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.