PBoC launches new stimulus for the economy. Silver hits two-month high

Stock indices traded mixed on Thursday. The Dow Jones Index (US30) was up 0.37% on Thursday. The S&P 500 Index (US500) was down 0.02%. The NASDAQ Technology Index (US100) closed positive 0.08%. A recovery in chip stocks supported the broader market after Taiwan Semiconductor Manufacturing, the main chip maker for Nvidia and Apple, eased concerns about chip demand by reporting a better-than-expected 54% increase in Q3 net profit and raising its 2024 revenue growth target. Stronger-than-expected economic news from the US on weekly jobless claims and retail sales in September supported equities as it boosted confidence in the US economy and improved prospects for a soft landing. The US weekly initial jobless claims unexpectedly fell by 19,000 to 241,000, showing a stronger labor market than expectations for a rise to 259,000. September retail sales rose by 0.4% m/m, stronger than expectations of 0.3% m/m.

Netflix’s (NFLX) shares are up about 4% after the streaming video company estimates higher earnings for next year. The company reported third-quarter EPS of $5.40, compared to the Wall Street consensus projection of $5.12.

Equity markets in Europe rallied on Thursday. Germany’s DAX (DE40) rose by 0.77%, France’s CAC 40 (FR40) closed 1.22% higher, Spain’s IBEX 35 (ES35) lost 0.77%, and the UK’s FTSE 100 (UK100) closed up 0.67%.

Denmark’s Central Bank, like its European counterpart (ECB), cut its benchmark interest rate by 25 basis points to protect its currency peg. The Nationalbanken, which does not hold scheduled meetings, cut its current account rate to 2.85% from 3.1%, it said Thursday. It is the third easing for the Scandinavian country this year. The Nationalbanken, whose mandate is to maintain a fixed exchange rate against the euro, usually echoes the ECB’s rate decisions. However, it can deviate from them if the krone becomes too weak or strong. Since early last year, it has kept Denmark’s key rate 40 basis points lower than the eurozone rate to weaken the Danish currency. The Central Bank officially keeps the krone within a 2.25 percent band of 7.46038 per euro, although it targets a narrower limit in practice.

Silver (XAG/USD) prices climbed above $32 an ounce to a two-week high on Friday, following gold prices higher as uncertainty surrounding the upcoming US election and rising tensions in the Middle East spurred demand for the precious metals. Less than three weeks before the US presidential election, former President Donald Trump and Vice President Kamala Harris are tied in the polls, with market estimates leaning slightly in favor of a Trump victory. In the Middle East, Israeli troops killed Hamas leader Yahya Sinwar, heightening fears of a wider regional conflict.

WTI crude oil prices were trading near $71 a barrel on Friday. The IEA recently lowered its demand estimates, signaling the possibility of a global glut, while OPEC cut its projections for the third consecutive month, mainly citing weaker demand from China.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) fell by 0.69%, China’s FTSE China A50 (CHA50) lost 1.40%, Hong Kong’s Hang Seng (HK50) decreased by 1.02%, and Australia’s ASX 200 (AU200) was positive 0.86%.

China’s Central Bank (PBoC) launched a lending program to support share buybacks of qualified companies and opened a swap fund to boost liquidity for financial firms. The PBoC also announced that it may lower banks’ reserve requirements by the end of the year, depending on liquidity conditions. These unexpected moves were a welcome relief for investors as the recent stimulus rally lost momentum following Beijing’s inconclusive fiscal policy plans. Meanwhile, data released on Friday showed China’s economy grew more than expected in the third quarter but at the slowest pace since the first quarter of 2023. The country also reported better-than-expected figures for retail sales, industrial production, and fixed asset investment.