Last week, the international market underwent dramatic changes with the Middle East situation causing significant oil price fluctuations, and the European Central Bank announced a rate cut.
In terms of the market, the three major U.S. stock indices continued their upward trend, with the Dow Jones Industrial Average up by 0.96% for the week, the Nasdaq Composite up by 0.26%, and the S&P 500 Index up by 0.85%. The three major European stock indices also performed well, with the UK's FTSE 100 Index up by 1.27% for the week, Germany's DAX 30 Index up by 1.46%, and France's CAC 40 Index up by 0.46%.
The latest inflation data sets the tone for the Bank of Canada's rate cut this week, while the Tokyo Consumer Price Index (CPI) may provide clues as to whether the Bank of Japan will raise interest rates in the near future. As the U.S. presidential election in early November approaches, investors' attention will increasingly turn to the policy positions of both parties. The earnings season is picking up, with performances from companies like Amazon and Tesla worth watching.
The International Monetary Fund (IMF) and the World Bank's 2024 Annual Meetings will be held in Washington D.C., the capital of the United States, from October 21 to 26. Central bank governors, ministers of finance and development, parliamentarians, private sector executives, representatives of civil society organizations, and scholars from around the world will gather to discuss global concerns, including the outlook for the world economy, poverty eradication, economic development, and the effectiveness of aid.
Advertisement
From October 22 to 24, the 2024 BRICS Summit will take place in Kazan, Russia. Faced with current international challenges, the BRICS Summit has become an important platform for the Global South countries to make their voices heard, playing a significant role in promoting the multipolarization of the world and reshaping a more equitable international order. As a member of the BRICS countries, China has had a profound impact on the global economic landscape through platforms such as the Belt and Road Initiative and has become an important force in promoting international cooperation and economic development among BRICS countries.
The peak season for earnings disclosures is approaching.
The recent strong U.S. economic data, including last month's retail sales figures, have led to a stabilization in the Federal Reserve's rate cut pricing. A compilation by the London Stock Exchange's Refinitiv found that the market expects a high likelihood of a modest rate cut of 25 basis points in November and December, no longer showing the possibility of a 50 basis point rate cut.
This week, investors will be looking at the details of the October Purchasing Managers' Index (PMI) to understand the latest employment conditions and price pressures in the service and manufacturing sectors. If the PMI continues to surprise on the upside, a soft landing could further diminish the prospects for easing.
Meanwhile, the monthly rates for new and existing home sales in September will be announced, and the subsequent impact of the Federal Reserve's rate cuts on the real estate market may gradually emerge. HSBC economists said in a report that due to still relatively high mortgage rates, new and existing home sales are temporarily at a very low level. Other indicators worth watching include initial jobless claims, September durable goods orders, and the University of Michigan's October Consumer Sentiment Survey.
The earnings season is picking up, with star tech stocks like Amazon and Tesla set to report earnings this week. In addition, companies such as Texas Instruments, Lockheed Martin, Coca-Cola, IBM, UPS, and Colgate-Palmolive will also receive considerable attention.Crude Oil and Gold
International oil prices have plummeted significantly, with the market focusing on developments in the Middle East situation and the outlook for demand. The near-month contract for WTI crude oil closed at $69.22 per barrel, falling by over 8% for the week, while the near-month contract for Brent crude oil closed at $73.06 per barrel, with a weekly drop of over 7%. Both have recorded their largest decline since September.
According to data from the U.S. Energy Information Administration (EIA), U.S. crude oil production set a new record last week. In the week ending October 11th, the national production capacity increased by 100,000 barrels per day from the peak of 13.4 million barrels per day reached two months ago, reaching 13.5 million barrels per day.
The United States has indicated that there is an opportunity to continue communication with Israel and Iran, which may lead to an end to their conflict in the Middle East within a period of time, causing oil prices to lose geopolitical risk premiums. Analyst Alex Hodes from the energy brokerage StoneX stated in a report that Biden understands how and when Israel will respond to Iran's missile attacks, and investors are still anxiously waiting.
Driven by tensions in the Middle East and expectations of a relaxation in monetary policy, gold prices have soared above $2,700. COMEX gold futures on the New York Commodity Exchange closed at $2,736.80 per ounce, with a weekly increase of 2.28%.
According to data from the London Stock Exchange Group (LSEG), gold prices have set 34 new historical highs this year. Expectations of further interest rate cuts by central banks and geopolitical uncertainties have driven gold prices up by more than 30% this year, marking the best performance since 1979.
Alexander Zumpfe, a precious metals trader at Heraeus metals Germany, said: "As conflict risks intensify again, investors are flocking to gold, a traditional safe-haven asset. At the same time, expectations of easy monetary policy have further driven the rally."
Can the British Economy Maintain Strength?
The European Central Bank (ECB) lowered interest rates for the third time this year last week, stating in its resolution that inflation in the eurozone is increasingly under control, while the economic outlook is deteriorating. The first consecutive rate cuts in 13 years signal a shift in focus for the eurozone's central bank from reducing inflation to protecting economic growth. ECB President Lagarde said at a press conference: "The disinflation process is progressing smoothly, and all the information we have received over the past five weeks is pointing in the same direction—downward."
Lagarde stated that any trade barriers are a "negative factor" for Europe. "Any restrictions, any uncertainties, any trade barriers are crucial for an economy as open as the European economy." She added that the ECB is also very concerned about the potential movements in oil prices related to conflicts in the Middle East. However, the ECB does not currently expect a recession and is still assuming that the economy will achieve a "soft landing."The money market has almost fully priced in three further interest rate cuts by next March. Lagarde did not provide any indications about future actions in her statement, instead reiterating that decisions will be made "meeting by meeting" based on incoming data. EFG Asset Management believes that the downside risks to economic growth will lead to interest rate cuts starting in December and continuing into 2025, until rates return to a neutral level, expected to be around 2%.
In the coming week, the UK's October manufacturing and services Purchasing Managers' Index (PMI) will be released. Analysts anticipate that this may continue to suggest that the UK economy is outperforming its Eurozone peers.
Interest rate market pricing indicates that the Bank of England will cut rates by 25 basis points in November. Amid recent weak UK inflation data, Bank of England Governor Bailey has indicated that if consumer prices continue to decline, rate setters may become "more aggressive" in cutting rates, and a faster easing path seems to be gradually digested by the market.