InvestMacro

At the end of Thursday, the Dow Jones Index (US30) was down 0.33%, the S&P 500 Index (US500) added 0.21%, and the NASDAQ Technology Index (US100) closed positive 0.83% yesterday. Stocks mostly rose on Thursday amid positive earnings results and lower T-note bond yields.

Better-than-expected US economic news on Thursday boosted the outlook for a soft landing and provided support for equities. Weekly jobless claims unexpectedly fell, indicating the strength of the labor market, October’s S&P manufacturing PMI rose more than expected, and September new home sales hit a 16-month high.

Tesla’s (TSLA) stock price rose more than 21% and led the S&P 500 and Nasdaq 100 higher after the company reported third-quarter adjusted earnings per share of 72 cents, topping the consensus forecast of 60 cents, and raised its full-year capital expenditures forecast to more than $11.0 billion from a previous forecast of $10.0 billion. T-Mobile US (TMUS) closed higher by more than 5% after reporting third-quarter earnings per share of $2.61, better than the consensus forecast of $2.43, and full-year guidance of 5.6-5.8 million net postpaid customers, above the consensus forecast of 5.56 million.

So far, more than 100 companies in the S&P 500 have released earnings data, with 76% announcing earnings that beat forecasts. According to Bloomberg Intelligence, S&P 500 companies, on average, are expected to report a 4.3% rise in quarterly earnings in Q3 from a year earlier, below the consensus for 7.9% growth.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) rose by 0.34%, France’s CAC 40 (FR40) closed higher by 0.08%, Spain’s IBEX 35 (ES35) fell by 0.21%, and the UK’s FTSE 100 (UK100) closed yesterday up 0.13%.

UK Finance Minister Rachel Reeves may allow more borrowing in the upcoming budget, which could delay the Bank of England’s (BoE) rate cut. Reeves plans to change fiscal rules to focus on public sector net financial liabilities (PSNFL), which could free up tens of billions for capital spending. According to the Institute for Fiscal Studies, this would have raised £53 billion of additional borrowing in March last year. However, the Treasury has said it does not intend to use these facilities immediately. Bank of England Governor Andrew Bailey expressed concern about persistent inflation, noting that while inflation is lower than expected, structural changes in the economy and high service inflation remain challenges. Market expectations for a November Bank of England rate cut have fallen to 86% from 100%.

WTI crude oil prices fell to $70 per barrel on Thursday, extending their decline after falling 1.4% in the previous session due to oversupply concerns. The latest EIA report showed a significant increase in crude oil inventories by 5.5 million barrels, well above expectations, while gasoline inventories also rose by 900,000 barrels rather than declining. In addition, crude oil consumption in China, the world’s largest importer, has weakened despite government stimulus measures. Concerns that the global oil market could run a surplus in the coming quarters are putting additional pressure on prices.

Natural gas prices (XNG/USD) rose on Thursday despite a bearish weekly EIA report showing an 80 Bcf increase in natural gas inventories last week. This is well above the consensus of 68 Bcf and above the 5-year seasonal average weekly increase of 76 Bcf.

Asian markets were mostly lower on Thursday. Japan’s Nikkei 225 (JP225) rose 0.10%, China’s FTSE China A50 (CHA50) fell 0.97%, Hong Kong’s Hang Seng (HK50) fell 1.30% and Australia’s ASX 200 (AU200) was negative 0.12% for the day.

The benchmark Consumer Price Index for the Tokyo area in October 2024 came in at 1.8% (forecast 1.7%) year-on-year, slowing for the second consecutive month. Last month, the index stood at 2%. Tokyo’s inflation reading is widely regarded as a leading indicator of nationwide price trends, and national CPI data will be released in about three weeks. Weakening Japanese inflation and political uncertainty cloud the prospects for further interest rate hikes by the Bank of Japan (BoJ).

At Wednesday’s close, the Dow Jones (US30) Index was down 0.96%, the S&P 500 Index (US500) decreased by 0.92%, and the NASDAQ Technology Index (US100) closed yesterday negative 1.55%. All three major US equity indices closed sharply lower on Wednesday amid rising Treasury yields and concerns over the upcoming US elections. Investors and hedge funds are locking in their profits to reduce uncertainty risks.

Stocks also declined amid negative corporate news: McDonald’s (MCD) shares fell by 5% after an E. coli outbreak was linked to Quarter Pounder sandwiches that sickened dozens of people in several states. Additionally, Boeing (BA) shares are down 1.7% after the company reported larger-than-expected negative adjusted free cash flow for the third quarter. Coca-Cola’s (KO) share price is down 2.00% after reporting an unexpected 1% decline in third-quarter sales.

The Canadian dollar fell to 1.38 per dollar, its lowest since August, after the Bank of Canada (BoC) cut rates by 50 bps and signaled that it will likely continue to lower its benchmark rate. It was the first significant rate cut in the current easing cycle after three consecutive 25 bps cuts. The MPC noted that recent data showed slowing inflation and a weakening labor market.  CAD was also pressured by lower oil prices, which limited the Canadian economy’s export turnover.

Equity markets in Europe were declining on Wednesday. Germany’s DAX (DE40) fell by 0.23%, France’s CAC 40 (FR40) closed down 0.50%, Spain’s IBEX 35 (ES35) gained 0.27%, and the UK’s FTSE 100 (UK100) closed down 0.58% yesterday.

WTI crude oil prices fell below $71 per barrel on Wednesday, ending a two-day rally, after the latest EIA data showed that US oil inventories remain high. The EIA reported a 5.5 million barrel increase in crude inventories, which was well above forecasts

Asian markets were mostly rising on Wednesday. Japan’s Nikkei 225 (JP225) fell by 0.80%, China’s FTSE China A50 (CHA50) gained 0.37%, Hong Kong’s Hang Seng (HK50) rose by 1.27%, and Australia’s ASX 200 (AU200) was positive 0.13% over yesterday. Chinese markets are rising for a fourth day, buoyed by bets on creating a 2 trillion yuan market stabilization fund, as suggested by a government-affiliated think tank. In addition, China’s central bank plans to expand the size of its new swap fund to support stock market liquidity after an initial quota of 500 billion yuan.

Judo Bank’s Australian Manufacturing PMI Index fell to 46.6 in October 2024 from 46.7 in September, This marks the ninth consecutive month of deterioration in the sector and the fastest pace since May 2020. The services PMI business activity index rose to 50.6 in October from 50.5 in September. This was the ninth consecutive month of growth. On the monetary policy front, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said earlier this week that the strong employment growth was a bit of a surprise, indicating that the central bank is prepared to react in either direction depending on incoming data. Markets expect the RBA to keep policy steady this year, with the first-rate cut not fully expected until May next year.

The New Zealand dollar traded near a two-month low as the US dollar strengthened amid growing expectations that the Federal Reserve will continue to moderate interest rate cuts in the coming months and improve the odds of Donald Trump winning the 2024 presidential election. Domestically, the Kiwi faced additional pressure as the Reserve Bank of New Zealand is expected to deliver another 50 bps rate cut at its final meeting in November, with markets pricing at some risk of a 75 bps rate hike.

At Monday’s close, the Dow Jones Index (US30) was down 0.80%. The S&P 500 Index (US500) was down 0.18%. The NASDAQ Technology Index (US100) closed positive 0.18%.

On Monday, the Dollar Index approached levels not seen since early August as hopes of a near-term interest rate cut by the Federal Reserve wane. Strong US economic data, such as strong retail sales, combined with the growing likelihood of a Donald Trump presidency, as well as his proposed policies on tariffs and taxes, are lending support to the dollar.

Now that the US Federal Reserve is cutting interest rates to support the economy, optimists expect stocks could rise further. However, critics warn that stock prices look too expensive, given that they are rising much faster than corporate profits. That’s forcing companies to push for profit growth to justify their stock prices, and this week, more than 100 companies in the S&P 500 are expected to detail their performance over the summer. They include heavyweights such as AT&T, Coca-Cola, IBM, General Motors and Tesla. Boeing will report its results on Wednesday. The company’s stock is up 3.1% after reaching an agreement with the union representing striking machinists on a contract proposal. Union members could vote Wednesday on the proposal, which could end a costly strike that has halted airplane production for more than a month.

The Mexican peso fell to 20 per US dollar in October, hitting a six-week low, amid external and domestic pressures that have intensified calls for easing borrowing conditions. Fears of disruptions in Mexico’s vital auto sector were heightened by former US President Donald Trump’s threats to impose tariffs of up to 300% on Mexican-made cars, coupled with his rising electoral prospects. Meanwhile, minutes from the Bank of Mexico’s meeting emphasized a willingness to pursue a less tight monetary policy. Economists estimate a 50 basis point rate cut by the end of the year.

Equity markets in Europe steadily went down on Monday. Germany’s DAX (DE40) fell by 1.00%, France’s CAC 40 (FR40) closed down 1.01%, Spain’s IBEX 35 (ES35) lost 0.71%, and the UK’s FTSE 100 (UK100) closed down 0.48%.

WTI crude oil prices rose by 1.9% on Monday to above $70.5 per barrel after falling 8.4% last week, helped by economic stimulus measures from China, the world’s largest oil importer.

The US natural gas prices rose about 3% to above $2.3/mmbtu on Monday, recovering from a significant 14.2% drop last week, thanks to lower production and estimates of colder weather that could boost heating demand.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) fell by 0.07%, China’s FTSE China A50 (CHA50) lost 0.39%, Hong Kong’s Hang Seng (HK50) decreased by 1.57%, and Australia’s ASX 200 (AU200) was positive 0.74%.

The Australian dollar edged above $0.665 on Tuesday. Still, it remained near its lowest levels in six weeks as the US dollar and Treasury yields rose on signs of continued strength in the US economy and improved chances of a Trump victory in November’s election. Domestically, Reserve Bank of Australia Deputy Governor Andrew Hauser said earlier this week that the strong pace of job growth was a small surprise while indicating that the Central Bank was prepared to react in either direction depending on incoming data.

The New Zealand dollar rose to 0.605 against the US dollar on Tuesday after hitting a two-month low earlier in the session. The kiwi received support from the recent rate cuts in China, given that China is New Zealand’s largest trading partner. However, the local currency remains under pressure due to the strong US dollar.

The Dow Jones (US30) Index was up 0.09% on Friday (+1.11% for the week). The S&P 500 Index (US500) was up 0.40% (for the week +0.60%). The NASDAQ Technology Index (US100) closed positive 0.63% (for the week +0.34%).

Atlanta Federal Reserve Bank President Raphael Bostic said he was in no hurry to cut interest rates to the so-called neutral level, emphasizing that policymakers intend to achieve the 2% inflation target. The Atlanta Fed chief reiterated that the central bank’s benchmark rate is still “somewhat above” the level at which it neither stimulates nor slows the economy, which he estimated at 3% to 3.5%. Bostic also said he expects inflation to fall to the Fed’s target level by the end of next year.

Netflix (NFLX) shares are up 11% after better-than-expected third-quarter earnings, revenue, and subscriber growth.

The world’s Central Bank governors and finance ministers will gather in Washington today for the annual meeting of the International Monetary Fund and the World Bank to discuss how countries can cope with low growth and high debt levels. Last week, the IMF warned that global public debt is expected to exceed $100 billion by the end of this year, driven by rising debt in the US and China. High debt levels could trigger a negative market reaction and limit budgetary efforts to respond to economic shocks.

Equity markets in Europe rose steadily on Friday. Germany’s DAX (DE40) rose by 0.38% (for the week +1.28%), France’s CAC 40 (FR40) closed 0.39% higher (for the week +0.39%), Spain’s IBEX 35 (ES35) gained 0.17% (for the week +1.78%), and the UK’s FTSE 100 (UK100) lost 0.32% (for the week +1.27%). European stocks closed solidly higher, helped by projections that the ECB will continue to cut key interest rates. Markets expect rates to be cut by 25 basis points at each meeting until mid-2025.

WTI crude oil prices fell by 2% to $69.2 a barrel, the biggest weekly decline since early September, falling more than 8%. The decline was driven by weakening demand estimates from OPEC and the IEA, slowing economic growth in China, and signs of easing geopolitical tensions in the Middle East. Both OPEC and the International Energy Agency (IEA) lowered their demand projections for 2024 and 2025. Output at China’s refineries declined for the sixth consecutive month, impacted by weak fuel demand and the rise of electric vehicles (EVs). Meanwhile, US crude oil production hit another record last week, although prices were supported by lower US crude inventories and better-than-expected US retail sales in September. In addition, investors are keeping a close eye on the possible development of the conflict between Israel and Iran, which could affect the global oil supply.

For the week, natural gas prices (XNG/USD) fell about 11% after falling 8% the week before. Traders are increasingly skeptical that extreme cold weather this winter will cause prices to spike. Gas production in the lower 48 states fell slightly in October, and production in 2024 could decline for the first time since 2020.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) fell by 1.65%, China’s FTSE China A50 (CHA50) lost 1.80%, Hong Kong’s Hang Seng (HK50) decreased by 2.00%, and Australia’s ASX 200 (AU200) was negative 0.87%.

Bank of Japan (BoJ) officials see no need to rush to raise interest rates this month, while they retain the option of raising rates at a later date if inflation remains in line with prognoses. Officials see only a small risk that prices will significantly exceed the Central Bank’s quarterly estimates set in July, reducing the need to act quickly. The Bank of Japan is expected to leave its benchmark rate unchanged at 0.25% at its policy meeting that ends October 31.

Traders reacted with restraint to the People’s Bank of China’s (PBoC) recent monetary easing, which sent rates to new record lows. The one-year LPR, which serves as a benchmark for most corporate and household loans, was cut by 25 bps, while the five-year LPR, often used as a benchmark for mortgages, was also cut by 25 bps to 3.6%. The decision followed PBOC head Pan Gongsheng’s announcement last week of a 20–25 bps LPR cut and his suggestion that the RRR for commercial banks could be further reduced in 4Q2.

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.

On Tuesday, the Dow Jones (US30) Index was down 0.75%. The S&P 500 Index (US500) decreased by 0.78%. The NASDAQ Technology Index (US100) closed negative 1.37%.

The Biden administration is discussing imposing country-specific restrictions on sales of advanced artificial intelligence chips. This hurt the stocks of chip and chip companies. ASML shares fell by 16.5% after lowering its projection, which put pressure on other chip makers, including Nvidia (-4.5%), Broadcom (-3.5%), AMD (-5.2%), and Intel (-3.3%). In addition, shares of energy companies, namely Exxon Mobil (-2.2%) and Chevron (-1.4%), were under pressure amid a sharp decline in oil prices.

Boeing (BA) shares rose more than 2%. They led the Dow Jones Industrials after receiving a $10 billion credit line from lenders and after filing a $25 billion financing request to counter a prolonged strike that shut down a Seattle manufacturing center for a month. Apple (AAPL) is up more than 1% and set a record high after unveiling a powerful new iPad mini equipped with Apple Intelligence artificial intelligence features.

Canada’s latest CPI report revived bets that the Bank of Canada may cut rates by 50 bps next week. The annual inflation rate fell to 1.6% in September, the lowest since February 2021, and is now below the Central Bank’s 2% target. Meanwhile, the annualized CPI Median and CPI Trimmed-Mean, which are the Central Bank’s two preferred measures of core inflation, were unchanged at 2.3% and 2.4%, respectively. The Bank of Canada will decide on monetary policy on October 23. Last month, Bank Governor Tiff Macklem opened the door for more rate cuts if inflation and the economy slow faster than expected.

Equity markets in Europe were declining Tuesday. Germany’s DAX (DE40) fell by 0.11%, France’s CAC 40 (FR40) closed down 1.05%, Spain’s IBEX 35 (ES35) gained 0.67%, and the UK’s FTSE 100 (UK100) closed down 0.52%. Eurozone industrial production rose by 1.8% m/m in August, matching expectations and the largest increase in 1 year. German economic growth expectations for October in the ZEW survey rose by 9.5 to 13.1, beating expectations of 10.0. Swaps estimate the odds of a 25bp ECB rate cut at Thursday’s meeting at 97%.

The UK annual core inflation rate fell to 3.2% in September 2024 from 3.6% in previous months, the lowest since September 2021. The data was below market estimates of 3.4%, with the annualized CPI services rate falling (4.9% vs. 5.6% in August) and the annualized CPI goods rate falling further (-1.4% vs. -0.9%).

WTI crude oil prices fell by 4.4% to $70.6 per barrel on Tuesday following reports that Israel may avoid strikes on Iran’s oil infrastructure, easing fears of major supply disruptions in the region. The IEA also cut demand growth estimates, citing near-record spare capacity in OPEC+ and slowing demand in major markets such as China, where consumption fell by 500,000 bpd in August for the fourth straight month. Global oil demand is estimated to grow by just under 900,000 bpd in 2024 and 1 million bpd in 2025, a slowdown from the 2 million bpd seen since the pandemic.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was up 0.77%, China’s FTSE China A50 (CHA50) fell by 2.78%, Hong Kong’s Hang Seng (HK50) was down 3.67%, and Australia’s ASX 200 (AU200) was positive 0.79%.

New Zealand’s annual inflation fell to 2.2% in the third quarter from 3.3% in the previous quarter, the lowest since March 2021. Inflation is within the Reserve Bank’s target range of 1–3%, paving the way for significant interest rate cuts in the coming months. The Central Bank has cut the official money rate by 75 basis points since August and is expected to continue cutting rates over the next year to stimulate the economy. Markets are now pricing in a high probability of another 50 basis point rate cut by the RBNZ at the last meeting of the year in November.