Stock Markets

After the exuberant post-election rally, the stock market takes a breather as winning investors take profits. Major stock indexes across the board ended lower this week. The 30-stock Dow Jones Industrial Average dropped by 1.24% while the Total Stock Market fell by 2.15%. The broad S&P 500 Index lost by 2.08% and the technology-heavy Nasdaq Stock Market Composite dipped further, giving up 3.15%.  The NYSE Composite lost by 1.46%. The CBOE Volatility Index (VIX), the generally accepted indicator of investor risk perception, climbed by 8.03%.

The wide dispersion of sector returns reflects the potential policy implications of the incoming administration for corporate earnings. Financials and energy shares continue to benefit from hopes for deregulation and merger approvals. Similarly, the price of Bitcoin had surged by nearly a third (32.46%) at its peak on Wednesday since the eve of the election, on investors’ anticipation of looser regulation for digital currencies. On the other hand, some healthcare shares sharply fell on Friday following the announcement on Thursday evening that Robert F. Kennedy, Jr., would be President-elect Donald Trump’s nominee as Secretary of Health and Human Services (HHS). Kennedy is a vocal critic of the pharmaceutical industry and existing public health programs, particularly vaccine initiatives. As HHS head, he would oversee Medicare, Medicaid, and other programs accounting for roughly one-quarter of government spending.

Also, notable movers during the week were electric vehicle (EV) makers, particularly Tesla. A surge in the stock price appears to have been driven by promises made by President-elect Trump that Tesla CEO Elon Musk would play a key role in his administration. At its intraday high on Monday, the stock gained 42.63% since the day before the election. Tesla and other EV makers fell back late in the week, however, when Reuters confirmed that the incoming administration plans to eliminate the $7,500 consumer tax credit for EV purchases.

U.S. Economy

The economic calendar this week was underscored by inflation data released on Wednesday. The results were largely in line with expectations. Headline prices rose by 0.2% in October and core prices (excluding food and energy) rose by 0.3%. However, year-on-year headline inflation rose for the first time since March, from 2.4% to 2.6%, due largely to stubbornly high housing costs. On Thursday, the monthly headline and core producer price inflation were released. Producer prices rose in line with expectations and their consumer counterparts.

As if to address the market expectations that rates are likely to be lowered soon. Federal Reserve Chair Jerome Powell delivered a speech on Thursday and remarked that “the economy is not sending any signals that we need to be in a hurry to lower rates,” thereby somewhat dampening sentiment. Expectations priced into futures markets for a quarter-point cut in December fell moderately over the week, from 64.6% to 58.4%. Expectations for a full percentage point of cuts by the end of the year fell further, from 41.3% to 32.6%, although it is not certain whether this was in reaction to Powell’s comments or new policy signals from the incoming administration.

Metals and Mining

Spot prices of precious metals fell for this week. Gold gave up 4.53% from its close one week ago at $2,684.77 to close this week at $2,563.25 per troy ounce. Silver ended this week at 3.32% down from its closing price last week of $31.31 to end this week at $30.27 per troy ounce. Platinum fell by 3.16% from last week’s close at $972.49 to finish this week at $941.80 per troy ounce. Palladium dropped by 3.91% from its last weekly close of $992.35 to settle this week at $953.58 per troy ounce. The three-month LME prices of industrial materials were mixed. Copper, which ended last week at $9,443.50, closed this week at $9,002.50 per metric ton, a drop of 4.67%. Aluminum, last priced at $2,620.50 one week ago, ended this week at $2,649.50 per metric ton for a gain of 1.11%. Zinc closed the previous week at $2,979.50 and this week at $2,947.50 per metric ton for a loss of 1.07%. Tin, priced last week at $31,648.00, last traded this week at $28,742.00 per metric ton for a loss of 9.18%.

Energy and Oil

The overwhelmingly bearish sentiment in the oil market was partly offset by the steep gasoline and diesel inventory draws in the United States. However, the offset was not large enough to stop the decline in oil prices. Meanwhile, China’s refinery throughput fell by 4.6% year-over-year to 14.02 million barrels per day (b/d), bearing disproportionately more heavily on independent teapot refiners in Shandong province as their utilization rate plunged to 58%, almost 20 percentage points lower than this time last year. Brent below $72 per barrel appears justified, given that China posted its seventh successive month of refinery run declines, and Jerome Powell cooled down expectations on U.S. interest rate cuts.

In other news, OPEC once more cut global oil demand growth forecasts for 2024 and 2025 for the fourth consecutive month. The projections were revised mostly by lowering China’s consumption upside to 450,000 b/d from last month’s monthly oil report, expecting 2024 demand growth to come in at 1.82 million b/d. Meanwhile, the International Energy Agency (IEA) believes that the 2025 global oil supply will exceed demand by an astounding 1 million b/d. This is equal to nearly 1% of total production worldwide, driven by the U.S., Guyana, and Canada. The IEA is keeping its demand forecast for next year unchanged at 990,000 b/d.

Natural Gas

For this report week beginning Wednesday, November 6 and ending Wednesday, November 13, 2024, the Henry Hub spot price rose by $0.30 from $1.80 per million British thermal units (MMBtu) to $2.10/MMBtu.  Regarding Henry Hub futures, the price of the December 2024 NYMEX contract increased by $0.24, from $2.747/MMBtu to $2.983/MMBtu through the report week. The price of the 12-month strip averaging December 2024 through November 2025 futures contracts rose by $0.14 to $3.100/MMBtu. Natural gas spot prices rose at most locations along with the Henry Hub price this report week. Price changes ranged from a decrease of $0.72 at Northwest Sumas to an increase of $1.63 at the Waha Hub.

International natural gas futures prices increased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.02 to a weekly average of $13.54/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.69 to a weekly average of $13.48/MMBtu. In the week last year corresponding to this report week (beginning November 8 to November 15, 2023), the prices were $17.17/MMBtu in East Asia and $14.97/MMBtu at the TTF.

World Markets

The pan-European STOXX Europe 600 Index ended lower by 0.69%, its fourth consecutive weekly descent. Investor sentiment is weighed on the concerns about the incoming Trump administration’s trade policies and the political upheaval in Germany. Also dampening buying incentives were cautious comments by Federal Reserve Chair Jerome Powell regarding U.S. interest rates. The major stock indexes were mixed. France’s CAC 40 Index dipped by 0.94%, Italy’s FTSE MIB climbed by 1.11%, and Germany’s DAX was mostly unchanged. The UK’s FTSE 100 Index was modestly down. Data on the Eurozone’s economy remained supportive of a soft landing. Eurostat’s second GDP estimate confirmed the surprisingly resilient 0.4% third-quarter expansion. Additionally, although Germany’s economy is expected to contract by 0.1%, the European Commission projected growth of 0.8% in 2024. Other data indicate that the labor market remained stable. In the third quarter, employment rose by 0.2%, compared to 0.1% in the preceding three months. Regarding monetary policy, the European Central Bank (ECB) policymakers unanimously approved of the quarter-point interest rate cut in October because, according to the minutes of the meeting, “the disinflationary trend was getting stronger” and there was a need to avoid “harming the real economy by more than was necessary.” The ECB also cited “prudent risk management” and provided insurance against downside risks that could lead to an undershooting of the inflation target.

Japan’s stocks lost ground over the week. The Nikkei 225 Index fell by 2.2% while the broader TOPIX Index slid by 1.1%. Providing some degree of support was the weakness of the yen since many of the listed counters generate revenues from export sales, but the uncertainties related to President-elect Donald Trump’s incoming administration raising tariffs weighed on the outlook for these same companies that heavily export to the U.S. The yen weakened to the JPY 155 range against the U.S. dollar from about JPY 152.6 at the end of the preceding week. The greenback strengthened at the back of Trump’s victory in the recent presidential election. The yen came under pressure when some fears arose that the incoming administration’s policies could prove inflationary and halt the plans of the Federal Reserve to lower borrowing costs. Another factor is the uncertainty regarding the timing of future interest rate hikes by the Bank of Japan (BoJ). Japan’s gross domestic product grew by 0.2% quarter-on-quarter during the third quarter of this year, slowing from the 0.5% increase recorded for the second quarter. The economy grew by 0.9% on an annualized basis, down from 2.2%. Increased private consumption (which accounts for more than half of the economy) drove the second consecutive quarter of GDP growth. A one-off income tax cut and higher summer bonuses also supported the GDP reading for that quarter.

Evidence of persistent deflation and worries about potential U.S. tariffs under income U.S. President Trump impacted investor confidence and brought Chinese equities lower for the week. The Shanghai Composite Index dropped by 3.52% while the blue-chip CSI 300 lost 3.29%. The Hong Kong benchmark Hang Seng Index slumped by 6.28%. Largely due to lower food and energy prices, China’s consumer price index rose by a below-consensus 0.3% in October year-on-year, down from 0.4% in September. Core inflation (which excludes volatile food and energy costs) increased by 0.2%, more than the 2.5% decrease analysts predicted and accelerating from the 2.8% drop in September, further extending the deflation in factor gate prices that commenced in late 2022. Retail sales expanded by 4.8% from a year ago which exceeded both analysts’ expectations and September’s 3.2% rise, marking the strongest growth since February. Industrial production rose by 5.3% year-on-year, lower than forecasted, and the 5.4% increase in September amid weaker auto sales. According to data from the National Bureau of Statistics, new home prices in 70 cities dropped in October by 0.5% from September, compared to home prices dropping by 0.7% from August. The October decline marked the second month of slowing home price declines and the slowest pace since March. The improvement was the result of Beijing unleashing a series of stimulus measures in recent months, which are aimed at boosting the housing sector. The measures include reducing mortgage rates, cutting taxes on home purchases, and relaxing homebuying curbs in big cities.

The Week Ahead

In the coming week, important economic releases will include the Conference Board’s leading indicators, PMI data, and the results of the Philadelphia Fed manufacturing survey.

Key Topics to Watch

• Home builder confidence index for Nov.
• Chicago Fed President Austan Goolsbee welcoming remarks (Nov. 18)     
• Housing starts for Oct.
• Building permits for Oct.
• Chicago Fed President Austan Goolsbee speaks (Nov. 19)  
• Fed Gov. Lisa Cooks speaks (Nov. 20)
• Fed Gov. Michelle Bowman speaks (Nov. 20)
• Initial jobless claims for Nov. 16
• Philadelphia Fed manufacturing survey        
• Cleveland Fed President Beth Hammack welcoming remarks (Nov. 21)
• Existing home sales for Oct.
• Leading economic index for Oct.
• Kansas City Fed President Jeff Schmid speaks (Nov. 21)    
• Fed Vice Chair for Supervision Michael Barr speaks (Nov. 21)      
• S&P flash U.S. services PMI for Nov.
• S&P flash U.S. manufacturing PMI for Nov.
• Consumer sentiment (final) for Nov.
• Fed Gov. Michelle Bowman speaks (Nov. 22)

Markets Index Wrap-Up

Stock Markets

U.S. stock indexes rallied sharply this week in reaction to the decisive U.S. presidential election outcome that cleared the cloud of uncertainty hovering over the markets. The 30-stock Dow Jones Industrial Average (DJIA) jumped by 4.61% while the Total Stock Market climbed by 5.06%. The broad S&P 500 gained by 4.66% while the technology-heavy Nasdaq Stock Market Composite surged by 5.74%.  The NYSE Composite added 3.55%. Investor risk perception as gauged by the CBOE Volatility Index (VIX) dropped by 31.72%.

Stocks posted their best-ever post-election rally in the nation’s history, with the Republicans garnering a strong political mandate, having won the White House, the Senate, and most likely the House. There are potential market implications from the shift in the balance of power, despite campaign trail pledges not always translating into policy. The new administration’s promise of tax cuts and deregulation could enhance more rapid economic growth. On the other hand, tariffs and debt worries may cause further rate hikes and pressure bonds.

During this cycle, the Federal Reserve cut interest rates for the second time and continued to maintain a somewhat restrictive policy. Nevertheless, the Fed may be convinced to move more slowly in anticipation of the strong growth and possibly more dovish fiscal policy next year as markets start to price in a shallower rate-cutting cycle. Fundamental conditions remain favorable, which may create opportunities to broaden equity allocations and lock in high bond yields. In any case, it is advisable to refocus on long-term fundamentals rather than focusing solely on recent political shifts.

U.S. Economy

The Federal Reserve announced a 25-basis-point (0.25 percentage point) cut in the federal funds rate following its scheduled policy meeting concluded on Thursday. This is the Fed’s first easing move since it cut rates by 50 basis points in mid-September. However, the week’s biggest surprise was the release of the Institute for Supply Management’s gauge of October services sector activity on Tuesday. The services sector activity came in at 56.0 which is well above expectation (readings above 50.0 indicate expansion) and the best performance since August. Fortunately, even as activity picked up, price pressures somewhat eased, reversing a string of three monthly gains. Surveyed companies reported they were only minimally impacted by recent severe weather as compared to the larger impact on manufacturing firms.

As yields largely ended lower than where they ended the previous week, U.S. Treasuries generated positive returns heading into Friday. Some short-term yields increased slightly while intermediate- and long-term yields ended slightly lower. (Recall that yields and bond prices move in opposite directions.) On Wednesday, the previous day’s election results sent yields upward, although the expected rate cut from the Federal Reserve helped bring them lower by Thursday evening.

Metals and Mining

The spot price of precious metals corrected on the back of improving the risk perception of investors in the financial markets, reducing the demand for risk haven assets for the moment. Gold closed at $2,684.77 per troy ounce this week, down by 1.89% from last week’s closing price of $2,736.53. Silver closed at $31.31 per troy ounce, lower by 3.63% from the previous weekly close of $32.49. Platinum settled at $972.49 per troy ounce, down by 2.37% from last week’s closing price of $996.08. Palladium closed this week at $992.35 per troy ounce, down by 10.16% from last week’s close at $1,104.60. The three-month LME prices of industrial metals were mixed. Copper ended the week at $9,443.50 per metric ton, lower by 1.33% from the previous week’s closing price of $9,570.50. Aluminum ended at $2,620.50 per metric ton, 0.79% higher than its last traded price of $2,600.00 one week ago. Zinc settled at $2,979.50 per metric ton, 2.93% down from last week’s closing price of $3,069.50. Tin closed at $31,648.00 per metric ton, 0.24% lower than the previous week’s close of $31,724.00.               

Energy and Oil

Global newsfeeds this week were dominated by the U.S. presidential election, resulting in widespread speculation regarding how the new administration would actualize its election promises in the coming weeks and months. In the meantime, the approaching Hurricane Rafael, which may be the last in this Atlantic season, has temporarily shut down about 400,000 barrels per day (b/d) of production. Ahead of Hurricane Rafael through the U.S. Gulf of Mexico, offshore operators evacuated 17 producing platforms. Even though it is gradually weakening, the seventeenth named storm of this hurricane season threatens some 4 million b/d of production capacity. In recent sessions, ICE Brent traded around the $75 per barrel level, suggesting that oil prices will remain rangebound. For the longer term, President Trump’s return to power has renewed the prospects of revising the stalled 830,000 b/d Keystone XL pipeline which is intended to carry Canadian oil from Alberta. Operator TC Energy is expected to drop its $15 billion claim against the U.S. government. 

Natural Gas

For the report week from Wednesday, October 30, to Wednesday, November 6, 2024, the Henry Hub spot price fell by $0.14 from $1.94 per million British thermal units (MMBtu) to $1.80/MMBtu.  Regarding Henry Hub futures, the price of the December 2024 NYMEX contract decreased by $0.10, from $2.845/MMBtu at the start of the week to $2.747/MMBtu at the week’s end. The price of the 12-month strip averaging December 2024 through November 2025 futures contracts declined by $0.07 to $2.965/MMBtu. Natural gas spot prices fell at most major pricing locations for this report week. Price changes ranged from a decrease of $2.57 at the Waha Hub to an increase of $0.25 at SoCal Citygate.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.17 to a weekly average of $13.52/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.66 to a weekly average of $12.79/MMBtu. In the week last year corresponding to this report week (beginning November 1 and ending November 8, 2023), the prices were $17.46/MMBtu in East Asia and $14.63/MMBtu at the TTF. 

World Markets

Worries about the impact of U.S. President-elect Donald Trump’s trade policies on European economic growth and central bank policy weighed on market sentiment this week. The pan-European STOXX Europe 600 Index ended 0.84% lower in local currency terms. Major stock indexes ended weaker: Italy’s FTSE MIB lost 2.48%, France’s CAC 40 Index declined by 0.95%, and Germany’s DAX softened by 0.21%. The UK’s FTSE 100 Index dipped by 1.28%. The Bank of England’s (BoE’s) policy committee voted 8 to 1 to reduce the key Bank Rate for a second time this year by a quarter-point to 4.75%, in light of inflation continuing to decelerate. Sweden likewise lowered its key rate although Norway left its policy rate unchanged. On the economic front, the HCOB eurozone composite purchasing managers’ index (PMI) was revised higher to 50 in October from an earlier estimate of 49.7. At this level, the indicator sits at the borderline of expansion (greater than 50) and contraction (less than 50). Manufacturing contracted at a slower pace than first estimated, while the services sector output expanded at a slightly faster rate. Business confidence fell to its lowest level for the year so far.

Japan’s stock markets climbed over the week. The Nikkei 225 Index gained 3,8% and the broader TOPIX Index climbed 3.7%. The outcome of the U.S. presidential election and the Federal Reserve rate cut positively impacted investor risk appetite. These events overshadowed the discouraging domestic corporate earnings season where there were some downgrades to company guidance, and the adverse effect of yen strength on Japan’s export-heavy industries. The yen appreciated to about JPY 152 against the USD, from around JPY 153 at the end of the previous week. Authorities committed to closely monitoring the impact of Donald Trump’s election victory on the country’s economy and finances, given the close economic ties between the two countries. On the economic front, Japan’s real (inflation-adjusted) wages fell by 0.1% in September, following a revised decline of 0.8% in August. In line with expectations, nominal wages grew by 2.8% in September, lagging consumer inflation at 2.9%. Household spending fell 1.1% year-on-year in September which was lower than the consensus estimate of 2.1% decline.

China’s stocks rallied as concerns about potential U.S. tariff hikes were offset by Beijing’s unveiling of fresh stimulus measures. The Shanghai Composite Index advanced by 5.51% while the blue-chip CSI 300 gained by 5.5%. The Hong Kong benchmark Hang Seng Index ended higher by 1.08%. The standing committee of the National People’s Congress, China’s top legislative body, announced on Friday a RMB 10 trillion program to refinance local government debt, a key national economic and financial risk flagged by Beijing. Policymakers also raised the local government debt ceiling from RMB 29.52 trillion to RMB 35.52 trillion. This is the first time that the government raised the ceiling midyear since 2015. On trade, exports rose by 12.7% in October which exceeds the forecast and is up sharply from 2.4% in September. This is the fastest export growth rate since July 2022 and was attributed to better weather and steep discounts. Imports fell by 2.3%, down from the previous month’s growth rate of 0.3%. The overall trade surplus rose to $95.72 billion from $81.71 billion in September. The growth in October’s exports indicated strong demand for Chinese goods, which has been an optimistic spot for the economy. Analysts cautioned, however, that the country’s export outlook has become increasingly uncertain in light of a possible trade war when Trump assumes office in 2025.

The Week Ahead

Included among the important economic reports scheduled for release this week are the CPI and PPI inflation, retails sales, and industrial production data.

Key Topics to Watch

• NFIB optimism index for Oct.
• Consumer price index for Oct.
• CPI year over year
• Core CPI for Oct.
• Core CPI year over year
• Monthly U.S. federal budget for Oct.
• Initial jobless claims for Nov. 9
• Producer price index for Oct.
• PPI year over year
• Core PPI for Oct.
• Core PPI year over year
• Import price index for Oct.
• Import price index minus fuel for Oct.
• Empire State manufacturing survey for Nov.
• U.S. retail sales for Oct.
• Retail sales minus autos for Oct.
• Industrial production for Oct.
• Capacity utilization for Oct.
• Business inventories for Sept.

Markets Index Wrap-Up

Stock Markets

All the major indexes are down for this week. The 30-stock Dow Jones Industrial Average (DJIA) slipped down by 0.15% while the Total Stock Market fell by 1.16%. The broad S&P 500 Index dropped by 1.37% with losses among small-cap, mid-cap, and super-composite counters. The Nasdaq Stock Market Composite edged down by 1.50%, and the NYSE Composite gave up 1.04%. The CBOE Volatility Indicator (VIX), which tracks investor risk perception, rose by 7.62%.

On Wednesday, the technology-oriented Nasdaq Composite and the S&P MidCap 400 Index reached record intraday highs before sharply falling back on Thursday. Due partly to cautious earnings reports from Facebook parent Meta Platforms and software giant Microsoft, growth stocks generally lagged value shares. Small caps also outperformed large caps. Roughly 42% of the companies in the S&P 500 Index were expected to report third-quarter earnings over the week. Analysts expected that overall earnings for the S&P 500 would have increased by 5.1% compared to the same quarter one year ago. This would indicate a faster pace of growth than expectations before the start of the reporting season when analysts anticipated earnings to grow by 4.3%.

U.S. Economy

This week, data on two critical key factors were released ahead of the U.S. elections – corporate earnings growth and the U.S. labor market. According to the data, the economy is moderating but remains solidly positive. Earnings growth for the third quarter remains on track for 5%, which is slightly above expectations of approximately 4% growth at the start of the quarter. Earnings growth for the full year is expected to be 9%, well above last year’s 1% growth rate. The jobs report for October came in well below expectations. Some events, however, that may have distorted this reading were last month’s hurricanes and ongoing labor strikes. The labor market may be moderating, but it is not collapsing.

On Tuesday, the Labor Department reported that the number of job openings in September had fallen to its lowest level since January 2021 at.44 million. The number of Americans leaving jobs was relatively unchanged, as well as the number of those quitting voluntarily which is considered a better measure of labor market conditions. On Friday, however, the Labor Department reported that nonfarm payrolls were overall “essentially unchanged” over the month, with employers adding only 12,000 jobs. This is the lowest jobs numbers since December 2020. The impact reflected a decline of 44,000 jobs in transport equipment manufacturing activity due to the Boeing strike. There was little or no growth in employment in other major industries which should have compensated for the weakness.  

Also, on Friday, the Institute for Supply Management’s gauge of manufacturing activity had unexpectedly dropped to 46.5. This is the seventh straight monthly decline and the lowest level in 15 months.  According to the Institute, “Demand remained subdued as companies continue to show an unwillingness to invest in capital and inventory due to concerns about federal monetary policy direction in light of the fiscal policies proposed by both major parties.”

The softening of the macroeconomic data nevertheless signifies that the Federal Reserve is still on track to lower interest rates in both November and December this year. The economy that remains resilient combined with lower rates has historically favored financial markets broadly.

Metals and Mining

There is no doubt that precious metals saw significant momentum over the past month due to the volatile environment leading to the election. In the weeks leading up to November, the risk uncertainty continued to rise regarding anticipation about which political party would gain control over the White House and the two chambers of Congress. However, while the gold market is overdue for a correction, the fear of missing out, or FOMO, is growing in the marketplace as analysts note that dips are being aggressively bought up and surprising any remaining bears in the market. Gold has managed to hold support at every major breakout level in this step-by-step rally since July. In August it held support at $2,400, in September at $2,500, and in October at  $2,600. As the U.S. economy and labor market slow, Gold continues to be well supported.

The spot prices of precious metals lost ground over the week. Gold, previously at $2,747.56, closed this week at $2,736.53 per troy ounce for a drop of 0.40%. Silver closed at $33.72 one week ago, and ended this week at $32.49 per troy ounce for a loss of 3.65%.  Platinum, which closed at $1,025.29 one week ago, closed this week at $996.08 per troy ounce, for a loss of 2.85%. Palladium, with a closing price last week of 1,196.50, settled at $1,104.60 per troy ounce this week, losing 7.68% from last week. The three-month LME prices of industrial metals also generally fell with few exceptions. Copper began at $9,602.50 last week and fell by 0.33% to end at $9,570.50 per metric ton. Aluminum lost 2.89% from its close last week at $2,677.50 to end this week at $2,600.00 per metric ton. Zinc dropped by 1.05% from its ending price last week at $3,102.00 to close this week at $3,069.50 per metric ton. Tin, on the other hand, rose by 1.27% from its close last week at $31,325.00 to finish the week at $31,724.00 per metric ton.

Energy and Oil

Iran reemerged as the main talking point of the markets no sooner had OPEC+ depressed market sentiment by admitting a potential rollover of its cuts in 2025. Due to concerns about soft oil demand at the heels of China’s slowdown and rising non-OPEC supply, OPEC+ could postpone its planned increase in oil production. This move could bring back the 2.2 million barrels per day (b/d) output under eight countries’ voluntary cuts. Regarding geopolitical developments, the oil markets are now anticipating an Iranian attack on Israel, after the Israeli retaliatory strike had been downplayed. Iran is expected to respond with numerous drones from Iraqi territory. As a result, ICE Brent futures were lifted back to $74-$75 per barrel by a semblance of geopolitical risk premium, ahead of a highly uncertain week when the U.S. president is elected.

Natural Gas

For the report week from Wednesday, October 23, to Wednesday, October 30, 2024, the Henry Hub spot price rose by $0.03 from $1.91 per million British thermal units (MMBtu) at the start of the week to $1.94/MMBtu at the week’s end. Regarding Henry Hub futures, the November NYMEX contract expired on Tuesday at $2.346/MMBtu, up modestly from the previous Wednesday. The December 2024 NYMEX contract price decreased to $2.845/MMBtu, down by $0.06 over the report week. The price of the 12-month strip averaging December 2024 through November 2025 futures contracts declined by $0.03 to $3.038/MMBtu. Regional natural gas spot price changes were mixed this report week. Price changes ranged from a decrease of $0.12 at Eastern Gas South to an increase of $1.63 at PG&E Citygate.

International natural gas futures prices rose this report week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.25 to a weekly average of $13.70/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.70 to a weekly average of $13.45/MMBtu. In the week last year that corresponds to this report week (beginning October 25 and ending November 1, 2023), the prices were $17.82/MMBtu in East Asia and $15.36/MMBtu at the TTF.     

World Markets

European stocks lost ground in trading this week. The pan-European STOXX Europe 600 closed 1.52% lower in local currency terms, due to concerns regarding the potential for escalating conflict in the Middle East, poor corporate results for some companies, and moderating expectations for the European Central Bank (ECB) to further cut interest rates. The major stock indexes in the region also suffered from sell-offs. Italy’s FTSE MIB plummeted by 1.42%, France’s CAC 40 Index sank by 1.18%, and Germany’s DAX lost by 1.07%. The UK’s FTSE 100 Index slid by 0.29%. In the third quarter, the eurozone economy expanded by 0.4% sequentially. Encouragingly, this exceeds the consensus estimate of 0.2% and is double the second-quarter growth rate. France and Spain reported stronger-than-expected economic growth. So did Germany which unexpectedly avoided a recession and grew by 0.2%. However, Italy’s economy stalled. Meanwhile, as the decline in energy prices last year dropped out of the annual comparison, the annual headline inflation accelerated slightly faster than forecast to 2% in October from 1.7% in September. The core rate (excluding energy, food, alcohol, and tobacco prices) remained unchanged at 2.7%. Services inflation also remained constant at 3.9%.

Japan’s stock market climbed over the week. The Nikkei 225 Index gained by 0.4% and the broader TOPIX index advanced by 1.0% as the Bank of Japan (BoJ) kept interest rates steady amid political uncertainty. In the country’s lower house election on Sunday, October 27, Japan’s ruling Liberal Democratic Party (LDP)-Komeito coalition failed to secure a majority, as the opposition capitalized on public discontent with the higher cost of living and the LDP corruption scandal. In an effort to maintain control of the lower house, Prime Minister Shigeru Isheba faces the prospect of a minority government as it sought the support of smaller parties. Initially, the yen weakened against the U.S. dollar on the outcome of the election on expectations that a period of political uncertainty would follow and potentially impact the BoJ’s monetary policy and future fiscal policy. The BoJ held its policy rate steady at 0.25% at its October meeting, aligning with expectations. By the end of the week, the yen traded within the JPY 152 range against the greenback, virtually unchanged. In the central bank’s view, the economic risks in the U.S. had broadly diminished which the market has taken to suggest that conditions could be aligning for another rate hike. Market participants are divided on whether this would come as early as December of this year or January of next year.

Chinese equities pulled back this week despite data showing that economic activity had begun to pick up. The Shanghai Composite Index lost 0.84%, while the blue-chip CSI 300 declined by 1.68%. The Hong Kong benchmark Hang Seng Index gave up 0.41%.  The country’s factory activity grew for the first time since April due to growing demand. According to the statistics office, the official manufacturing purchasing managers’ index (PMI) rose from 49.8 in September to an above-consensus 50.1 In October, moving from contraction to expansion. The nonmanufacturing PMI, which is the gauge for construction and services activity, rose to a lower-than-expected 50.2 in October from 50 in September. Increased spending during the country’s Golden Week holiday partly accounts for the rise in services activity. On the other hand, the private Caixin/S&P Global survey of manufacturing activity advanced from 49.3 in September to 50.3 in October amid new order growth. Regarding the property sector, the value of new home sales by the country’s top 100 developers rose by 7.1% in October year-on-year compared to September’s decline of 37.3%. According to the China Real Estate Information Corporation, this marks the first year-on-year growth in 2024. Overall, the first batch of major economic indicators after the rollout of Beijing’s stimulus package point to early signs of recovery in the Chinese economy.

The Week Ahead

In the coming week, look forward to important events including the U.S. presidential election, the FOMC meeting, and the release of the preliminary report on U.S. productivity for the third quarter.

Key Topics to Watch

• Factory orders for Sept.
• U.S. trade deficit for Sept.
• ISM services for Oct.
• S&P final U.S. services PMI for Oct.
• Initial jobless claims for Nov. 2
• U.S. productivity (prelim) for Q3
• Wholesale inventories for Sept.
• FOMC interest-rate decision
• Fed Chair Powell press conference (Nov. 7)
• Consumer credit for Sept.
• Consumer sentiment (prelim) for Nov.

Markets Index Wrap-Up

Stock Markets

The bull market continues as major indices rose through this week. The 30-stock Dow Jones Industrial Average (DJIA) added 1.21% while the Total Stock Market Index gained 1.17%. The broad S&P 500 likewise climbed by 1.11% and the technology-heavy Nasdaq Stock Market Composite rose by 1.13%. The NYSE Composite inched up by 0.88% and the Russell 1000, 2000, and 3,000 all ended higher for the week. The CBOE Volatility Index, the indicator of investor risk perception, rose by 6.51%.

This past week marks the two-year anniversary of the present bull market during which time stocks gained around 60%.  Historically, returns tend to moderate as bull markets make it to the end of the third year. This may likewise happen with this bull market since fundamental conditions remain strong but are tending to slow down. The Federal Reserve is expected to continue with its easing campaign even though September inflation came in slightly hotter than expected. It is more likely that quarter-point rate cuts will be decided on at each meeting until the Fed policy approaches 3% 5o 3.5%. However, earnings will have to push any future market gains since valuation have limited room to increase further. Signs of earnings broadening are expected to become evident as the third quarter season kicks off.

U.S. Economy

There has been several disappointing economic news over the weekend. The Labor Department reported on Thursday some modest some upside movements in headline and core (excluding food and energy) inflation which rose in September by 0.2% and 0.3% respectively, both slightly above expectations. Core prices rose by 3.3% year-over-year in September compared to 3.2% in August, the first increase since March 2023. Medical care (up 0.7%) and transportation (up 1.4%) services registered sharp increases in their seasonally-adjusted prices, which offset a 1.9% drop in energy prices.

The Labor Department also reported on Thursday a surprise jump in weekly jobless claims to its highest level in 14 months at 258,000. Partly to blame were disruptions by Hurricane Helene, however, Michigan also recorded substantial job losses. Continuing claims also rose to 1.86 million, their highest level since late July. This may have influenced the University of Michigan’s preliminary gauge of consumer sentiment in October which declined unexpectedly as respondents to the survey expressed greater caution about their personal finances.

The surprise increase in consumer inflation led to a significant change in expectations about the Fed’s next policy meeting in November. The futures market ended the week pricing in a respectable 14.1% likelihood that the Fed will hold rates steady. Minutes from the Fed’s October meeting, which were released on Wednesday, likewise revealed that some members favored on a 25-basis-point rate cut, compared to a 50-basis-point cut.

Metals and Mining

Gold’s price action continues to remain bullish despite being mostly ignored by generalist investors. Shallow corrections are consistently bought resulting in the yellow metal continuing to defy the odds. According to analysts, gold investors are justified in taking profits as expectations around the monetary policy actions of the Federal Reserve continue to vacillate. Last Friday, the market’s expectation of a 50-basis-point cut next month was dramatically doused by a stellar jobs report. This week, it was reported that consumer inflation rose more than expected as the core Consumer Price Index increased by 3.2% year-on-year, causing monetary policy doves to take another hit. Despite the hawkish news, analysts have noted that the gold market is delinking from single monetary policy decisions and growing much bigger. While a 50-basis-point but remains out of the question, it is evident the Fed will continue to ease interest rates even if the inflation rate remains high.

The spot prices of precious metals ended mixed week-on-week. Gold rose by 0.11% from last week’s close at $2,653.60 to this week’s close at $2,656.59 per troy ounce.  Silver ended 2.05% lower from its last traded price of $32.20 one week ago to its last traded price this week at $31.54 per troy ounce. Platinum lost 0.48% from its close last week at $992.55 to its close this week at $987.76 per troy ounce. Palladium surged by 5.73% from its ending price last week at $1,013.11 to its ending price this week at $1,071.21. The three-month LME prices of base metals have mostly come down. Copper, which closed last week at $9,866.00, ended this week at $9,723.00 per metric ton for a loss of 1.45%.  Aluminum, which ended at $2,629.00 the prior week, ended this week at $2,586.00 per metric ton for a decline of 1.64%.  Zinc settled this week at $3,086.50 per metric ton, 1.20% lower than last week’s closing price of $3,124.00. Tin closed this week at $32,817.00 per metric ton, 2.65% below last week’s close at $33,709.00.     

Energy and Oil

Brent futures were nudged lower by some of the disappointment that an Israeli retaliatory strike on Iran, which the market anticipated all week, failed to materialize. Brent futures settled this week just below the $79-per-barrel mark. The oil-related impacts of Hurricane Milton were relatively minor despite the devastation the storm wreaked on Florida. Macroeconomics played a more robust role in influencing prices this week, particularly on the back of U.S. inflation dipping to an annual rate of 2.4%.  In other parts of the world, A UK oil major signaled a $500 million decline in refining margins and a weak performance from oil trading into its third-quarter earnings. Its rival company Shell quantified the decline in refining margins at 30% quarter-on-quarter, down to $5.5 per barrel compared to $7.7 per barrel in the second quarter.

Natural Gas

For the report week from Wednesday, October 2, to Wednesday, October 9, 2024, the Henry Hub spot price fell by $0.34, from $2.76 per million British thermal units (MMBtu) to $2.42/MMBtu. Regarding Henry Hub futures, the price of the November 2024 NYMEX contract decreased by $0.23, from $2.886/MMBtu at the start of the report week to $2.660/MMBtu by the week’s end. The price of the 12-month strip averaging November 2024 through October 2025 futures contracts declined by $0.12 to $3.130/MMBtu.

Concerning regional markets, natural gas spot price changes were mixed this report week. Prices rose in the Northeast but fell in most other major pricing locations. Price changes ranged from a decrease of $2.64 at the Wahu Hub to an increase of $0.48 at Algonquin Citygate.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.06 to a weekly average of $13.10/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands increased by $0.20 to a weekly average of $12.78/MMBtu. In the week last year that corresponds to this report week (from October 4 to October 11, 2023) the prices were $14.18/MMBtu in East Asia and $13.28/MMBtu at the TTF. 

World Markets

European equities were up, albeit modestly, for the week as the pan-European STOXX Europe 600 Index closed 0/66%. The market continued to hope that the European Central Bank (ECB) would proceed more quickly to cut interest rates and that China is set to enhance its economic stimulus, The major continental stock indexes were elevated as Italy’s FTSE MIB added 2.13%, Germany’s DAX rose by 1.32%, and France’s CAC 40 Index gained by 0.48%. However, the UK’s FTSE 100 Index lost by 0.33%. More ECB officials foresee that inflation may slow closer to the 2% target by the end of 2024, as indicated in the minutes from the September meeting. If incoming inflation data points align with the ECB’s projections, the central bank noted that a gradual reduction of borrowing costs would be appropriate. Nevertheless, policymakers refuse to commit to a particular rate path, although based on recent comments from ECB officials, they appeared to align with the market’s view that the pace of policy easing could quicken if inflation slows and the economy weakens. 

Japanese stock indexes climbed over the week. The Nikkei 225 rose by 2.45% while the broader TOPIX Index gained by 0.45%, largely due to the weakness in the yen that provided a favorable profit outlook for Japanese exporters. The exchange rate floated close to its lowest level since August at about the high JPY 148 level against the US dollar. Earlier this month, the new prime minister, Shigeru Ishiba, brought the yen came under pressure when he cautioned that the environment is not ready for another interest rate hike. The 10-year Japanese government bond (JGB) yields rose in tandem with U.S. Treasury yields. Investors’ expectations around the likelihood of another aggressive (50-basis-point) rate cut by the Federal Reserve in November moderated. From 0.87% at the end of the prior week, the yield on the 10-year JGB rose to 0.94%.  Regarding its economy, Japan’s real wages (wages adjusted for inflation) fell by 0.6% year-on-year in August. The first decline in three months was brought about partly due to the diminishing impact of higher bonuses paid in the preceding two months. However, since the positive cycle wherein rising wages boost consumer spending has not yet come about, the sluggishness in the pay trend could lend some support to the view that the Bank of Japan (BoJ) may avoid raising interest rates again anytime soon. While the August household spending declined by 1.9% year-on-year, the drop was less than the consensus forecast of 2.6%.

During the holiday-shortened week, Chinese equities fell as optimism about the most recent stimulus measure faded. The Shanghai Composite Index lost by 3.56% and the blue-chip CSI 300 shed 3.25%. The Hong Kong benchmark Hang Seng Index gave up 6.53%. The markets in the mainland were closed on Monday for the National Day holiday that started on Tuesday, October 1.  At a press conference on Tuesday, the country’s economic planning agency, the National Development and Reform Commission, announced that China would speed up countercyclical measures to support growth. The announcement reiterated for the most part plans to boost investment and increase direct support to low-income groups and fresh graduates. Towards this end, the central government will continue ultra-long special bonds in 2025 for the purpose of funding major projects. Officials stated that Beijing will invest RMB 100 billion in strategic areas. In the meantime, over the long holiday that ended on Monday, spending by Chinese consumers failed to rise to pre-pandemic levels. Spending increased by 6.3% year-on-year while passenger traffic rose by 5.9%. Box office sales amounted to RMB 2.1 billion, lower than the RMB 2.7 billion reported last year. However, the average spending per trip was roughly RMB 131, which was higher than the RMB 113 recorded during the five-day Labor Day in May.

The Week Ahead

The CPI inflation data, import price index data, and an analysis of consumer sentiment are among the important economic releases this coming week.

Key Topics to Watch

• Columbus Day holiday. Bond market closed. (October 14)
• Federal Reserve Governor Christopher Waller speaks (October 14)
• Empire State manufacturing survey for Oct.
• Fed Governor Adriana Kugler speaks (October 15) 
• Import price index for Sept.
• Import price index minus fuel for Sept.
• Initial jobless claims for Oct. 12
• S. retail sales for Sept.
• Retail sales minus autos for Sept.
• Industrial production for Sept.
• Capacity utilization for Sept.
• Business inventories for Aug.
• Home builder confidence index for Oct.
• Housing starts for Sept.
• Building permits for Sept.
• Federal Reserve Governor Christopher Waller speaks (October 18)

Markets Index Wrap-Up

Stock Markets

Stocks hit new record highs this week on the back of optimism about the Federal Reserve’s recent rate cut, ongoing enthusiasm about AI, and new stimulus measures adopted by China that may spur hopes for a rebound in that country’s demand. All major stock market indexes were up week-on-week. The 30-stock Dow Jones Industrial Average (DJIA) inched up by 0.59%, mimicking the Total Stock Market Index’s 0.59% rise. The broad-based S&P 500 Index gained 0.62% while the technology-heavy Nasdaq Stock Market Composite Index climbed by 0.95%. The NYSE Composite Index added 0.66% this week. The investor risk perception indicator, the CBOE Volatility Index (VIX) rose by 5.02%.

Technology stocks outperformed on the back of reports of a possible takeover of Intel and news that the CEO of NVIDIA had halted sales of his own shares in the company. Additionally, chip maker Micron Technology surged following its positive outlook for artificial intelligence demand, thereby providing a general tailwind for the sector. Sentiment was also driven in part by economic news. On Tuesday, there was a slight sell-off as news that the Conference Board’s index of U. S. consumer confidence fell sharply in August and put it back close to the bottom of its range over the past two years.  

U.S. Economy

This week, it was reported that the index of consumers’ perception of labor market conditions slid to 81.7, only slightly above the threshold of 80 that historically had predicted a recession. There was also some mixed news regarding the housing sector. There have been some recent signals that the sector may be stabilizing as mortgage rates start to descend. On Wednesday, the Commerce Department reported that new home sales declined, although not as much as expected, by 4.7% in August, and building permits data were revised lower. New buyers remained on the sidelines, but the falling mortgage rates appeared to spark a surge in refinancing. Shortly after the Fed started to raise short-term rates, the Mortgage Bankers Association Mortgage Refinance Index jumped to its highest level since April 2022.

On Friday, some benign inflation data helped trigger an early rally in the markets. The Commerce Department reported that the core personal consumer expenditures (PCE) price index (less food and energy), which is the Fed’s preferred inflation gauge, rose by only 0.1% in August, slightly below expectations. The index climbed only 2.2% year-on-year, close to the Fed’s 2.0% long-term inflation target and the lowest since February 2021. Personal incomes and spending in August were both lower than expected, which further signals a moderation in inflationary pressures.

Metals and Mining

Although September has traditionally been a trying time for metals, This week’s trading appears to have broken the trend. The spot prices for precious metals generally went up this week. Gold closed at $2,658.24 per troy ounce, 1.39% higher than the previous weekly close of $2,621.88. Silver settled at $31.57 per troy ounce for the week, higher by 1.25% from the last weekly close at $31.18. Platinum closed this week at $1,003.82 per troy ounce for a gain of 2.49% over last week’s close at $979.43. Palladium ended at $1,016.12 per troy ounce for a decline of 4.95% from last week’s $1,069.01. The three-month LME prices of industrial metals were also mostly up. Copper closed the week at $9,982.50 per metric ton, 5.34% above the last weekly close of $9,476.50. Aluminum rested this week at $2,646.50 for an increase of 6.50% from last week’s close of $2,485.00. Zinc ended at the week’s closing price of $3,089.50 per metric ton, 7.50% higher than last week’s close of $2,874.00. Tin ended the week at $2,913.00, 2.45% higher than the metal’s previous weekly closing price of $32,127.00.

 Gold underwent its best monthly gain since March, and while it has drawn much attention from investors, other metals appear to present great prospects. Silver ended this week with some strong selling momentum despite exhibiting some volatility over the past weeks. It rallied to a new 12-year high at $33 per ounce. December silver futures last traded at $31.74 per ounce, down by almost 2% on the day, but up 8.8% for the month. Silver saw renewed buying interest after China launched its most impressive stimulus package since the COVID-19 pandemic. Beijing is pumping more liquidity into the financial markets and has also cut interest rates to prevent its economy from lapsing into a deflationary spiral and pull it back toward its growth target. Almost 50% of the demand for silver comes from industrial applications, mostly from the solar power sector. So far this year, gold prices have ascended by 28.8% while silver prices have rallied by nearly 32%.

Energy and Oil

Firm fundamental support for oil prices has been provided so far by China’s economic stimulus measures and U.S. hurricanes, but the big story this week came from Saudi Arabia. Media outlets alleged that Riyadh is considering a strategy shift to retake its market share in the oil market. According to the Financial Times, Saudi Arabia is adopting measures to raise its crude oil production in a bid to win back market share. It will allegedly abandon its unofficial $100 per barrel oil price target despite the likelihood of lower prices and has raised hopes that OPEC+ would proceed with its December hikes. Market observers witnessed a $3 per barrel drop from one week ago in fear of an oversupply, with WTI dropping below $70 per barrel again.

Natural Gas

For the report week covering Wednesday, September 18, to Wednesday, September 25, 2024, the Henry Hub spot prices rose by $0.29 from $2.33 per million British thermal units (MMBtu) to $2.62/MMBtu.  Regarding Henry Hub futures, the price of the October 2024 NYMEX contract increased by $0.353, from $2.284/MMBtu at the start of the week to $2.637/MMBtu at the week’s end. The price of the 12-month strip averaging October 2024 through September 2025 futures contracts advanced by $0.191 to $3.134/MMBtu. At most locations this report week, natural gas spot prices rose. Price changes ranged from a drop of $0.59 at the Waha Hub to an increase of $0.54 at the FGT Citygate in Florida.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.37 to a weekly average of $13.03/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands increased by $0.10 to a weekly average of $11.54/MMBtu. In the week last year corresponding to this report week (the week from September 20 to September 27, 2023) the prices were $14.63/MMBtu in East Asia and $12.61 /MMBtu at the TTF.

World Markets

Evidence of slowing business activity spurred hopes for potential interest rate cuts and drove European equities to rally for the week. The pan-European STOXX Europe 600 Index rebounded this week and settled 2.69% higher. Sentiment also lifted as a result of China’s newly launched round of stimulation measures that can energize the global economy. Major stock indexes also rebounded. Italy’s FTSE MIB rose by 2.86%, France’s CAC 40 Index gained 3.89%, and Germany’s DAX surged by 4.03%. The UK’s FTSE Index added 1.10%. According to purchasing managers’ indexes (PMIs) compiled by S&P Global, business activity in the eurozone shrank unexpectedly in September as a result of a significant flow of new orders. An initial reading of the seasonally adjusted HCOB Eurozone Composite PMI Output Index fell from 51.0 in August to 48.9 in September, signifying a shift from expansion to contraction. As the boost from the Paris Olympics faded, services activity came close to stalling. German business activity declined the most in seven months, signaling that a second quarterly drop in output is likely in the outlook of the economy. UK private sector activity, on the other hand, remained in expansionary territory for the 11^th consecutive month.

Japan’s stock markets soared over the week. The Nikkei 225 Index surged by 5.6% while the broader TOPIX Index rose by 3.7%. Providing a favorable backdrop was the latest commentary from the Bank of Japan (BoJ) that was perceived as dovish and which weighed on the yen. China’s fresh round of stimulus announcements that detailed various support mechanisms drove optimism that the country will better respond to sluggish economic growth and the weak housing market. The stimulus announcements boosted the many Japanese companies that directly or indirectly China beneficiaries, given the large volume of Japanese exports that go to China and Japan’s sensitivity to the Chinese purchasing managers’ index. Regarding Japan’s economic front, the Tokyo-area core consumer price index (CPI) rose by 2.0% year-on-year in September, down from 2.4% in August. Given that the indicator is considered a leading indicator of nationwide trends, there is a slowdown in consumer inflation, although this was expected and largely attributable to the effect of renewed energy subsidies. Separately, flash PMI data collated by an Jibun Bank showed that Japan’s private sector continued to expand in September albeit the rate of growth has slowed slightly from August. The driver of the expansion was business activity in the services segment, while manufacturing output contracted marginally.

China’s stocks skyrocketed after Beijing set into motion a host of measures to shore up the economy. The Shanghai Composite Index jumped 12.8% while the blue-chip CSI 300 soared by 15.7%. Hong Kong’s benchmark Hang Seng Index gained 13%. The rally charted the biggest weekly for the CSI 300 since 2008. At that time, Beijing put into effect a massive stimulus package to address the global financial crisis. To meet the present economic challenges, China’s top leaders committed to take action to stabilize the property market and halt the decline of real estate prices. The 24-man Politburo stated that China would deploy the necessary fiscal spending to meet its 2024 growth target of 5%. Although there were no specifics contained in the Politburo statement, China plans to issue special sovereign bonds worth about RMB 2 trillion (USD 284.4 billion) this year as part of the financial stimulus plan, plus other measures. All in all, the stimulus package is a positive development for China’s economy and will bolster short-term economic activity and enhance market sentiment. In the long term, however, it is not certain that the present steps taken will be sustainable in the long run.

The Week Ahead

Among the important economic data scheduled for release this week are the September non-farm payrolls report, the ISM manufacturing PMI, and the ISM services PMI all for September.

Key Topics to Watch

• Federal Reserve Governor Michelle Bowman speaks (Sept. 30)
• Chicago Business Barometer (PMI) for Sept.
• Federal Reserve Chair Jerome Powell speaks (Sept. 30)
• S&P final U.S. manufacturing PMI for Sept.
• ISM manufacturing for Sept.
• Construction spending for Aug.
• Job openings for Aug.
• Federal Reserve Governor Lisa Cook speaks (Oct. 1)
• Richmond Fed President Tom Barkin, Atlanta Fed President Raphael Bostic and Boston Fed President Susan Collins on a joint panel about technology-enabled disruption (Oct. 1)
• Auto sales for Sept.
• ADP employment for Sept.
• Cleveland Fed President Beth Hammack gives welcoming remarks (Oct. 2)
• Louis Fed President Alberto Musalem gives opening remarks (Oct. 2)
• Federal Reserve Governor Michelle Bowman speaks (Oct. 2)
• Richmond Fed President Tom Barkin speaks (Oct.2)
• Initial jobless claims for Sept. 28
• S&P final U.S. services PMI for Sept.
• ISM services for Sept.
• Factory orders for Aug.
• Minneapolis Fed President Neel Kashkari moderates discussion with Atlanta Fed President Raphael Bostic (Oct. 3)
• U.S. nonfarm payroll for Sept.
• U.S. unemployment rate for Sept.
• U.S. hourly wages for Sept.
• Hourly wages year over year 
• New York Fed President John Williams gives opening remarks (Oct. 4)

Markets Index Wrap-Up

Stock Markets

The major stock indexes are mostly up for the week. The 30-stock Dow Jones Industrial Average (DJIA) rose by 1.62% while the Total Stock Market Index gained 1.49%. The broad-based S&P 500 Index advanced by 1.36% while the technology-heavy Nasdaq Stock Market Composite added 1.49%. The NYSE Composite climbed by 1.32%. The investor risk-perception indicator, the CBOE Volatility Index (VIX) slid by 2.48%.  

The large-cap indexes climbed to record highs as investors rushed to take positions on what they perceived to be a prolonged Fed rate-cutting cycle. The rally was relatively broad. Smaller-cap indexes outperformed even while remaining below their previous highs. In particular, the small-cap Russell 2000 Index closed the week about 9% below its all-time high set in November 2021. The week prior, although the rate cut was generally expected, there was a split in opinion between whether the rate cut would amount to the more cautious 25 basis points (0/25%) or 0.50%. Initial reaction to the Fed’s decision to “go bigger” was comparatively muted, with the S&P 500 Index falling slightly before the day’s end.

U.S. Economy

For the first time in four years, the U.S. Federal Reserve, or Fed, lowered its policy rate last week. The rate cut, a larger-than-usual 0.5% or 50-basis-point reduction, signals that the monetary policy cycle has entered a critical turning point and that the Fed has adopted a proactive approach that increases the likelihood of a soft landing. The projected series of rate cuts tends to lower borrowing costs for consumers and businesses over time. The result points to reaccelerated growth in 2025.

The Commerce Department announced on Tuesday that retail sales had risen 0.1% which is more than anticipated and followed an upwardly revised growth rate of 1.1% in July. On Thursday, more evidence that consumers remained strong came in the form of a lower-than-expected weekly jobless claims report. Likewise, continuing claims dropped to their lowest level in three months.

Investors also showed interest in improving data regarding the troubled housing sector. Building permits rose by 4.9% in August, their biggest monthly gain in a year, according to the Commerce Department in a report released on Wednesday. This restores the building permits statistic to its highest level since March. On the contrary, the sales of existing homes had unexpectedly fallen by 2.5% in August, as reported by the National Association of Home Builders. Fed Chair Powell stressed that the central bank had limited influence on housing prices and easing the current tight housing supply.  

Metals and Mining

Gold ended this week at a new high, but its path had been volatile and far from smooth. December gold futures last traded at $2.647.40 per ounce, higher by 1% from one week ago. Gold prices sharply rallied after the Federal Reserve cut interest rates by 50 basis points, as expected. The move signaled that rates could drop to 3% by mid-2026. In an attempt to quickly quell the market rally, Federal Reserve Chair Jerome Powell warned investors that the Fed is not in a hurry to further lower rates drastically or too son.  Instead, the committee foresees that interest rates will be reduced in an orderly manner, keeping the neutral rate well above 0%. This is unlike the levels encountered during the Great Financial Crisis and the pandemic.

The spot markets for precious metals were mixed this week. Gold gained 1.71% from its close last week at $2,577.70 to its closing price this week at $2,621.88 per troy ounce. Silver added 1.50% from last week’s closing price of $30.72 to end this week at $31.18 per troy ounce. Platinum lost 1.93% from last week’s close at $998.70 to settle this week at $979.43 per troy ounce. Palladium also gave back 0.16% from its closing price last week at $1,070.73 to end this week at $1,069.01. The three-month LME prices of industrial materials were also mixed. Copper, which closed at $9,308.00 one week ago, ended at $9,476.50 per metric ton for a gain of 1.81%. Aluminum, which closed last week at $2,471.00, ended this week at $2,485.00 per metric ton to realize a gain of 0.57%. Zinc settled this week at $2,874.00 per metric ton, 1.05% lower than last week’s close of $2,904.50. Tin closed this week at $32,127.00 per metric ton, 1.01% higher than its close last week at $31,805.00.       

Energy and Oil

For the second straight week, oil prices registered week-on-week gains as the WTI rebounded above $70 per barrel. It is now trading closer to the $72 per barrel resistance level. It is likely, however, that the fact that the Fed has finally initiated a new cycle of monetary easing should prompt a stronger market response. Additionally, crude oil inventories in the United States have plummeted to their lowest level in a week to post another week-on-week decline to 417.5 million barrels. Stocks were particularly drained in the Midwest where they fell to their lowest since December 2014. Next week could see further upside due to a weaker dollar and an improved macro risk outlook.

Natural Gas

For the report week from Wednesday, September 11 to Wednesday, September 18, 2024, the Henry Hub spot price rose by $0.19 from $2.14 per million British thermal units (MMBtu) to $2.333/MMBtu. Regarding the Henry Hub futures, the price of the October 2024 NYMEX contract increased by $0.01, from $2.270/MMBtu to $2.284/MMBtu for the same week. The price of the 12-month strip averaging October 2024 through September 2025 futures contracts decreased by $0.02 to $2.944/MMBtu.

International natural gas futures prices decreased for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.38 to a weekly average of $13.40/MMBtu.  Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands decreased by $0.32 to a weekly average of $11.44/MMBtu. In the week last year corresponding to this report week (the week from September 13 to September 20, 2023), the prices were $13.83/MMBtu in East Asia and $11.29/MMBtu at the TTF.  

World Markets

European stocks slid as the rally triggered by the Fed’s rate cut in the US was discounted by the market. The pan-European STOXX Europe 600 Index descended by 0.33%. Investors appear to have grown cautious about the monetary policy outlook moving forward, now that the long-anticipated rate cut has taken place. Major stock indexes advanced in the region. Germany’s DAX squeezed out a 0.11% increase, France’s CAC 40 Index had a more substantial gain of 0.47%, and Italy’s FTSE MIB added 0.58%. The UK’s FTSE 100 Index went in the opposite direction and lost 0.52%. The Bank of England (BoE) met expectations by holding its key policy rate at 5% after the Monetary Policy Committee voted 8-1 to adopt no change. According to Gov. Andrew Bailey, “It is vital that inflation stays low, so we need to be careful not to cut too fast or by too much,” although he expressed optimism that rates would further fall with further evidence that the inflationary pressures were cooling.  Regarding the European economy, hourly wages and salaries in the Eurozone grew at an annual rate of 4.5% in the three months through June, down from a revised 5.2% in the first quarter.  

Japan’s equities markets climbed this week, as the Nikkei 225 Index advanced by 3.1% and the broader TOPIX Index gained 2.8%. As the yen weakened on the U.S. Federal Reserve’s latest monetary policy decision to cut interest rates for the first time since its series of steep rate hikes, Japanese stocks benefited. The Fed delivered an outsized 50-basis-point reduction in interest rates. The Bank of Japan’s (BoJ’s) decision to leave rates unchanged on Friday further weighed on the yen, which depreciated to about JPY 143.8 against the U.S. dollar. At the end of the previous week, the currency exchange rate was around 140.8 yen versus the greenback. The yield on the 10-year Japanese government bond rose to 0.86% from 0.84% the prior week. On the economic front, Japan’s core consumer price index (CPI) for August rose by 2.8% year-on-year from 2.7% in July and generally in line with expectations. Also matching consensus was the overall CPI which rose by 3.0% up from 2.8% in July.

 On this holiday-shortened week, Chinese stocks rose as the Fed’s decision to cut interest rates offset disappointing economic data released during the week. The Shanghai Composite Index added 1.21% while the blue-chip CSI 300 gained by 1.32%. The Hong Kong benchmark Hang Seng Index advanced by 5.12%. The markets this week in mainland China were closed on Monday and Tuesday for the Mid-Autumn Festival, while Hong Kong markets were closed on Wednesday but reopened on Thursday. Disappointing August data only brought into focus the slowing momentum of China’s economy. Amid weaker commodity prices and auto sales, industrial production rose by 4.5% from last year, lower than forecasted and down from July’s 5.1% increase. Expansion in retail sales was 2.1% year-on-year, compared to July’s 2.7% rise and short of expectation. The January to August fixed asset investment rose by a lower-than-expected 3.4% down from 3.6% for the same period last year. Property investment fell by 10.2% year-on-year. New home prices in 70 cities fell by 0.7% in August, unchanged from the pace of declines in the prior three months and marking the 14^th consecutive monthly decline. In their overall picture, the indicators suggest that Beijing is encountering a growing risk in meeting its economic growth target of around 5% this year. Many economists therefore expect that China’s government will try to stimulate the economy by implementing further easing measures.  

The Week Ahead

PCE inflation data, an analysis of consumer confidence, and a revised GDP reading are among the important economic news expected to be released in the coming week.

Key Topics to Watch

• Atlanta Fed President Raphael Bostic speaks (Sept. 23)
• S&P flash U.S. services PMI for Sept.
• S&P flash U.S. manufacturing PMI for Sept.
• Chicago Fed President Austan Goolsbee speaks (Sept. 23)
• Minneapolis Fed President Neel Kashkari speaks (Sept. 23)
• Federal Reserve Governor Michelle Bowman speaks (Sept. 24)
• S&P Case-Shiller home price index (20 cities) for July
• Consumer confidence for Sept.
• New home sales for Aug.
• Federal Reserve Governor Adriana Kugler speaks (Sept. 25)
• Initial jobless claims for Sept. 21
• Durable-goods orders for Aug.
• Durable-goods minus transportation for Aug.
• GDP (second revision) for Q2
• Federal Reserve Governor Adriana Kugler and Boston Fed President Susan Collins speak together (Sept. 26)
• Federal Reserve Governor Michelle Bowman speaks (Sept. 26)
• Federal Reserve Chair Jerome Powell gives opening remarks (Sept. 26)
• New York Fed President John Williams speaks (Sept. 26)
• Pending home sales for Aug.
• Federal Reserve Vice Chair for Supervision Michael Barr speaks (Sept. 26)
• Federal Reserve Governor Lisa Cook speaks (Sept. 26)
• Minneapolis Fed President Neel Kashkari speaks with Fed Vice Chair for Supervision Michael Barr (Sept. 26)
• Personal income for Aug.
• Personal spending for Aug.
• PCE index for Aug.
• PCE (year-over-year)
• Core PCE index for Aug.
• Core PCE (year-over-year)
• Advanced U.S. trade balance in goods for Aug.
• Advanced wholesale inventories for Aug.
• Advanced retail inventories for Aug.
• Consumer sentiment (final) for Sept.
• Federal Reserve Governor Michelle Bowman speaks (Sept. 27)

Markets Index Wrap-Up

Stock Markets

All the major U.S. stock market indexes rallied during the week. The 30-stock Dow Jones Industrial Average (DJIA) ended the week 2.60% higher, and the Total Stock Market Index climbed by 4.04%. The S&P 500 Index, a broad-based metric, ascended by 4.02%, while the technology-heavy Nasdaq Stock Market Composite jumped by 5.95%, the best-performing index for the week. The NYSE Composite Index gained 2.46%. The risk perception indicator, the CBOE Volatility Index (VIX) dropped by 26.01%.

Stocks posted solid gains this week and recovered from the steep losses of the weeks preceding it. The pullback in weeks past saw the S&P 500 Index plunge to its worst weekly decline since March 2023. For this week, growth stocks outpaced value shares by a wide margin due to the strong performance of the technology stocks that caused the Nasdaq to outperform the other indexes. After NVIDIA offered a positive outlook on artificial intelligence at an investment conference, its stock surged. The week was particularly busy generally due to numerous conferences, and this seemed to drive the week’s positive sentiment.  

U.S. Economy

The Labor Department’s inflation reports dominated the week’s relatively light economic calendar. Stocks initially headed sharply lower on Wednesday on news that core consumer inflation (excluding food and energy) rose a bit higher than consensus expectations to 0.3% in August. Headline inflation, meanwhile, showed an annual increase of 2.5% which is well below the 2.9% increase in July, and its lowest level since early 2021. Other economic reports also provided some hope for the troubled housing sector. On Wednesday, the Mortgage Bankers Association reported that the average rate for a 30-year, fixed-rate mortgage dropped to 6.29%, well below the 7.21% one year ago and the lowest since February. The Association also reported that its index of home loan applications continued to climb off its August lows – a heartening sign, since this indicator is a leading signal of home purchases.

Metals and Mining

Gold is ending the week at a new all-time high above $2,500 per ounce, higher by more than 3%  while silver charted an even larger percentage gain, almost 10% up. U.S. inflation surpassed analysts’ expectations, with the combined dip in U.S. Treasury yields and the U.S. dollar. These developments prompted investors to send the price of bullion skyrocketing. According to analysts, markets expect a 45% probability of a more aggressive move next week. The U.S. economy has held up relatively well, even as activity slows, so it is difficult to justify this market reaction. Consumer prices dropped more than expected this past week, but core inflation (which excludes volatile energy and food prices) increased by 3.2%, slightly up from July, which is not exactly an economy that is addressed with aggressive rate cuts. As interest rates fall worldwide, global real yields move lower, which is consistent with driving the precious metals rally seen this week.

Precious metal spot prices rebounded for the week. Gold rose by 3.21% from its closing price last week of $2,497.41 to end this week at $2,577.70 per troy ounce. Silver ended 9.95% higher than last week’s close at $27.94 to close at $30.72 per troy ounce. Platinum landed 8.00% higher than its close a week ago at $924.71 to trade last this week at $998.70 per troy ounce. Palladium ascended by 16.89% from its previous weekly close at $916.05 to close this week at $1,070.73 per troy ounce. The three-month LME prices of base metals have also appreciated. Copper, traded last week at $9,092.00, ended this week at $9,308.00 per metric ton for an increase of 2.38%. Aluminum, which closed last week at $2,378.50, settled this week at $2,471.00 per metric ton for a gain of 3.89%. Zinc rose by 6.10% from its closing price last week of $2,737.50 to end this week at $2,904.50 per metric ton. Tin closed this week at $31,805.00 per metric ton, 3.36%          higher than its price last week of $30,771.00.       

Energy and Oil

Oil prices edged higher this week after Hurricane Francine sparked bearish sentiments that overtook the market. As Hurricane Francine made landfall in Louisiana this week as a Category 2 hurricane, about 42% of crude oil and 53% of natural gas production was pre-emptively shut in across the US Gulf of Mexico. Some 730,000 barrels per day (b/d) and 992 million cubic ft per day were taken off the market, even if just for several days. After UN-brokered talks collapsed, a large amount of Libyan production remained shut-in, signifying that supply disruptions now total 1.5 million b/d already. With China’s pessimism peaking in the entire post-pandemic period, however, it would take more than supply disruptions for Brent to rise above its current price of $73 per barrel. 

Natural Gas

For the report week from Wednesday, September 4 to Wednesday, September 11, 2024, the Henry Hub spot price rose by $0.08 from $2.06 per million British thermal units (MMBtu) to $2.14/MMBtu. Concerning Henry Hub futures, the price of the October 2024 NYMEX contract increased by $0.125 from $2.145/MMBtu at the start of the report week to $2.270/MMBtu at the week’s end. The price of the 12-month strip averaging October 2024 through September 2025 futures contracts increased by $0.025 to $2.959/MMBtu. Regional natural gas spot price changes were mixed this report week, ranging from an increase of $0.12 at FGT Citygate to a decrease of $1.07 at both the Waha Hub and Northwest Sumas.

International natural gas futures prices decreased this report week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased $0.15 to a weekly average of $13.78/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.52 to a weekly average of $11.76/MMBtu. In the week last year corresponding to this report week (from September 6 to September 13), the prices were $13.36/MMBtu in East Asia and $10.99/MMBtu at the TTF.  

World Markets

European stocks ended the week higher on positive sentiment created by the interest rate cut from the European Central Bank (ECB). The pan-European STOXX Europe 600 rose by 1.85% in local currency terms. Major indexes likewise climbed in tandem with the pan-European index. Germany’s DAX climbed by 2.1%, France’s CAC 40 Index rose by 1.54%, and Italy’s FTSE MIB gained by 0.83%. The UK’s FTSE 100 Index added 1.12%. The ECB announced a quarter-point cut in its deposit rate to 3.5% – in line with expectations. This is a reduction in its deposit rate for the0.4% incresae second time this year. ECB’s move was prompted by signs of weakening economic growth and slowing inflation in the Eurozone. The central bank nevertheless emphasized that it remains cautious and stressed that it is not “pre-committing to a particular rate path.” The updated quarterly forecasts for headline inflation remain unchanged. However, due to stronger-than-expected services prices, core inflation was revised modestly higher for the next two years. The modified economic growth forecasts by the ECB are now one percentage point less in 2024 (0.8%), 2025 (1.3%), and 2026 (1.5%).

Japan’s stock markets ended mixed over the week. The Nikkei 225 Index gained 0.5% and the broader TOPIX Index lost by 1.0%. As the yen strengthened to the high end of the JPY 140 range against the USD from the previous week’s JPY 142.3, Japanese exporters continued to face currency headwinds amid a hawkish outlook on the monetary policy of the Bank of Japan (BoJ). The latest comments from members of the BoJ’s board bolstered expectations that the central bank will raise interest rates again this year. One member, Junko Nakagawa, said that if the outlook for Japan’s economy and inflation is realized, the degree of monetary easing will be adjusted as the current level of real rates is extremely low. Another member, Naoki Tamura, suggested that the short-term rate needs to be raised to at least around 1% in the second half of the BoJ’s projection period through fiscal year 2026 to curb upside inflation risks and maintain price stability. Although the comments were hawkish, the yield on the 10-year Japanese government bond (JGB) dipped to 0.84% from 0.86% at the end of the prior week. The JGB tracked U.S. bonds lower on speculation that the Fed could more aggressively cut interest rates by 50 basis points at the September FOMC meeting.

Chinese stocks fell due to weak inflation data that fueled concerns about a downward price-wage spiral weighing on the economy. The Shanghai Composite Index and the blue-chip CSI 300 both fell by 2.23%. The Hong Kong benchmark Hang Seng Index lost by 0.43%. China’s consumer price index (CPI) inched up by 0.6% in August year-on-year, up from 0.5% in July, but this is still below economists’ forecast. Core inflation (excluding food and energy costs) rose by 0.3% which is slower than July’s 0.4% increase and marks the lowest level in more than three years. The producer price index (PPI) fell by 1.8% from last year, deepening from July’s 0.8% drop and lagging forecasts. The PPI extends the deflation in factory gate prices that began in late 2022. The latest data encouraged calls for the government to roll out additional stimulus measures to move back a negative cycle of falling corporate revenue, wages, and spending that, if it happened, would threaten the country’s long-term growth. Other news saw exports exceeding forecast in August by rising 8.7% from one year earlier compared to 7% growth in July. China’s exports are the bright spot in China’s economy, which is mired in the prolonged property crisis.

The Week Ahead

The FOMC interest rate decision, retail sales data, and initial jobless claims are among the important economic releases expected in the coming week.

Key Topics to Watch

• Empire State manufacturing survey for Sept.
• U.S. retail sales for Aug.
• Retail sales minus autos for Aug.
• Industrial production for Aug.
• Capacity utilization for Aug.
• Business inventories for July
• Home builder confidence index for Sept.
• Housing starts
• Building permits for Aug.
• FOMC interest-rate decision
• Fed Chair Powell press conference
• Initial jobless claims for Sept. 14
• Philadelphia Fed manufacturing survey for Sept.
• Existing home sales for Aug.
• U,S. leading economic indicators for Aug.

Markets Index Wrap-Up

Stock Markets

Stocks corrected this week on the back of a disappointing labor market report. The 30-stock Dow Jones Industrial Average (DJIA) plummeted by 2.93% while the Total Stock Market Index plunged even deeper, by 4.38%. The broad S&P 500 Index came down by 4.25%, but the technology-heavy Nasdaq Stock Market Composite even underperformed the other major indexes by giving back 5.77%. The NYSE Composite slid by 3.26%. The risk perception indicator CBOE Volatility Index (VIX) shot up by 43.92%.

The S&P 500 experienced its deepest weekly drop in 18 months due to worries over an economic slowdown weighed on investors’ sentiment. Leading the declines were information technology shares, partly driven by NVIDIA following rumors that the firm might be the subject of an antitrust investigation by the Justice Department. September has historically been one of the worst months for stocks, averaging a monthly 0.7% drop since 1950. On the other hand, the S&P 500 has experienced declines of 4.9%, 9.3%, 4.8%, and 3,9% during September over the last four years. These suggest that investor nervousness over seasonal trading patterns may be a factor in the September declines. Trading volumes rose as investors returned to the market after the summer vacation and the long Labor Day weekend.

U.S. Economy

Economic news released during the week generally surprised on the downside and raised concerns that the Federal Reserve may have delayed too long before easing monetary policy. The Institute for Supply Management reported on Tuesday that its gauge for U.S. manufacturing activity remained in the contraction territory in August as new orders fell for the third straight month. 

The report of July’s job openings by the Labor Department, which was released on Wednesday, further disappointed with the number of unfilled positions falling to 7.67 million, its lowest level since January 2021. Payroll processing firm ADP reported on Thursday that its count of private payrolls had increased only by 99,000 in August, the weakest since January 2021 and well below expectations. The U.S. economy created 142,000 jobs, falling short of the expected 164,000.  July’s gain was revised down to 89,000, marking the lowest level since December 2020. Simultaneously, the unemployment rate fell to 4.2% from 4.3% while average hourly earnings rose by a better-than-expected 0.4%.

Friday’s jobs data appeared to sharply reduce expectations that the Fed would cut rates by a full 50 basis points. Nevertheless, a rate cut is still to be expected at the Fed’s upcoming policy meeting in September, leading many to expect a reduced 25-basis-point decrease. 

Metals and Mining

Investors took profits this week as expectations for an aggressive easing of an aggressive rate easing were rolled back. Investors appear to accept that the Fed will cut rates by 25 basis points less than two weeks before the Federal Reserve’s monetary policy meeting. Expectations appear to firm up after data from the U.S. Bureau of Labor Statistics indicated that the labor market is cooling but not collapsing.  Technical analysts have warned that the gold market appeared to be overextended above $2,550 per ounce as a 50-basis-point cut seemed unlikely. Furthermore, due to seasonal factors, September is one of the worst months for gold. Rather than any single event, gold investors need to focus on the path of rate cuts. The long-term rally is far from over. The economy is slowing and real interest rates will trend lower. This is an ideal environment for gold.

Gold ended this week at $2,497.41 per troy ounce, 0.24% lower than last week’s close of $2,503.39. Silver was last traded this week at $27.94 per troy ounce, 3.19% below the previous week’s closing price of $28.86. Platinum closed the week at $924.71 per troy ounce, 0.55% below its close last week at $929.79. Palladium was last traded at $916.05 per troy ounce, lower by 5.53% from the previous week’s closing price of $969.63. The three-month LME prices of industrial metals also went south. Copper, which ended last week at $9,235.00, last traded this week 1.55% lower, at $9,092.00 per metric ton. Aluminum, transacted last week at $2,447.00, fell by 2.80% to close this week at $2,378.50 per metric ton. Zinc, which closed last week at $2,897.00, lost this week by 5.51% to end at $2,737.50 per metric ton. Tin, priced last week at $32,346.00, last traded this week at $30,771.00 per metric ton for a 4.87% loss.

Energy and Oil

Typically, OPEC+ decisions which tend to impact highly on the market trigger reactions among investors. The same is not true about the group’s recent decision to postpone the return of barrels they have cut in 2023. Eight members of OPEC+ that were scheduled to unwind their 2.2 million barrels per day (b/d) of voluntary production cuts have agreed to delay their production hikes by two months, citing worse-than-assumed economic data from China and the United States. The lack of any reaction reinforces concerns that next year will see balances swinging heavily towards oversupply. Oil prices are set to close this week at their lowest level since June 2023 as ICE Brent hovers around $73 per barrel.

Natural Gas

For the report week beginning Wednesday, August 28, to Wednesday, September 4, 2024, the Henry Hub spot price rose by $0.17 from $1.89 million British thermal units (MMBtu) to $2.06/MMBtu. Regarding Henry Hub futures, the price of the October 2024 NYMEX contract increased by $0.048, from $2.097/MMBtu to $2.145/MMBtu this report week. The price of the 12-month strip averaging October 2024 through September 2025 futures contracts increased by $0.082 to $2.934/MMBtu. Natural gas spot prices rose at all major pricing locations this report week. The price increases ranged from $0.14 at the FGT Citygate to $3.57 at the Waha Hub.  

International natural gas futures price changes were mixed for this week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.03 to a weekly average of $13.93/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.04 to a weekly average of $12.28/MMBtu. In the week last year that corresponds with this report week (from August 30 to September 6, 2023), the prices were $13.26/MMBtu in East Asia and $10.75/MMBtu at the TTF.

World Markets

European stocks fell on renewed fears regarding the deteriorating outlook for global economic growth. This week, the pan-European STOXX Europe 600 Index closed 3.52% lower in local currency terms. Major stock indexes in the region also ended weaker. Italy’s FTSE MIB lost by 3.15%, Germany’s DAX lost by 3.20%, and France’s CAC 40 Index plunged by 3.65%.  The UK’s FTSE 100 fell by 2.33%. UK and Eurozone government bond yields dropped across the board. As prospects appear mixed, the European Central Bank (ECB) potential rate cut rate cut is increasingly likely. ECB Governing Council member Gediminas Simkus said that he saw a “clear case” for a September interest rate cut, but that the potential for another rate cut in October was “quite unlikely.” Rate cuts could decrease in September but the policy should only ease gradually. Recent economic data so far confirms that inflation is slowing, enabling the ECB to lower borrowing costs without risking premature easing. Meanwhile, following an upward revision of June’s result to 4.6%, German manufacturing orders in July rose unexpectedly by 2.9% sequentially after seasonal and calendar adjustments. When large orders for transportation equipment were excluded, however, factory orders dropped by 0.4%.

Japan’s stocks succumbed to a sell-off for the week. The Nikkei 225 Index fell by 5.8% while the broader TOPIX Index lost by 4.2%. The market slumped halfway through the week due to semiconductor stocks tracking a U.S.-led sell-off, and the strength of the yen posed a headwind for Japan’s export-oriented companies. The yen strengthened from around JPY 145 the previous week to the JPY mid-142 range against the US dollar on expectations of narrowing Japan-U.S. interest rate differentials. The market anticipates that interest rates will be raised further this year by the Bank of Japan (BoJ), while the U.S. Federal Reserve is expected to cut interest rates in September.  Demand for Japanese government bonds (JGB) grew as investors sought assets with lower risk. This is on the back of the perception that the U.S. economic data points to the possibility that the world’s largest economy is headed for a recession. The 10-year JGB yield dropped to 0.86% from 0.90% at the end of the previous week, despite data showing that Japan’s real wages (adjusted for inflation) grew by 0.4% year-on-year in July boosted by pay increases and summer bonuses. On the other hand, household spending rose only 0.1% year-on-year in July and remains sluggish despite solid income growth.

Chinese stocks pulled back due to weak corporate earnings and economic data. The Shanghai Composite Index declined 2.69% while the blue-chip CSI 300 gave up 2.71% for the week. The Hong Kong benchmark Hang Seng Index lost 3.03%. The National Bureau of Statistics reported that production and new order declines deepened, resulting in China’s official manufacturing purchasing managers’ index (PMI) slipping to a lower-than-expected 49.1 in August from 49.4 in July. The gauge holds below the 50-mark threshold that separates growth from contraction for all but three months since. The indicator for construction and services activity, the non-manufacturing PMI, exceeded expectations by inching up to 50.3 in August from 50.2 in July. The value of new home sales by the country’s top 100 developers fell by 26.8% year-on-year in August, picking up pace from a 19.7% drop in July, based on an assessment by the China Real Estate Information Corp. This continued drop in new home prices shows the waning impact of the government’s real estate rescue package in May, fueling further speculation that Beijing may announce further support measures to halt the property downturn. China’s housing clump, which is now in its fourth year, and rising trade tensions continue to weigh on China’s growth outlook, sending mixed signals to investors.

The Week Ahead

The CPI and PPI inflation data and consumer sentiment data are important economic releases scheduled for the week to come.

Key Topics to Watch

• Wholesale inventories for July
• Consumer credit for Aug.
• NFIB optimism index for Aug.
• Consumer price index for Aug.
• CPI year over year
• Core CPI for Aug.
• Core CPI year over year
• Initial jobless claims for Sept. 7
• Producer price index for Aug.
• Core PPI for Aug.
• PPI year over year
• Core PPI year over year
• Monthly U.S. federal budget for Aug.
• Import price index for Aug.
• Import price index minus fuel for Aug.
• Consumer sentiment (prelim) for Sept.

Markets Index Wrap-Up

Stock Markets

Most of the major indexes ended in positive territory. The Dow Jones Industrial Average (DJIA) gained modestly by 0.94% and the Total Stock Market Index gained by 0.21%. The S&P 500 Index inched up by 0.24% while the NYSE Composite rose by 1.04%. Among the major indexes, only the technology-heavy Nasdaq Stock Market Composite Index suffered a loss, although a modest one of 0.92%. The CBOE Volatility Index (VIX), the indicator of investors’ risk perception in the market, fell by 5.42%, suggesting that the market consolidation contributed to lower volatility risk in the market.

Trading this week was light ahead of the Labor Day holiday weekend. Fewer shares exchanged hands on Monday more than any other full trading day (excluding early closes) this year so far. The Nasdaq Composite underperformed the other major indexes, having been pulled lower partly by the chip company NVIDIA which lost $300 billion or 10% of its value at the stock’s lowest point on Thursday. Value stocks outperformed growth shares by the largest margin since late July. The market will remain closed on Monday in observance of the Labor Day holiday.

U.S. Economy

Playing a robust role in driving sentiment in the markets this week is the end of the earnings season and the week’s moderately busy economic calendar. The Labor Department’s release of its core personal consumption expenditure (PCE) price index on Friday morning was the most closely watched data point this week. The core PCE price index is the Federal Reserve’s preferred inflation gauge, and it showed that prices rose by 2% in July which aligned largely with expectations. The year-on-year price increase was a tick below the consensus of 2.6%, pleasing investors with the confirmation that inflation remained subdued and close to the Fed target. In particular, Nasdaq futures surged in the wake of the release.

On the back of improving inflation concerns, the housing sector appeared to be the weakest in the expanding economy. On Thursday, the National Association of Realtors reported that pending home sales had plummeted by 5.5% in July, the lowest level on record since 2001. The drop was attributed by the association’s chief economist to “affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election,” and the expectations by some buyers that mortgage rates will drop as the Fed eases policy.

Metals and Mining

Precious metals, particularly gold and silver, came under strong selling pressure ahead of the four-day Labor Day weekend. Understandably, some players may want to close their positions particularly facing a month-end and before a protracted holiday weekend, and while prices may have room to move lower, it retains a significant upward momentum. As gold reached its all-time highs above $2,500 per ounce last week, technical momentum indicators did not suggest that the market was close to overheating. Despite gold’s record highs, there is little of the euphoria that traditionally accompanies a market top in gold. Another indication is that while gold is not in overbought territory, the U.S. dollar is oversold and may be facing a potential bounce. The U.S. dollar index this week dropped to its lowest levels since mid-July 2023 and is testing support at 100.50. The dollar index measures the greenback against a basket of currencies. Interest rates may soon be coming down, and some volatility may be expected in the gold market as it reacts to forces such as the U.S. dollar, but the marketplace still affords some broad support.

The precious metals spot market entered a slight correction for the week. Gold, which ended at $2,512.59 last week, closed at $2,503.39 per troy ounce this week for a dip of 0.37%. Silver came from its close last week at $29.82 to end this week at $28.86 per troy ounce for a loss of 3.22%. Platinum descended from its close last week at $965.62 to close this week at $929.79 per troy ounce to register a loss of 3.71%. Palladium, which closed last week at $964.30, bucked the trend and ended at $969.63 per troy ounce for a gain of 0.55%. The three-month LME prices for industrial metals also registered a correction. Copper closed at $9,235.00 per metric ton this week for a loss of 0.58% from last week’s close of $9,288.50. Aluminum closed this week at $2,447.00 per metric ton, a decline of 3.74% from last week’s close at $2,542.00. Zinc slid by 0.52% from its close last week at $2,912.00 to close this week at $2,897.00 per metric ton. Tin dipped by 72% from its ending price last week of $32,912.00 to settle this week at $32,346.00 per metric ton.            

Energy and Oil

Oil markets have undergone a volatile week due to Libya’s oil blockade that sent a supply shock through the markets, after which traders returned to focus their attention on China’s demand. Iraq has simultaneously exerted mounting pressure on Kurdish producers to reduce their output. Aftermarket reports indicated that output in the region is as high as 350,000 barrels per day (b/d), the federal Iraqi government sent an ultimatum to Kurdistan’s Regional Government to reduce its crude production. The move undermines Iraq’s commitments under the OPEC+ compensation plan. Meanwhile, the U.S. has released some constructive macroeconomic news. Oil prices swung back into the red early on Friday morning, with Brent trading at $78.54 and WTI below $75.

Natural Gas

For the report week from Wednesday, August 21, to Wednesday, August 28, 2024, the Henry Hub spot price fell by $0.23 from $2.12 per million British thermal units (MMBtu) to $1.89/MMBtu. Regarding Henry Hub futures, the September 2024 NYMEX contract expired at the end of this report week at $1.930/MMBtu, down by $0.25 from the start of the report week. The October 2024 NYMEX contract price decreased to $2.097/MMBtu, down by $0.22 from the start to the end of the report week. The price of the 12-month strip averaging October 2024 through September 2025 futures contracts declined by $0.11 to $2.957/MMBtu.

At all major pricing locations this report week, natural gas spot prices fell. Price declines range from $2.83 at the Waha hub in West Texas to $0.01 at the Eastern Gas South. Regarding the international natural gas futures, price changes were mixed during the report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia were unchanged this week at $13.90/MMBtu. Natural gas futures for delivery at the Title Transfer Facility in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.28 to a weekly average of $12.32/MMBtu. In the week last year corresponding to this report week, (from August 23 to August 30, 2023), the prices were $13.33/MMBtu in East Asia and $11.22/MMBtu at the TTF.

World Markets

European stock indexes ended higher for the week in a rally for the fourth week in response to sharply slower inflation. The pan-European STOXX Europe 600 Index gained 1.34% as it rose to a record high. The significant slowdown in inflation supports the case for the European Central Bank (ECB) to cut interest rates in September. Major stock indexes reflected this rally. France’s CAC 40 Index added 0.71%, Germany’s DAX registered a new peak as it accelerated by 1.47%, and Italy’s FTSE MIB surged by 2.15%. The UK’s FTSE 100 Index gained by 0.59%. The Eurozone headline inflation dropped to 2.2% in August from 2.6% in July, closer to the 2% target set by the European Central Bank (ECB), although some policymakers still urge caution. The August inflation figure is the lowest level in three years. Responsible for the decline are higher energy costs a year ago. Core inflation (excluding volatile food and energy costs) was measured at 2.9%. Services inflation, however, quickened from 4.0 to 4.2%, and it is a closely watched indicator by policymakers. The economic sentiment indicator for the euro area climbed from 96 in July to 96.6 in August, the strongest in more than a year. Although consumers were gloomier, confidence improved in the services sector. On the contrary, the business climate index for Germany as measured by the Ifo Institute dropped more than expected to 86.6 in August, its lowest level since February. Companies in Germany appear to be growing more pessimistic, prompting Ifo President Clemens Fuest to say, “The German economy is increasingly falling into crisis.”

Japanese stocks rose over this week, wrapping up a volatile month. The Nikkei 225 Index gained 0.7% while the broader TOPIX Index added 1.0%. Both the indexes lost in the steep sell-off around the start of the month, grounds which they mostly recovered by the month’s end. The deep dive was caused by the late July interest rate hike by the Bank of Japan (BoJ) and was further driven by renewed U.S. growth fears and the speedy unwinding of the yen carry trade. The latest inflation data reinforced a hawkish outlook on the BoJ’s monetary policy. A leading indicator of nationwide trends, the Tokyo-area core consumer price index (CPI) rose by 2.4% year-on-year in August, versus the consensus 2.2% and the highest since March. As the central bank gained confidence that the economy would stably achieve 2% inflation, BoJ Governor Kazuo Ueda reiterated that it would continue to normalize its monetary policy. This is an indication that the central bank is willing to raise interest rates again if its projections for the economy and prices materialize. BoJ Deputy Governor Ryozo Himino further stated that the baseline scenario for the future remains that growth and inflation will develop in line with the BoJ’s outlook. The yield on the 10-year Japanese government bond remained broadly unchanged at about 0.9%. The yen weakened to the high end of the JPY 144 against the USD range from JPY 144.35 at the end of the previous week.

China stocks fell over the week on the back of a series of disappointing corporate earnings reports that fell below expectations and dampened buying sentiment. The blue-chip CSI 300 lost 0.17% while the Shanghai Composite Index fell by 0.43%. The Hong Kong benchmark Hang Seng Index, on the other hand, gained by 2.14%. The country continued to deal with a prolonged property sector slump and weak domestic demand prompting some Chinese economists to reduce their 2024 growth forecasts. A key consumption indicator, retail sales, is estimated to grow by 4% this year, lower than the July estimate of 4.5%. Expected fixed asset investment, estimated during the prior month at 4.4%, is now projected to grow at 4.2%. The estimated consumer price index forecast previously at 0.6% has been trimmed to 0.5%. This sober outlook for China has raised the probability that the country may fall short of its official growth target of 5% in 2024. Speculations were also raised that the central bank may loosen its policy further in the short term, together with additional interest rate cuts. The reserve requirement ratio for domestic lenders may also be reduced.

The Week Ahead

The ISM Manufacturing PMI, job openings for July, and the nonfarm payrolls report for August are among the important economic releases expected in the coming week.

Key Topics to Watch

• S&P final U.S. manufacturing PMI for Aug.
• Construction spending for July
• ISM manufacturing for Aug.
• U.S. trade deficit for July
• Job openings for July
• Factory orders for July
• Fed Beige Book
• Auto sales for Aug.
• ADP employment for July
• Initial jobless claims for Aug. 31
• U.S. productivity (revision) for Q2
• S&P final U.S. services PMI for Aug.
• ISM services for Aug.
• U.S. employment report for Aug.
• U.S. unemployment rate for Aug.
• U.S. hourly wages for Aug.
• Hourly wages year over year
• New York Fed President Williams speaks (Sept, 6)
• Fed Gov. Christopher Waller speaks (Sept. 6)

Markets Index Wrap-Up