the rate will be raised by 25 bps at the meeting ending December 13. Markets then expect the FOMC to start cutting rates in the second half of 2024 in response to an anticipated slowdown in the US economy.

Equity markets in Europe were mostly down on Wednesday. Germany’s DAX (DE40) was down by 0.25%, France’s CAC 40 (FR40) fell by 0.03% yesterday, Spain’s IBEX 35 (ES35) lost 0.42%, and the UK’s FTSE 100 (UK100) closed negative by 0.43%.

Germany’s GfK Consumer Confidence Index for October fell to a 6-month low of 26.5, weaker than expectations of 26.0. The French consumer confidence indicator for September fell to a 4-month low of 83, weaker than expectations of 84. Five German economic institutions downgraded their forecasts for German GDP for 2023 to a contraction of -0.6% from a previous forecast of 0.3% growth. Eurozone M3 money supply contracted by a record 1.3% y/y in August, weaker than expectations of 1.0% y/y.

Oil prices rose to a 13-month-high yesterday. Crude oil prices continue to rise amid concerns that global oil supplies will remain tight for the foreseeable future. The weekly EIA report released on Wednesday showed crude oil inventories fell to a 9-month low, and crude inventories at Cushing, the delivery point for WTI crude futures, fell to a 14-month low.

Asian markets traded flat on Wednesday. Japan’s Nikkei 225 (JP225) gained 0.18% for the day, China’s FTSE China A50 (CHA50) fell by 0.05%, Hong Kong’s Hang Seng (HK50) ended the day up by 0.83%, and Australia’s ASX 200 (AU200) ended Wednesday positive 0.05%.

In China, Evergrande’s suspension has dampened sentiment in Chinese markets ahead of the week-long Autumn Festival holiday. Nevertheless, the holiday is expected to support the Chinese economy by boosting consumer spending.

Uncertainty over China caused Australia’s ASX 200 Index (AU200) to lose most of its gains for the day. Data also showed that Australian retail sales rose less than expected in August amid continued pressure from high-interest rates and inflation.

S&P 500 (F)(US500) 4,274.51 +0.98 (+0.02%)

Dow Jones (US30) 33,550.27 −68.61 (−0.20%)

DAX (DE40)  15,217.45 −38.42 (−0.25%)

FTSE 100 (UK100) 7,593.22 −32.50 (−0.43%)

USD Index  106.73 +0.50 (+0.47%)

• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – German Consumer Price Index (m/m) at 15:00 (GMT+3);
• – US GDP (q/q) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Pending Home Sales (m/m) at 17:00 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Fed Chair Powell Speaks at 23:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.