Stock Markets

Markets tread water throughout the week in anticipation of the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, held from August 22 to 24. While there are typically no policy decisions made at this meeting, the Jackson Hole Symposium influences global financial markets. Expectations about interest rates and monetary policy are shaped by pronouncements by the Fed, particularly those articulated in Jackson Hole. The stock market has been fixated for a long time on the timeline of rate cuts, and the policymaking body has held its policy rate unchanged for more than a year. Fed Chair Powell’s speech on Friday suggests that officials perceive that the central bank’s dual mandate of stable inflation plus maximum employment has been sufficiently met to begin adjusting rates.   

All major U.S. stock indexes are up for the week. The Dow Jones Industrial Average (DJIA) rose by 1.27% while the Total Stock Market Index outperformed by climbing 1.65% for the week. The S&P 500 Index advanced by 1.45% which is not far from the technology-heavy Nasdaq Stock Market Composite’s 1.40% gain. The NYSE Composite Index rose by 1.81% with all Russell components up. The CBOE Volatility Index (VIX), the indicator of investor risk perception, also went up by 7.16%. The rising stock market is therefore viewed as accompanied by rising volatility risk.

U.S. Economy

The economic news released this week came in mostly aligned with expectations and did little to move the markets. The S&P Global report on its first estimate of August economic activity confirmed that the manufacturing sector remained in a slump. It also confirmed, however, that the larger services sector continued at a healthy rate of expansion. Existing home sales rose slightly and in accordance with expectations, ending four months of straight declines. There was, however, the unexpected announcement by the Labor Department in its annual revision of its nonfarm payroll count through March. The estimates were revised downward by 818,000 jobs over the previous 12 months than were originally reported. The July jobs report was underwhelming because monthly hiring slowed and the unemployment rate inched up to its highest level since October 2021. A few weeks ago, this triggered recession worries and sparked the early August market drop. The recession panic seems to be overblown, and the data in recent weeks turned out to support a more positive outlook.

Metals and Mining

While gold ended last week above $2,500, it was uncertain if it would correct this week below that resistance level. Gold ended this week solidly above that level, making it a support level for the metal’s further upward movement. It is trading near record highs and signaling strongly that this latest rally is not over. There appears to be no signs of the market overheating albeit being hot, nor are there signs of frothy volatility that it may be approaching its peak. Gold seems to have plenty of room to rally as the Federal Reserve is just beginning a new easing cycle, according to analysts. The Fed dispelled any doubts that rates will be coming down in September. The minutes from the July monetary policy meeting indicated that several committee members were in favor of lowering the Fed Funds rate last month. This may negatively impact the U.S. dollar, rendering the USD index at a low for the year, breaking below 101 points. A weak dollar and low rates create a favorable situation for precious metals. Furthermore, other precious metals critical to the electrification of the global economy may turn bullish.

The spot prices of precious metals rose for the week. Gold modestly advanced by 0.18%, from its close last week at $2,508.01 to its close this week at $2,512.59 per troy ounce. Silver closed last week at $28.98 but ended this week at $29.82 per troy ounce for a gain of 2.90%. Platinum ended one week ago at $957.20 and this week at $965.62 per troy ounce, rising by 0.88%. Palladium ended this week at $964.30 per troy ounce, up 1.35% from its end last week at $951.48. The three-month LME prices of industrial metals were also up for the week. Copper, which ended last week at $9,115.50, closed this week at $9,288.50 per metric ton for a weekly gain of 1.90%. Aluminum last traded one week ago at $2,365.50 and this week at $2,542.00 per metric ton to register a gain of 7.46%. Zinc closed this week at $2,912.00 per metric ton, an increase of 5.41% over last week’s close at $2,762.50. Tin ended this week at $32,912.00 per metric ton for a 3.16% gain over last week’s close at $31,903.00.     

Energy and Oil

This week, oil prices remained rangebound. The market appears to be recovering after the frenzy in the first two weeks of August. ICE Brent settled in a narrow band between $76 and $78 per barrel. After the US Federal Reserve’s July meeting notes indicated September would be the most probable date for the Fed interest rate cut, overall sentiment in the oil market has been improving. Macroeconomics might lift oil even higher if the Federal Reserve’s symposium at Jackson Hole does not disappoint.

In the meantime, a megamerger of two leading U.S. coal producers creates a new industry giant. Major coal producers Arch Resources and Consol Energy will merge in an all-stock deal to create a mining giant valued at more than $5 billion. It will boost an export capacity of 25 million tons per annum across two separate shipping terminals.

Natural Gas

For the report week beginning Wednesday, August 14 to Wednesday, August 21, 2024, the Henry Hub spot price fell by $0.05 from $2.17 per million British thermal units (MMBtu) to $2.12/MMBtu. Concerning Henry Hub futures, the price of the September 2024 NYMEX contract decreased by $0.042, from $2.219/MMBtu last Wednesday to $2.177/MMBtu yesterday. The price of the 12-month strip averaging September 2024 through August 2025 futures contracts declined by $0.041 to $2.978/MMBtu. At most locations, natural gas spot prices fell, ranging from a decrease of $0.47 at the Waha Hub in West Texas to an increase of $0.39 at Northwest Sumas on the Canada-Washington border.

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 increased by $1.27/MMBtu to a weekly average of $13.90/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 $0.16 to a weekly average of $12.60/MMBtu. In the week last year that corresponds to this report week (beginning August 16 and ending August 23, 2023), the prices were $14.09/MMBtu in East Asia and 12.35/MMBtu at the TTF.

World Markets

The pan-European STOXX Europe 600 Index closed this week higher by 1.31% on the back of rising hopes for interest rate cuts by both the Fed and the European Central Bank (ECB) by September. The major continental stock indexes also closed higher. Italy’s FTSE MIB gained by 1.83%, France’s CAC 40 Index advanced by 1.71%, and Germany‘s DAX added 1.70% for the week. The UK’s FTSE 100 Index gained by 0.20%. Eurozone business activity was boosted by the Paris Olympics, although manufacturing is still shrinking. Eurozone business activity stalled in July but picked up in August, as suggested by the S&P Global purchasing managers’ index (PMI). The Olympic games in France drove the services sector to a four-month high, as the first estimate of the HCOB Eurozone Composite PMI Output Index came in at 51.2 from 50.2 (a reading greater than 50 signifies expansion). However, manufacturing production contracted for the 17^th consecutive month. According to the ECB, growth in negotiated wages in the eurozone (a key indicator for monetary authorities) slowed to 3.55% in the second quarter, down from 4.74% in the three preceding months. In its August report, the Bundesbank said that “the expected slow recovery in the [German] economy is being delayed further” by weak foreign demand.

Japan’s stock markets rose modestly for the week. The Nikkei 225 Index moved upward by 0.8% while the broader TOPIX Index inched up by 0.2%. Bank of Japan (BoJ) Governor Kazuo Ueda reiterated that the central bank would continue to normalize its monetary policy as it gains confidence that the economy may achieve 2% inflation in a stable manner, amid some speculation that recent market turmoil could discourage the Bank of Japan (BoJ) from further hiking interest rates. For the third straight month in July, core consumer price inflation accelerated, supporting the BoJ’s hawkish shift this year. The yen strengthened to the high end of the JPY 145 against the USD range from about JPY 147.6 at the end of the previous week, amid contrasting monetary policy outlooks for Japan and the U.S. The yield on the 10-year Japanese government bond rose from the prior week’s 0.88% to this week’s end at 0.90%.  the latest domestic inflation data was aligned with the BoJ’s conservative shift. The nationwide rate of core consumer price inflation climbed to 2.7% year-on-year from 2.6% in June, in line with expectations. The headline rate of inflation remained unchanged at 2.8% year-on-year. In terms of GDP growth and consumption, broader domestic data appear healthy.

Ahead of Fed Chair Powell’s Jackson Hole speech and on the back of a light economic calendar, Chinese stocks fell as buyers were kept on the sidelines. Both the Shanghai Composite and CSI 300 Indexes declined for the week, although the Hong Kong benchmark Hang Seng Index advanced. China’s central bank kept its benchmark lending rates unchanged on Monday, a reflection of policymakers’ intention to protect banks’ profit margins. The People’s Bank of China (PBOC) maintained the one-year loan prime rate at 3.35% and the five-year loan prime rate (LPR) at 3.85%. The LPR is a policy rate for mortgages and other long-term loans. After the bank unexpectedly trimmed several key rates in July, economists broadly expected the PBOC’s decision to remain steady on both LPRs. However, it is believed that there is room for further loosening in China this year should the Fed start cutting rates in the U.S. In earnings releases, the search engine leader Baidu’s second-quarter revenue came in lower than expected, even though earnings beat analysts’ forecast. Baidu, based in Beijing and often referred to as China’s Google, reported that second-quarter revenue ending June dropped by 0.4%.

The Week Ahead

Among the important economic releases scheduled in the coming week are personal income and spending for July, the second quarter GDP, and July inflation data.

Key Topics to Watch

• Durable-goods orders for July
• Durable-goods minus transportation for July
• San Francisco Fed President Daly TV interview (August 26)
• S&P Case-Shiller home price index (20 cities) for June
• Consumer confidence for Aug.
• Atlanta Fed President Raphael Bostic speech (August 28)
• Initial jobless claims for Aug. 24
• Advanced U.S. trade balance in goods for July
• Advanced retail inventories for July
• Advanced wholesale inventories for July
• GDP (2nd revision) for Q2
• Pending home sales for July
• Atlanta Fed President Raphael Bostic speech (August 29)
• Personal income (nominal) for July
• Personal spending (nominal) for July
• PCE index (for) July
• PCE (year-over-year)
• Core PCE index for July
• Core PCE (year-over-year)   
• Chicago Business Barometer (PMI) for Aug.
• Consumer sentiment (final) for Aug.

Markets Index Wrap-Up

Stock Markets

All major indexes are significantly up for the week. The Dow Jones Industrial Average gained 2.94% while the Total Stock Maret advanced by 3.86%. The broad-based S&P 500 Index surged by 3.93% and the technology-heavy Nasdaq Stock Market Composite shot up by 5.29%. The NYSE Composite Index climbed by 2.66%. The investor risk perception indicator, the CBOE Volatility Index (VIX) dropped by 27.34%.

The positive sentiment in the stock markets appears to have been driven by two themes, The first is the continued moderation of the inflation data, as both the consumer price index (CPI) and the producer price index (PPI) inflation for July came in softer than expected. The second is the resilience in the economic data which continues to hold up well for both retail sales and jobless claims which came in better than forecast. The implication may be that the US economy may be cooling, although it is certainly not on the edge of a sharp downturn or recessionary environment. Softer inflation and cooling but positive economic growth continue to support the scenario that the Federal Reserve may still cut interest rates as soon as the next FOMC meeting on September 18.

U.S. Economy

The official economic data released during the week suggested that the consumer remains resilient in the cooling labor market. The Commerce Department reported on Thursday this week that retail sales grew by 1.0% in July, the indicator’s best performance in 18 months. The volatile auto sector yielded the strongest gains, although increases were broad-based. Sales at bars and restaurants increased by 0.3% which is a sign of healthy discretionary spending. The positive sentiment seems also to align with this week’s inflation data. According to the Labor Department, after three months of solid increases, core inflation (excluding food and energy) prices paid by producers remained unchanged in July. Consumer price index (CPI) inflation, released on Wednesday, was more aligned with expectations and reassuring to investors. For the first time in over three years, the year-over-year rise in CPI fell below 3.0%.

The housing sector outlook was less encouraging. New housing activity retreated to its level in the early pandemic years. The Commerce Department reported on Friday that building permits fell below 1.4 million for the first time since the bottom of the pandemic in 2020. Actual housing starts also plunged to their lowest level in four years. A gauge of builder sentiment released on Thursday also dropped to its lowest level this year. The yield on the benchmark 10-year Treasury note declined throughout the week on the benign inflation data. It jumped on Thursday morning, however, after the announcement of the strong retail sales data. Technical factors were supportive in the tax-free municipal bond market as primary issuance was lighter than the volumes encountered in recent weeks.

Metals and Mining

The spot prices of precious metals are up for the week. Gold, which ended last week at $2,431.32, closed this week 3.15% higher at $2,508.01 per troy ounce. Silver came from $27.46 last week to end this week 5.54% higher at $28.98 per troy ounce. Platinum, last priced one week ago at $925.47, closed this week at $957.20 per troy ounce for a 3.43% gain. Palladium, which ended last week at $909.67, closed this week at $951.48 per troy ounce for an increase of 4.60%. The three-month LME prices of industrial metals have also gone up for the week. Copper ended this week at $9,115.50 per metric ton, 3.65% higher than last week’s close at $8,794.50. Aluminum closed at $2,365.50 per metric ton, higher by 4.02% over last week’s close of $2,274.00. Zinc ended last week at $2,646.00 but this week closed at $2,762.50 per metric ton for a gain of 4.40%. Tin closed this week at $31,903.00 per metric ton, 4.62% higher than last week’s close of $30,494.00.   

Energy and Oil

Last week saw global markets panic on negative economic news from the U.S. What was largely a knee-jerk reaction last week propped this week up for a technical bounce-back. Oil prices climbed on a technical recovery, as both Brent and WTI prices emerged with a series of five consecutive days of price gains. Some of that upward movement was dampened by OPEC’s belated acknowledgment that 2024 demand growth will not be as outstanding as they have signaled for months. The OPEC reduced its forecast for global oil demand growth for this year resulting from weaker-than-expected first-trimester economic data and a slacker China outlook. The revised forecast is now 2.11 million barrels per day (b/d) year-over-year growth, down 140,000 b/d from the earlier forecast. Analysts also observed that investors have reduced their market positions in crude oil futures to the lowest level in at least a decade. A massive 110 million barrels were sold in the six most important contracts in the week ending August 6. The pessimistic news notwithstanding, Brent futures are still comfortably poised above $81 per barrel.

Natural Gas

For the report week from Wednesday, August 7, to Wednesday, August 14, 2024, the Henry Hub spot price climbed $0.18 from $1.99 per million British thermal units (MMBtu) to $2.17/MMBtu. Concerning Henry Hub futures, the price of the September 2024 NYMEX contract increased by $0.107, from $2.112/MMBtu at the start of the report week to $2.219/MMBtu by the week’s end. The price of the 12-month strip averaging September 2024 through August 2025 futures contracts rose by $0.081 to $3.020/MMBtu.

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 $0.12 to a weekly average of $12.62/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 $0.98 to a weekly average of $12.76/MMBtu. In the week last year that corresponds to this report week (from August 9 to August 16, 2023), the prices were $11.76/MMBtu in East Asia and $11.75/MMBtu at the TTF.

World Markets

European stocks are up for the week in hopeful anticipation of another round of interest rate cuts come in early September. The pan-European STOXX Europe 600 Index ended 2.46% higher and most major continental indexes also posted strong gains. Italy’s FTSE MIB surged by 4.09%, Germany’s DAX added 3.38%, and France’s CAC 40 Index climbed by 248%.  The UK’s FTSE 100 Index advanced by 1.75%. Similar to the first quarter, the Eurozone economy grew by 0.3% sequentially in the second quarter. Germany’s gross domestic product (GDP) unexpectedly contracted, but this slide was offset by GDP growth in France, Italy, and Spain. Nevertheless, industrial production contracted by 0.1% in June, failing to meet a consensus estimate for a 0.5% increase. Business activity stalled in July as well, as suggested by a purchasing managers’ survey. The labor market nevertheless remains resilient. According to Eurostat data, employment in the second quarter expanded 0.2% sequentially. In the UK, inflation slows down as the economy grows, leaving hopes for a rate cut soon. Headline inflation in the UK inched up to 2.2% in July from 2.0% in June. However, a growth in services prices, which is a focus for policymakers, slowed more than forecasted. This signals financial markets to price in a higher likelihood of interest rate cuts later this year. In the three months through June, the economy remained strong. Following a solid rebound in the first quarter after last year’s recession, GDP expanded 0.6% sequentially.

Japan’s stocks outperformed over the holiday-shortened week, rebounding off their lows in previous weeks’ trading. The Nikkei Index advanced 8.7% and the broader TOPIX Index climbed by 7.9%. The yen weakened from around JPY 146.6 per US dollar in the previous week to the high-JPY 148 range versus the US dollar. This provides Japan’s exporters a tailwind to realize stronger revenues. The better-than-expected US economic data boosted investors’ sentiment and alleviated concerns about a recession in the world’s leading economy. Japan’s second quarter, in turn, expanded by more than anticipated, thus lending further support. In the fixed-income markets, the yield on the 10-year Japanese government bond rose from 0.86% at the end of the previous week to 0.88% at the end of this week. The future monetary policy trajectory of the Bank of Japan (BoJ) continued to be the subject of speculation, after the recent comments by its deputy governor that the central bank will not raise interest rates when markets are unstable. Huge volatility resulted when the BoJ raised rates in July, leading numerous market participants to scale down their expectations for another hike this year. The country’s economy rebounded strongly in the second quarter of the year. Japan’s GDP expanded 0.8% quarter-on-quarter, ahead of estimates of 0.5% and reversing the first quarter’s 0.6% contraction. A strong uptick in private consumption and a bounce-back in business investment generally drove the rebound.

Chinese stocks advanced as investors largely ignored the weaker-than-expected economic activity. The Shanghai Composite Index rose by 0.6% while the blue-chip CSI 300 gained 0.42%. The Hong Kong benchmark Hang Seng Index was higher by 1.99%.  The weakness in China’s economy was underscored by the July data. Industrial production grew by 5.1% in July year-on-year, a below-consensus performance partly due to lower auto sales. Retail sales expanded by 2.7% in July from a year earlier up from a 2% increase in June and exceeding the expected growth rate. Fixed asset investment lagged forecasts with a growth of 3.6% in the January to July period compared to last year. Property investment fell by 10.2% year-on-year. Urban unemployment grew by 5.2% from 5% the previous month. New home prices in 70 cities fell by 0.7% in July. This remains unchanged from the rate of declines in the prior two months and marked the 13^th consecutive monthly decline. Buying interest remains sluggish in smaller towns even while the government’s rescue package rolled out in May has spurred demand in major cities, data suggests.

The Week Ahead

Important economic releases this week include the Leading Economic Index, the PMI composite, and the minutes of the Federal Reserve’s July FOMC meeting.

Key Topics to Watch

• Fed Governor Christopher Waller welcoming remarks (Aug. 19)
• U.S. leading economic indicators for July
• Atlanta Fed President Raphael Bostic speech (Aug. 20)
• Fed Vice Chair for Supervision Michael Barr speech (Aug. 20)
• Minutes of Fed’s July FOMC meeting
• Initial jobless claims for Aug. 17
• S&P flash U.S. services PMI for Aug.
• S&P flash U.S. manufacturing PMI for Aug.
• Existing home sales for July
• Fed Chair Jerome Powell speech at Jackson Hole retreat (Aug. 23)
• New home sales for July

Markets Index Wrap-Up

Stock Markets

The major indexes closed modestly lower for the week. According to the Wall Street Journal markets weekend report, the 30-stock Dow Jones Industrial Average (DJIA) gave up 0.60% while the Total Stock Market Index fared slightly better as it pulled back by only 0.07%.  The broad S&P 500 Index slid by 0.04% with both mid- and small-caps losing ground. The technology-heavy Nasdaq Stock Market Composite lost by 0.18%. The NYSE Composite was the only major index to register a gain, chalking up a 0.58% gain. The CBOE Volatility Index (VIX), which indicates the market’s risk perception, dropped by 12.91% after it briefly spiked on Monday to 65.73, its highest since 2020. The VIX ended the week at 20.69.

Factors that partly account for the swings are technical considerations and programmed trading strategies, among others. A recent hike in Japanese short-term interest rates, although modest, appears to cause a partial unwind in the so-called carry trade. Investors borrow at near-zero interest rates in Japan and invest the funds in higher-yielding assets in the U.S. and other countries. Conversely, short-covering (the need to hedge bets that stocks will further fall) appeared to help stocks move off their lows on Monday afternoon; stock buybacks also provided some support. Another factor that exacerbated volatility may have been the summer vacation season which kept some longer-term investors away from the market.

U.S. Economy

Some fundamental factors that may have contributed to the market volatility are the continuing concerns regarding the previous week’s downside economic surprises. Paramount among these shocks were the surprise increase in the employment rate and negative manufacturing signals. Several major companies reported signs of weakening consumer demand in earnings calls. A bounce-back rally on Thursday seemed to be attributable to a reassuring drop in weekly jobless claims. During the rally, the S&P 500 scored its best daily gain since November 2022. The weekly jobless claims fell to 233,000 from an upwardly revised 250,000. The number of continuing claims rose slightly, however, by 6,000 to 1.875 million. Investors and analysts appeared to take a second look at the previous week’s increase in the household employment survey. Reconsideration was focused particularly on the role played by Americans and recent migrants who were not included in the weekly claims data and who are newly reporting that they are looking for work.

There are other reasons that the job market might be stronger than the headline unemployment data suggest. First, there may be an increase in the number of individuals who were not able to work due to the inclement weather. Second, there may be a rise in temporary layoffs, where the affected employees may be called back to work in the next two months. After the initial shocks, it appears that a near-term recession is unlikely, and the latest inflation and labor market data have met the requirements of the Fed to start cutting interest rates. The first cut may be in September, with possibly up to two more rate cuts before the year ends. As fears dissipate over a weakening labor market, the yield on the benchmark 10-year Treasury increased over the week.

Metals and Mining

The spot prices of precious metals were mixed. Gold closed this week at $2,431.32 per troy ounce, lower by 0.49% from last week’s close at $2,443.24.  Silver last traded at $27.46 per troy ounce for a loss of 3.85% from the previous week’s close at $28.56. Platinum ended at $925.47 per troy ounce, 3.59% down from last week’s close at $959.95. Palladium ended trading this week at $909.67 per troy ounce for a gain of 1.61% from the previous week’s closing price of $895.22.  The three-month LME prices of industrial metals were also mixed. Copper (per MT) (LME)         came from the previous week’s closing price of $9,055.50 to end at $8,794.50 per metric ton for a 2.88% drop. Aluminum came from its previous weekly close of $2,263.50 to settle at $2,274.00 per metric ton for a gain of 0.46%. Zinc, which last traded the week before at $2,653.00 per metric ton, closed this week at $2,646.00 for a dip of 0.26%. Tin, which previously closed at $30,188.00, last traded this week at $30,494.00 per metric ton for a gain of 1.01%.

Energy and Oil

Monday’s giant stock selloff rocked the markets, but oil prices appear to be recovering from four straight week-over-week losses to finally arrive at a much-needed weekly rise. ICT Brent hovers close to the $80 per barrel mark once more, while fears of a coming economic recession were somewhat calmed by stronger US jobs data. Markets continue to anticipate news about Iran’s retaliation against Israel, and the overall geopolitics continue to add some bullish incentive to the oil market. Tensions continue to run high across the Middle East. The Greek-owned Delta Blue tanker carrying Iraqi oil to Greece’s Corinth Port has survived two grenade attacks, one missile strike, and a maritime drone ramming attempt, totaling four attacks in the past 24 hours.

Natural Gas

For the report week beginning Wednesday, July 31, and ending Wednesday, August 7, 2024, the Henry Hub spot price rose by $0.06 from $1.93 per million British thermal units (MMBtu) to $1.99/MMBtu. Regarding Henry Hub futures, the price of the September 2024 NYMEX contract increased by $0.076, from $2.036/MMBtu at the start of the report week to $2.112/MMBtu at the end of the week. The price of the 12-month strip averaging September 2024 through August 2025 futures contracts rose by $0.034 to $2.939/MMBtu.

International natural gas futures increased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.15 to a weekly average of $12.50/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 $1.08/MMBtu to a weekly average of $11.78/MMBtu.  In the week last year corresponding to this report week (the week starting August 2 and ending on August 9, 2023), the prices were $10.98/MMBtu in East Asia and $10.35/MMBtu at the TTF.

World Markets

European stocks recovered from sharp losses earlier in the week to end slightly higher upon the close of trading for the week. The pan-European STOXX Europe 600 Index climbed back from its deep drop to end 0.27% higher for the week. Major regional indexes were mixed. France’s CAC 40 Index gained by 0.25% while Germany’s DAX outperformed with slightly a 0.35% climb. Italy’s FTSE MIB fell by 0.74%. The UK’s FTSE 100 Index was hardly changed. Climbing from lows earlier this week are the Eurozone government bond yields after a global market rout sparked by worries about the sustainability of economic growth. Helping to allay these concerns was a news release showing a notable drop in U.S. jobless claims which had been worsened by weak U.S. manufacturing and jobs data. In the eurozone, retail sales volumes declined unexpectedly by 0.3% in June after increasing to 0.1% in May. A drop in the sales of food, drinks, and tobacco accounted for the weakness in the indicator. The data shows that customers may be taking longer to recover from the inflationary squeeze, contributing to doubts regarding the strength of second-quarter demands.

Japanese stocks experienced the most severe one-day sell-off in decades at the start of the week. The plunge was driven by a rebounding yen resulting from the hawkish turn taken by the Bank of Japan (BoJ) at its July meeting. The central bank raised interest rates while simultaneously detailing plans to taper its bond purchases. Risk appetite was dampened by concerns that global growth is slowing down, and investors continued the rapid unwinding of the yen carry trade (where they borrow yen at Japan’s ultralow interest rates to invest in a higher-yielding foreign market) in anticipation of a narrowing in US-Japan rate differentials and a stronger yen. Despite the steep drop, Japan’s markets had recovered most of their losses by the end of the week, with the Nikkei 225 Index and the broader TOPIX Index down by 2.5% and 2.1% respectively. The global reverberation caused by Japan’s market volatility was allayed to some degree by dovish comments by BoJ Deputy Governor Shinichi Uchida when he stated that the BoJ will not raise interest rates while the markets are unstable. This reduced the likelihood that interest rates would be hiked soon. Nevertheless, the pronouncement weakened the yen which ended the week at the low end of the JPY 147 range against the USD from the previous week’s mid-JPY 146 range.

China’s stocks plunged as the increase in consumer prices, which proved stronger than expected, failed to offset worries about deflationary pressures. The Shanghai Composite Index dropped by 1.48% and the blue-chip CSI 300 lost by 1.56%. The Hong Kong benchmark Hang Seng Index rose by 0.85%. From a year earlier, China’s consumer price index rose by 0.5% in July, an increase over June’s 0.2% rise. The increase was attributed by analysts to seasonal factors, including bad weather conditions and a low base for pork prices in 2023. Core inflation (which excludes volatile food and energy costs) rose by 0.4% down from 0.6% in June and registering the lowest growth since January. The producer price index fell by 0.8% year-on-year, unchanged from June, and marking the 22^nd consecutive monthly decline. In economic news, China’s imports in July rose by 7.2% from last year, exceeding expectations and up from a 2.3% decline in June. July exports rose by a lower-than-expected 7%, with the shortfall being attributed to sluggish demand. The decline in exports raised key worries regarding softening global demand which has key repercussions for China’s economy this year. In the past, strong global demand compensated for sluggish domestic demand.

The Week Ahead

Retail sales and two key inflation readings, namely the CPI and the PPI, are among the important economic releases expected to come out in the coming week.

Key Topics to Watch

• Monthly U.S. federal budget for July
• NFIB optimism index for July
• Producer price index for July
• Core PPI for July
• PPI year over year
• Core PPI year over year
• Consumer price index for July
• CPI year over year
• Core CPI for July
• Core CPI year over year
• Initial jobless claims for Aug. 10
• Empire State manufacturing survey for Aug.
• Philadelphia Fed manufacturing survey for Aug.
• U.S. retail sales for July
• Retail sales minus autos for July
• Import price index for July
• Import price index minus fuel for July
• Industrial production for July
• Capacity utilization for July
• Business inventories for June
• Consumer sentiment (prelim) for Aug.
• Housing starts for July
• Building permits for July
• Home builder confidence index for July

Markets Index Wrap-Up

Stock Markets

The weekly performances of major stock indexes plummeted across the board. The 30-stock Dow Jones Industrial Average (DJIA) fell by 2.10%, mirroring the Total Stock Market Index which dropped by 2.51%. The broad-based S&P 500 Index slumped by 2.06% with small, mid, and large-cap components down. The technology-heavy Nasdaq Stock Market Composite lost 3.35%, and the NYSE Composite Index gave up 2.17%. The investor risk perception indicator, the CBOE Volatility Index (VIX) shot up by 42.71%, suggesting that the market expects significant volatility in the coming days.

Investors reacted to the busiest week of the quarterly earnings reporting season which is arguably also the most important week of the monthly economic data. During the week, companies representing almost 40% of the S&P 500’s market capitalization reported second-quarter earnings. Among them are four of the so-called Magnificent Seven – Microsoft, Meta Platforms (parent of Facebook) Apple, and Amazon.com. Results varied relative to consensus expectations. However, expectations for heavy capital spending to build out artificial intelligence (AI) capabilities appeared to be a common theme.

U.S. Economy

The closely watched nonfarm payrolls report was released on Friday, and it was the main driver of sentiment for the week. The data indicated more rapid cooling in the labor market than was originally thought. According to the Labor Department, the economy added only 114,000 jobs in July which is well short of expectations and the lowest number in three months. Only 97,000 jobs originated from the private sector, the lowest in 15 months.  Surprising on the high side is the jump in the unemployment rate from 4.1% to 4.3%, its highest level since October 2021. The Labor Department reported earlier that the number of Americans leaving jobs voluntarily dropped to 3.82 million in June, the lowest number since November 2020. The quits rate is considered by many observers to be a more accurate metric of labor market conditions than the number of job openings. Job openings fell slightly to 8.18 million but remain above 7.92 million, its April low.

Another event that shook the confidence of investors in the strength of the economy seems to be the release on Thursday of the gauge of July manufacturing activity by the Institute for Supply Management (ISM). This surprised on the low side, falling unexpectedly to 46.6 its lowest level since November. Ratings below 50.0 are indicative of contraction. This week’s reading marks nearly two years of almost continuous contraction in the sector. Manufacturing jobs remained roughly steady in July, however, while the tech sector shed 20,000 jobs. In the aftermath of both the ISM manufacturing report and the jobs data, longer-term interest rates plummeted, sending the yield on the benchmark 10-year Treasury note to its lowest intraday level of 3.79% since late December.

Metals and Mining

Since mid-2022, the gold market has been pricing in a pivot from the Federal Reserve. Investors were not disappointed this week when they got the signal they were waiting for after two years of lackluster trading. The Fed signaled to the market that it expects to cut interest rates in September. After the central bank left interest unchanged in its last meeting, Fed Chair Jerome Powell declared in a press conference that the body was amenable to considering a rate cut “as soon as the next meeting.” He also mentioned that “We think the time is approaching.” The dovish stance hinted at by the Fed propelled gold price to a new record high of $2,500 an ounce. Although the Fed is finally open to cutting rates, it might be too late as fears of an impending recession are intensifying. On Friday morning, following significantly disappointing employment numbers, gold demand heightened as a solid safe-haven asset in the face of heightened risk.

The spot prices for precious metals generally rebounded from their recent weekly corrections. Gold shot up by 2.35% from its close last week at $2,387.19 to end this week at $2,443.24 per troy ounce. Silver began at its previous weekly close of $27.93 and climbed by 2.26% to end this week at $28.56 per troy ounce. Platinum, which was priced at $940.30 at the end of trading last week, closed this week at $959.95 per troy ounce for a weekly gain of 2.09%.  Palladium closed this week at 895.22 per troy ounce, a loss of 1.09% from last week’s close at $905.09. The three-month LME prices of industrial metals were mixed. Copper, which previously closed at $9,122.00, ended this week at $9,055.50 per metric ton for a loss of 0.73%. Aluminum closed this week at $2,263.50 per metric ton, down by 0.31% from its previous weekly close of $2,270.50. Zinc gave up 1.04% from its close last week at $2,681.00 to end this week at $2,653.00 per metric ton. Tin, which closed last week at $29,416.00, ended this week at $30,188.00 per metric ton for a weekly gain of 2.62%.

Energy and Oil

This week saw a sudden escalation of geopolitical tensions brought about by Israel’s strike in Lebanon and the assassination of Hamas leader Ismail Haniyeh in Iran. These events should have sent oil prices skyrocketing. Iran’s failure to mount a swift retaliation is one factor that dampened sentiments for a possible rally. Furthermore, the OPEC+ meeting failed to surprise the markets this week, and there remain lingering demand concerns, which contributed to dragging oil prices back down. The August 1 online meeting of OPEC+ ministers left the oil group’s current policy unchanged, with participating members reiterating their intent to start unwinding the third layer of voluntary production cuts beginning October 2024.  

Natural Gas

For the report week from Wednesday, July 24 to Wednesday, July 31, 2024, the Henry Hub spot price fell by $0.10 from $2.03 per million British thermal units (MMBtu) to $1.93/MMBtu. Regarding the Henry Hub Futures, the August 2024 NYMEX contract expired Monday at $1.907/MMBtu, down by $0.21 from the start of the report week. This settlement price for the August 2024 contract is the lowest since trading of this contract began 12 years ago. The September 2024 NYMEX contract price decreased to $2.036/MMBtu, down by $0.12 from the start to the end of the report week.  The price of the 12-month strip averaging September 2024 through August 2025 futures contracts declined by $0.08 to $2.905/MMBtu.

International natural gas futures prices increased this report week. The weekly average front-month futures prices for LNG cargoes in East Asia increased by $0.21 to a weekly average of $12.35/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 $0.43 to a weekly average of $10.70/MMBtu. In the week last year corresponding to this report week (beginning July 26 and ending August 2, 2023) the prices were $10.91/MMBtu in East Asia and $8.92/MMBtu at the TTF.

World Markets

European stocks ended lower this week on the back of weak U.S. economic data that triggered concerns about a likely global recession ahead. The pan-European 600 Index closed the week 2.92% lower than last week in local currency terms. Major continental stock indexes also declined significantly. Italy’s FTSE MIB plummeted by 5.30%, Germany’s DAX plunged by 4.11%, and France’s CAC 40 Index tumbled by 3.54%. The UK’s FTSE 100 Index dropped by 1.34%. The market also priced in the possibility of more rate cuts from the European Central Bank later this year, bringing UK gilt yields and German bund yields lower. The Bank of England (BoE) lowered borrowing costs for the first time in four years. The BoE cut its key interest rate by a quarter point to 5.00%, its first reduction in borrowing costs since the coronavirus pandemic began in March 2020. The move to reduce rates was a split decision, however, as the Monetary Policy Committee voted 5-4 in favor of the cut. Governor Andrew Bailey cautioned against embarking on a rapid succession of rate cuts, emphasizing that “We need to make sure that inflation stays low and be careful not to cut interest rates too quickly or by too much.” The eurozone economy in the second quarter grew by a faster-than-expected 0.3% sequentially, translating to 0.6% year-over-year. The economies of France, Italy, and Spain expanded, but counter to expectations, Germany’s economy contracted.

Japan’s stock markets suffered heavy losses this week as the Bank of Japan (BoJ) took a hawkish turn. The Nikkei 225 Index fell by 4.7% and the broader TOPIX Index came down by 6.0%. Disappointing U.S. macroeconomic data which dropped on the last trading day of the week dampened investor risk appetite. The drop in the Nikkei was comparable to its one-day plunges in March 2020 when the coronavirus pandemic hit, which were among the biggest in the index’s history. It was also comparable to the “Black Monday” global stock market crash in October 1987. Meanwhile, the earnings outlooks for Japan’s export-oriented companies were hampered by a rebounding yen. Japan’s currency strengthened to around JPY 148.9 against the U.S. dollar from about JPY 153.7 at the end of the previous week. Regarding fixed-income investments, the yield on the 10-year Japanese government bond (JGB) fell from the prior week’s 1.06% to this week’s 0.98%.  In a quarterly outlook, the BoJ lowered its core inflation outlook for fiscal year 2024 from 2.8% forecast in April to 2.5%. The bank also slightly cut its growth outlook from 0.8% to 0.6%.

After weak manufacturing data tempered investor sentiment, Chinese equities ended mixed. The Shanghai Composite Index rose by 0.5% while the blue-chip CSI 300 declined by 0.73%. The Hong Kong stock market benchmark Hang Seng Index fell by 0.45%. On the economic front, the official manufacturing Purchasing Managers’ Index (PMI) dipped to 49.4 in July compared to 49.5 in June which is contractionary since it falls below the borderline of 50.0. The non-manufacturing PMI slipped to 50.2 from 50.5 in June, in line with expectations. The non-manufacturing PMI measures construction and services activity. Officials declared in a statement following the release that the declines are attributed to seasonal factors and extreme weather events in some Chinese cities. At industrial firms, profits rose by 3.6% in June compared to one year ago. It is up from a 0.7% gain in May, as shown by official data. Amid stronger industrial production growth and slower producer price declines, a steady recovery in topline revenue drove June’s rise. However, speculation that Beijing will continue to roll out measures to shore up the economy has been raised by persistent weakness in domestic demand, as recent stimulus measures have done little to boost consumption.   

The Week Ahead

Among the important economic releases scheduled this week are the ISM Services PMI for July, the U.S. trade deficit for June, and consumer credit data.

Key Topics to Watch

• S&P final U.S. services PMI for July
• ISM services for July 
• The U.S. trade deficit for June
• Consumer credit for June      
• Initial jobless claims for Aug. 3        
• Wholesale inventories for June         
• Richmond Fed President Tom Barkin speaks (August 8)                 

Markets Index Wrap-Up

Stock Markets

The major stock indexes are mixed for this week, with the broader stock indexes marginally down and the narrower indexes slightly up. The Dow Jones Industrial Average (DJIA) gained by 0.75%, while the Total Stock Market lost by 0.48%. The broad S&P 500 Index slid by 0.83% and the technology-heavy Nasdaq Stock Market Composite down by 2.08%. The NYSE Composite Index is up by 0.86%. The Russell 1000 and 3000 Indexes dipped by less than 1% although the Russell 2000 climbed by 3.47%. The CBOE Volatility Index (VIX), which indicates investor risk perception, is down by 0.79%.

For the second consecutive week, stocks recorded mixed returns with small-cap and value shares outpacing the large-cap growth stocks that led the market for the first half of the year. The past week’s trading continues the rotations in the equities market that has been observed in recent weeks. The mega-cap technology stocks, which for most of the year have been the favorite of investors, have been lagging more recently. Conversely, value and cyclical parts of the market, which include most small- and mid-cap stocks, have been outperforming. More broadly, the theme of the broadening of market leadership in both the tech and non-tech sectors is likely to continue in the second semester of this year.

U.S. Economy

Economic reports for the week paint a mixed picture concerning how well consumers and businesses are faring. More broadly a favorable backdrop exists for equity investors, and while economic growth is cooling the signals sent are positive that inflation is easing and the Fed is poised to lower interest rates in the second half of this year. The housing market slump continues, but business investment is picking up. On Wednesday, a report by the Commerce Department indicated that only 617,000 new homes were sold in June, well below the expected 640,000 homes. It is also the lowest monthly tally since November of last year. Also, the average selling price of new homes fell by approximately 4% from one year ago. S&P Global also reported on the same day that its gauge of manufacturing activity surprisingly fell back into contraction territory for the first time since December, that is, to 49.5 (50.0 being the borderline between contraction and expansion).

On Thursday, the Commerce Department reported that in the second quarter, the economy grew at an annualized rate of 2.8%, well above expectation and double the reading for the first quarter. It is noted, however, that much of the gain in the second quarter came from inventory building and increased government spending. Another factor appeared to be the Commerce Department’s release of its core personal consumption expenditure (PCE) price index, which excludes food and energy. The PCE price index rose slightly more than expected (0.2%) in June but remained steady at an annual rate of 2.6%, which is not too far above the Fed’s inflation target of 2,0%.  The inflation data seems to support expectations of the Fed rate cut during its September meeting.

Metals and Mining

Gold saw an intraday record high this week at $2,400 per ounce but lost steam and was unable to hold as investors took profits and sent the metal down due to significant selling pressure. Despite the volatility, however, investors remain bullish and appear poised to buy when the price descends. Analysts view the correction as a buying opportunity, and it is only a matter of time that the metal surges again, particularly since the Federal Reserve is expected to reverse interest rate by September. The approaching presidential election season is also likely to cause some volatility due to political uncertainty. Whichever side wins, though, their policy stances are seen to push the deficit higher leading to growing demand for safe-haven assets like precious metals.

The spot prices of precious metals fell this week. Gold dropped by 0.57% from its closing price last week of $2,400.83 to this week’s closing price of $2,387.19 per troy ounce. Silver came from $29.22 to end this week at $27.93 per troy ounce, a loss of 4.41%. Platinum, which closed last week at $965.95, ended this week at $940.30 per troy ounce for a drop of 2.66%.  Palladium lost 0.55% from last week’s close at $910.05 to this week’s close at $905.09 per troy ounce. The three-month LME prices of industrial metals likewise trended down. Copper closed at $9,122.00 per metric ton this week, lower by 2.81% from last week’s close at $9,386.00. Aluminum closed at $2,270.50 per metric ton this week, for a loss of 4.80% from last week’s close of $2,385.00. Zinc ended this week at $2,681.00 per metric ton, losing by 4.56% from its closing price last week of $2,809.00. Tin closed this week at $29,416.00 per metric ton, lower by 6.92% from last week’s close at $31,604.00.     

Energy and Oil

The oil markets were volatile last week, leaving investors and analysts guessing where oil prices are eventually headed. Factors that should have lifted market sentiment were continuously decreasing US oil stocks Canada’s wildfires, and GDP figures in the States that came in well above expectations. These events went largely unnoticed, however, due to a widespread selloff in tech stocks and a general disappointment in Chinese commodities. This will be the third straight week of decline as ICE Brent is set to finish the week below $82 per barrel.

Natural Gas

For the report week beginning Wednesday, July 17, and ending Wednesday, July 24, 2024, the Henry Hub spot price rose by $0.05 from $1.98 per million British thermal units (MMBtu) to $2.03/MMBtu. Regarding Henry Hub futures, the price of the August 2024 NYMEX contract increased by $0.082, from $2.035/MMBtu at the start of the week to $2.117/MMBtu at the week’s end. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts rose by $0.06 to $2.887/MMBtu.

International natural gas futures price changes were mixed for the week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.15 to a weekly average of $12.13/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 $0.10 to a weekly average of $10.26/MMBtu. In the week last year corresponding to this report week (for the week beginning July 19 and ending July 26, 2023), the prices were $11.13/MMBtu in East Asia and $9.67/MMBtu at the TTF.   

World Markets

In Europe, stocks rose for the week with the pan-European STOXX Europe 600 Index ending 0.55% higher in local currency terms. The positive ending was largely due to a rally on Friday brought about by investors focusing on a better day of quarterly earnings reports. The major continental indexes were mixed. Italy’s FTSE MIB plunged by 1.27% and France’s CAC 40 Index gave up 0.22%, but Germany’s DAX ended up gaining by 1.35%. The UK’s FTSE 100 Index climbed by 1.59%. By midweek, European equity markets were weighed down as technology and luxury goods sectors reported disappointing returns. Negative sentiment pervaded the tech sector because of steep declines in Tesla and other “Magnificent Seven” mega-cap U.S. stocks. As Paris headed into Friday’s official opening ceremonies for the Summer Olympics, French President Emmanuel Macron called for a political truce during the games. The opening was marred somewhat by travel disruptions caused by Friday’s arson attacks on the country’s high-speed rail infrastructure. Otherwise, however, the incident did not affect the equities trading for the day.  

Sharp weekly losses beset Japanese equities. The broad TOPIX Index lost by 5.6% while the benchmark Nikkei 225 Index declined by 6.0%. As the shares of U.S. mega-cap technology companies continued their sell-off, Japanese stocks remained under pressure. The yen strengthened for the third consecutive week. The exchange rate settled at around JPY 154.2 versus the U.S. dollar, from the JPY 157.45 per USD rate the week before. This rise continued to hurt the profit outlook for Japanese exporters. It appears to confirm that the government intervened in the foreign exchange market earlier in July to support the yen. The strength of the currency was also attributed to the recovery of short positions in anticipation of narrowing U.S.-Japan interest rate differentials. On the economic situation, a potential rate hike is expected in response to rising inflation. Tokyo’s core consumer price index rose by 2.2% year-on-year in July, mostly in line with expectations and up from 2.1% in June. A constraint against raising rates, however, is seen in the weakness in private consumption. Flash Purchasing Managers’ Index data showed Japan’s private sector firms’ activity returning to expansion in July. Service providers are expected to lead the expansion while manufacturers anticipate a marginal reduction in output.

Chinese stocks fell in reaction to unexpected rate cuts by the central bank which failed to instill confidence in the economic outlook. The blue-chip CSI 300 was down by 3.67% while the Shanghai Composite Index gave back 3.07%. The Hang Seng Index, Hong Kong’s benchmark, retreated by 2.28%. The People’s Bank of China (PBOC) reduced its medium-term lending facility (MLF) by 20 basis points to 2.3%. This is its first rate cut since August 2023 after holding the rate steady at its regularly scheduled operation on July 15. This is one of several rate cuts adopted by the PBOC aimed at making it cheaper for consumers to take out mortgages and other loans. The string of rate cuts hinted at Beijing’s growing urgency to support growth. China’s gross domestic product (GDP) fell below expectations in the second quarter. Other economic data, such as the slowdown in June of industrial production, retail sales, and property investment, pointed to weakness in the economy. The central bank is expected to further loosen policy and potentially reduce its reserve requirement ratio to bolster the economy.

The Week Ahead

In the coming week, included among the important economic releases are the job openings for June, the nonfarm payrolls report for July, and the minutes of the FOMC meeting.

Key Topics to Watch

• S&P Case-Shiller home price index (20 cities) for May
• Consumer confidence for July
• Job openings for June
• ADP employment for July
• Employment cost index for Q2
• Chicago Business Barometer (PMI) for July
• FOMC interest-rate decision 
• Fed Chair Powell press conference (July 31)
• Initial jobless claims for July 27
• U.S. productivity for Q2
• S&P U.S. manufacturing PMI for July
• ISM manufacturing for July
• Construction spending for June
• U.S. employment report for July
• U.S. unemployment rate for July
• U.S. hourly wages for July
• Hourly wages year over year 
• Factory orders for June

Markets Index Wrap-Up

Stock Markets

The major stock market indexes ended mixed for the week. The 30-stock Dow Jones Industrial Average (DJIA) rose by 0.72% while the DJ Total Stock Market fell by 1.68%. The broad S&P 500 Index likewise lost by 1.97% and the technology-heavy Nasdaq Stock Market Composite plunged by 3.65%. Mid-caps lost ground while small-caps gained. The NYSE Composite dipped by 0.54%. The CBOE Volatility Index (VIX), the indicator for investor risk perception, climbed by 32.58%.\

The week’s trading saw a continued rotation in market leadership to value shares and small-caps. The DJIA outperformed due to it being narrowly focused and comprised more of value stocks. The Nasdaq underperformed as it consists more of growth stocks in the technology sector. Late this week was also made memorable by the widespread global disruption of IT systems caused by an error in a vendor’s security update to major users of the Microsoft operating system. Although flights, banking services, and other institutions were disrupted, the financial markets were hardly impacted.  

The underperformance of growth stocks was affected by a sharp decline in chip stocks on Wednesday. News emerged that the Biden administration informed allies that it was considering curbing exports sharply if companies in their jurisdictions continued providing China with access to advanced semiconductor technology. Two of the companies alluded to were Tokyo Electron and ASML of the Netherlands. Stock prices of Taiwan Semiconductor Manufacturing, Broadcom, and NVIDIA (the third-largest company by market capitalization) plunged on the news.

U.S. Economy

Economic data released during the week generally surprised on the upside. Excluding volatile gas and auto segments, retail sales shot up by 0.8% in June, the most since January 2023 and well above the consensus estimate. Building permits also rose by more than expected, jumping by 3.4% in June. The Federal Reserve also reported on Wednesday the increase in industrial production by 0.6% in June, roughly twice the estimates. The Philadelphia Fed announced that its gauge of current regional business conditions surged to its highest in three years.

The outlier was the Labor Department’s report of weekly jobless claims, which indicated that the number of Americans filing for unemployment increasing to 243,000. The figure rebounded to the nine-month high that it set for the week ended June 8. A 20,000 increase in continuing claims to 1,867,000, the highest number since November 2021, appears to be of greater concern.

Metals and Mining

The political climate in the US is heating up as November elections draw near. After the assassination attempt on Republican Party nominee Donald Trump one week ago and turmoil within the opposing Democrat party, analysts believe that his chances of reclaiming the presidency have greatly increased. This has prompted experts such as Thorsten Polleit, Honorary Professor of Economics at the University of Bayreuth, to forecast that gold prices are poised to rise, possibly by 10% to 15%, by this time next year. Currency and commodity analyst Arslan Ali at FX Empire noted that Trump’s policy stance may be potentially inflationary, weakening the dollar and enhancing the attraction of gold as a safe-haven asset. In any case, investors expect a 90% chance that the Federal Reserve will cut interest rates in September creating tailwinds for gold.

Spot prices of precious metals are down for the week. Gold closed at $2,400.83 per troy ounce, 0.44% lower than its close last week at $2,411.43. Silver ended at $29.22 per troy ounce, 5.10% below last week’s close at $30.79. Platinum settled at $965.95 per troy ounce, 3.78% below its close last week at $1,003.92. Palladium last traded at $910.05 per troy ounce, 6.35% down from its closing price last week of $971.77. The three-month LME prices of industrial metals also ended lower for the week. Copper came from $9,786.50 last week to end at $9,386.00 per metric ton this week for a 4.09% loss. Aluminum slid from its close last week at $2,476.50 to its close this week at $2,385.00 per metric ton, coming down by 3.69%. Zinc, which ended last week at $2,959.00, closed this week at $2,809.00 per metric ton, a loss of 5.07%. Tin, which closed last week at $34,666.00, ended this week at $31,604.00 per metric ton for a loss of 8.83%.

Energy and Oil

Disappointment in China’s outlook has offset the consistent stream of positive news for oil from the United States despite the largely unexpected 5-million-barrel drop in US crude stocks. Hardly any tangible pledges were seen by the Third Plenum of China’s Central Committee, with the lack of constructive takeaways across commodities. Meanwhile, shrinking stocks in the delivery point of WTI in Cushing fell to their lowest reading in three months, and the premium of front-month US crude futures over the M2 contract widened to its highest since October 2023, as high as $1.60 per barrel. Furthermore, the global IT outage disrupted Friday trading, prompting ICE Brent to close the week at around $85 per barrel.

Natural Gas

For the report week from Wednesday, July 10 to Wednesday, July 17, 2024, the Henry Hub spot price fell by $0.39 from $2.37 per million British thermal units (MMBtu) to $1.98/MMBtu. The last time the Henry Hub price fell below $2.00/MMBtu in July was in 2020 during the COVID-19 pandemic. Regarding Henry Hub futures, the price of the August 2024 NYMEX contract decreased by $0.294, from $2.329/MMBtu at the beginning of the report week to $2.035/MMBtu at the week’s end. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.175 to $2.827/MMBtu.

International natural gas futures price changes were mixed this week. The weekly average front-month futures prices of LNG cargoes in East Asia decreased by $0.12 to a weekly average of $12.28/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 $0.04 to a weekly average of $10.16/MMBtu. In the week last year corresponding to this report week (beginning July 12 and ending July 19, 2023), the prices were $11.22/MMBtu in East Asia and $8.67/MMBtu at the TTF.

World Markets

European stocks lost some ground this week as the pan-European STOXX Europe 600 Index closed 2.68% lower in local currency terms amid rising trade tensions between China and the U.S. The major indexes in the Continent were also down. Italy’s FTSE MIB lost by 1.05%, France’s CAC 40 Index fell by 2.46%, and Germany’s DAX declined by 3.07%. The UK’s FTSE 100 Index gave back 1.18%. While the European Central Bank (ECB) was expected to reduce interest rates this second half of 2024, it has not yet happened as the central bank kept their rates unchanged at 3.75%. The ECB clarified that it will not commit to any rate path and will base its decisions on economic data. ECB President Christine Lagarde that a move in September is “wide open” and that risks to economic growth were “tilted to the downside.”  Industrial production in the euro area dropped in May by 0.6% sequentially, for the first time since January. Output dropped by 2.9% year-over-year, with the steepest declines registered in Germany, Italy, and France. In the UK, average earnings, excluding bonuses, grew by an annual 5.7% in the three months to May, remaining close to double the headline annual inflation which holds steady at 2% in June. The jobs market remains strong, sparking doubts that the Fed will announce a rate cut in August.

Japan stocks fell over the week. The Nikkei 225 Index lost by 2.7% while the broader TOPIX Index declined by 1.2%. Rising concerns about tighter U.S. restrictions on exporters of advanced semiconductor technology to China (including several Japanese chipmakers), weighed on technology stocks. The yield on the 10-year Japanese government bond dropped to 1.04%, from 1.06% at the end of the previous week, amid speculation about whether the Bank of Japan (BoJ) would hike interest rates at its meeting scheduled for July 30-31. The yen strengthened to about JPY 157.37 against the greenback, from JPY 157.91 during the previous week. The yen’s second successive weekly gain came after what is suspected to be recent yen-buying operations by the government. On the Japanese economy, inflation ticked up as the closely monitored core consumer price index (CPI) rose by 2.6% year-over-year in June, up from 2.5% year-on-year in May, but still short of a consensus estimate of 2,7%. The country’s economic fragility was underscored by the government reducing its gross domestic product growth forecast for the current fiscal year ending March 2025 to a 0.9% expansion, from a projected gain of 1.3% in January. The downgrade is largely due to sluggish domestic demand amid rising import costs resulting from the yen’s weakness, which in turn erodes the purchasing power of households.

China’s equities market climbed as investor sentiment was largely unmoved by weaker-than-anticipated economic growth in the second quarter. The Shanghai Composite Index rose by 0.37% for the week while the blue-chip CSI 300 advanced by 1.92%. Hong Kong’s benchmark Hang Seng Index fell back by 4.79%. The country’s gross domestic product grew slower than expected at 4.7% in the second quarter year-on-year, slowing down from the first quarter’s 5.3% growth. The economy grew by 0.7% on a quarterly basis, which is less than half of the first quarter’s revised 1.5% expansion. The weakness in the economy was highlighted by other data. Year-on-year retail sales grew by 2%, which is slower than forecasted, and slower than the 3.7% increase in May. This was partly due to lower sales of autos and household appliances. A bright light is that industrial production rose by a better-than-expected 5.3% in June from one year ago, but it was slower than May’s 5.6% rise. China’s new home prices dipped by 0.7% in June, the same as May’s 0.7% drop and extending losses for the 12^th consecutive month. The data suggests that the major property rescue package rolled out by Beijing in May had little impact in turning around the property market slump that has become the greatest hindrance to China’s economic recovery.

The Week Ahead

The second quarter GDP and PCE inflation data for June are among the important economic data scheduled for release in the coming week.

Key Topics to Watch

• Existing home sales for June
• New home sales for June
• GDP for Q2
• Initial jobless claims for July 20
• Durable-goods orders for June
• Durable-goods minus transportation for June
• Advanced U.S. trade balance in goods for June
• Advanced retail inventories for June
• Advanced wholesale inventories for June
• Personal income (nominal) for June
• Personal spending (nominal) for June
• PCE index for June
• PCE (year-over-year)
• Core PCE index for June
• Core PCE (year-over-year)
• Consumer sentiment (final) for July

Markets Index Wrap-Up

Stock Markets

The Dow Jones Industrial Average (DJIA), which consists of 30 stocks, inched up by 0.54% for the week, while the Dow Jones Total Stock Market Index jumped by 1.33%. The broad S&P 500 Index is up by 1.54% while the technology-heavy Nasdaq Stock Market Composite added 2.77% and outperformed all the other major indexes. The NYSE Composite is up by 0.50%, mirroring the DJIA. Investor risk perception as reflected by the CBOE Volatility Index (VIX) went up by 1.96% for the week. 

The S&P 500 continued to break into new highs despite the notably narrow market advance. Growth shares outperformed value stocks by 415 basis points, as measured by the Russell 1000 indexes, while the small- and mid-cap benchmarks registered losses. The Nasdaq Composite, which tracks technology (growth) stocks, closed this week 73.71% off its lows since the market turned and reversed its downtrend in mid- to late-2022, while the more value-oriented and narrowly focused DJIA had achieved half that increase, 32.79%. A major factor for investors to favor growth stocks was the expectation for lower interest rates, fed by weakening growth and easing inflation pressures.  This combination places a lower implied discount on future earnings. Volume was light this week partly due to the Independence Day Holiday when the markets were closed.

U.S. Economy

On Monday, the Institute for Supply Management (ISM) posted its lowest reading of manufacturing activity since February at 48,5, a level in contraction territory. A surprise contraction in construction activity was also signaled by a separate reading. More surprising is a report released on Wednesday showing a sharp downturn in the ISM’s gauge of current services sector activity. This metric plunged from 53.8 in May to 48.8 in June, a full five points into contraction territory. It is also the index’s lowest level since soon after the start of the pandemic lockdowns in early 2020. According to the survey respondents, the high gas prices and worries over elevated restaurant menu prices were weighing on consumers. The survey’s chief researcher and other observers hope, however, that the drop will eventually prove to be an anomaly. By comparison, S&P’s Global rival survey rose from 55.1 to 55.3, indicating continued expansion and even a slight acceleration.

The week’s important jobs data was similarly mixed on the health of the economy. The Labor Department’s JOLTS report revealed on Tuesday that job openings slightly increased to 8.14 million in May but the same statistic was downwardly revised to 7.9 million in April, the lowest level in more than three years. Likewise, the tally of private sector job growth by payroll processor ADP was released on Wednesday. The job tally fell more than expected, from 160,000 in May to 150,000 in June. Chief US Economist Blerina Uruçi noted that the JOLTS data showed both quits and hiring back to pre-pandemic levels, indicating sustained loosening in the labor market. Labor market cooling does not, however, signify weakness.

Metals and Mining

The precious metals market was up for the week. Gold, which ended at $2,326.75 last week, closed this week at $2,392.16 per troy ounce for an appreciation of 2.81%. Silver ended at $31.22 per troy ounce, higher by 7.14% over last week’s close at $29.14. Platinum came from $996.26 last week to end at $1,030.09 per troy ounce this week, an increase of 3.40%. Palladium was worth $977.10 last week but gained by 5.37% to settle at the closing price of $1,029.57 per troy ounce.  The three-month LME prices of base metals are also up during this week’s trading. Copper closed at $9,944.00 per metric ton, 4.50% higher than its close last week at $9,515.50. Aluminum ended the week at $2,535.50 per metric ton, 1.73% above last week’s closing price of $2,492.50. Zinc settled this week at $3,001.00 per metric ton, higher than the previous week’s close at $2,929.50 by 2.44%. Tin, which traded last week at $32,208.00, closed this week at $33,874.00 per metric ton, higher by 5.17%.

Energy and Oil

US markets were closed for the Independence Day Holiday thus market activity was relatively light. Hopes were instilled among investors that summer demand would not be that bad after all, as indicated by the triple combination of lower US crude, gasoline, and diesel inventories. Crude is set for another weekly gain with ICE Brend ending the week above $87 per barrel The bullish sentiment is driving the market amid increasing optimism for US interest rate cuts in September. In the meantime, in defiance of the White House snapback of sanctions, Venezuela increased its oil production last month to 922,000 barrels per day (b/d), up from 912,00 b/d in May, due to increasing activity in new drilling and well workovers.

Natural Gas

For the report week from Wednesday, June 19 to Wednesday, June 26, 2024, the Henry Hub spot price rose by $0.06 from $2.39 per million British thermal units (MMBtu) to $2.45/MMBtu. Regarding Henry Hub futures, the July 2024 NYMEX contract expired at the end of the report week at $2.628/MMBtu, down by $0.11.3 from the start of the week. The August 2024 NYMEX contract price decreased to $2.745/MMBtu, down by $10.9 from the start to the end of the report week. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.085 to $3.268/MMBtu.

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 increased by $0.25 to a weekly average of $12.61/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 $0.27 to a weekly average of $10.75/MMBtu. In the week last year corresponding to this report week (beginning June 21 and ending June 28, 2023), the prices were $11,96/MMBtu in East Asia and $10.72/MMBtu at the TTF.

World Markets

European stocks ended higher this week. The pan-European STOXX Europe 600 Index closed the week 1.01% higher in local currency terms. The favorable turn is attributable to the easing of political jitters as the far right in France failed to win an outright majority in the first round of legislative elections on June 30. In the UK, the Labour Party won the general elections on July 4 with a large majority. Major stock indexes in the region climbed. France’s CAC 40 surged by 2.62%, Italy’s FTSE MIB advanced by 2.51%, and Germany’s DAX added 1.32%. The UK’s FTSE 100 Index gained by 0.49%. In the last European Central Bank’s (ECB’s) annual retreat in Portugal, Christine Lagarde, ECB President, struck a more hawkish tone. According to Lagarde, Europe is “still facing several uncertainties regarding future inflation, especially in terms of how the nexus of profits, wages, and productivity will evolve and whether the economy will be hit by new supply-side shocks… It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed.” The year-over-year change in consumer prices ticked lower in June to 2.5%, as a final estimate of eurozone inflation confirmed. A crucial services component, however, remains stubbornly high and reinforces the ECB’s cautious approach.

Japan’s stocks generally ended the week higher, and both its major stock indexes hit all-time highs during the week. The Nikkei 225 Index climbed 3.36% while the broader TOPIX Index gained 2.56% in local currency terms. The stellar performance of equities was in part propelled by the weakness in the yen, typically a tailwind for export-focused industries. Later in the week, the yen slightly recovered. Members of Japan’s biggest union group achieved an average wage increase of 5.1%, the largest increase in 33 years, based on data from the union group. The final wage increase statistic, which included more small businesses, came in at a 5.28% wage hike, highlighting the strong upward wage momentum. In May, household spending declined by 1.8% year-over-year, short of the consensus estimate of a 1% increase. Consumer spending slid by 0.3% compared with the consensus estimate for an increase of 0.5% month-over-month. The weak spending appeared to be dependent upon the weak yen, particularly for the demand for overseas package tours. A 3.1% decline in outlays for food year-on-year appeared to have been driven by rising prices.  

Chinese stocks fell due to the lackluster manufacturing data that heightened concerns about China’s slowing economy. Both the Shanghai Composite Index and the blue-chip CSI 300 recorded modest losses for the week. The Hong Kong benchmark Hang Seng Index rose by 0.46% during the holiday-shortened week. Markets in Hong Kong were closed on Mondy in commemoration of the Special Administrative Region Establishment Day.  Government data showed that China’s manufacturing sector shrank in June for the second consecutive month. As new orders and exports declined, the official manufacturing purchasing managers’ index (PMI) reached 49.5 in June, unchanged from May. Since the figure still missed the 50-mark threshold, the index remained in contraction. The nonmanufacturing PMI, which measures construction and services activity, registered 50.5 which, while expansionary, is below consensus estimates and down from 51.1 in May. On the other hand, the value of new home sales by China’s top 100 developers fell by 17% in June from last year, slowing down from a 34% decline in May. This data released by the China Real Estate Information Corp. raises hopes that the Chinese housing market, now on a downturn for its fourth consecutive year, may begin to gain traction after the government’s sweeping rescue package in May.

The Week Ahead

The CPI and PPI inflation data for June as well as a read on the preliminary consumer sentiment for July are among the important economic releases in the coming week.

Key Topics to Watch

• Consumer credit for May
• NFIB optimism index for June
• Fed Chairman Powell testimony to Senate (July 9)
• Wholesale inventories for May
• Fed Chairman Powell testimony to House (July 10)
• Initial jobless claims for July 6
• Consumer price index for June
• CPI year over year     
• Core CPI for June
• Core CPI year over year        
• St. Louis Fed President Alberto Musalem speaks (July 11)
• Monthly U.S. federal budget by June
• Producer price index for June
• PPI year over year     
• Core PPI by June
• Core PPI year over year        
• Consumer sentiment (prelim) July

Markets Index Wrap-Up

Stock Markets

In the week just ended, small-cap stocks and technology stocks outperformed in mostly quiet trading. According to the Wall Street Journal Markets report, the Dow Jones Industrial Average (DJIA), comprised of 30 stocks, lost 0.08% over the week. The Dow Jones U.S. Total Stock Market Index hardly changed with a small gain of 0.04%. The broad S&P 500 Index surprisingly mirrored the narrow DJIA, losing 0.08%, while the technology-tracking index, the Nasdaq Stock Market Composite, inched up by 0.24%. The NYSE Composite gained marginally by 0.17%. The CBOE Volatility Index (VIX), the indicator of investor risk perception, dipped by 5.76%.

Growth stocks outpaced value stocks as small-cap companies and information technology stocks performed best. Index provider FTSE Russell was due to rebalance its series of Russell indexes after the markets closed on Friday, The primary indexes in the Russell family include Russell 3000, 2500, 2000, 1000, Top 200, Top 50, and a host of other Indexes. So it is likely that some of the market activity during the week may have stemmed from positioning adjustments by investors tracking those indexes.

U.S. Economy

This week, news about the banking sector was featured in the headlines and drove a common benchmark for the industry, the KBW Bank Index, to a strong performance. Media reports announced that the Federal Reserve is considering significantly lighter additional capital requirements for banks than had originally been proposed by regulators in the wake of the banking crisis in March 2023. This positive news was followed by the Fed’s declaration that all 31 of the large U.S. banks assessed by the central bank in its latest round of stress testing remain above their minimum capital levels. This potentially allows the assessed banks to return capital to their shareholders in the form of dividends and buybacks.

The Bureau of Economic Analysis released on Friday morning the May data for the core personal consumption expenditures (PCE) price index. The core PCE index excludes food and energy prices and is the Fed’s preferred measure of inflation. This indicator rose by 0.1% from April. Markets welcomed the deceleration from April’s upwardly revised 0.3% rate as it may signal that the Fed rate cut may likely occur in September.

Metals and Mining

Gold continues to trade in the range between $2,300 to 2,350 for now, but the longer it stays within this narrow margin, the better consolidated this metal would be at this support level. Friday marked the close of the second quarter of 2024, and this is the third consecutive quarter that gold has established a new all-time quarterly closing price. Its close this week is higher than the end of the first quarter by more than 5%. On an annual basis, gold prices are up by a remarkable 21% from the end of the second quarter of last year. Gold’s long-term chart justifies the current extreme bullishness of many commodity analysts, and it is difficult to see a scenario where the current uptrend materially shifts. The price also has solid fundamental macroeconomic support that aligns with the clear technical uptrend.

The spot price of precious metals ended the week mixed. Gold ended at $2,326.75 per troy ounce,      0.21% higher than its close last week at $2,321.98. Silver, which ended last week at $29.55, closed this week at $29.14 per troy ounce for a decline of 1.39%. Platinum gained 0.14% from its closing price last week at $994.90 to end this week at $996.26 per troy ounce. Palladium ended the week at $977.10 per troy ounce, 2.33% higher than last week’s closing price of $54.81. The three-month LME prices of the base metals did not fare any better. Copper, which ended at $9,682.50 last week, closed at $9,515.50 per metric ton for a loss of 1.72%. Aluminum descended by 0.84% from last week’s closing price of $2,513.50 to end this week at $2,492.50 per metric ton. Zinc, which ended last week at $2,844.00, closed this week higher by 3.01% to close at $2,929.50 per metric ton. Tin last traded at $32,208.00 per metric ton this week, ending 1.42% lower from its last weekly close at $32,671.00.            

Energy and Oil

Attention of investors and analysts are currently fixated on the U.S. inflation data even as crude oil prices maintained their hot streak, ending this week with its third consecutive weekly gain. Slackening economic data from the U.S. in May were overshadowed by surging geopolitical tensions centered on Israel and Lebanon. Every day this week saw prices posting a small but steady rise. Brent is set to finish the week at $87 per barrel. Meanwhile, hedge funds and other money managers have expanded their exposure to Brent futures and options. In the week ending June 18, they have bought the equivalent of 69 million barrels, making this the fourth fastest week-on-week increase since 2013.

Natural Gas

For the report week beginning Wednesday, June 19, and ending Wednesday, June 26, 2024, the Henry Hub spot price rose by $0.06 from $2.39 per million British thermal units (MMBtu) to $2.45/MMBtu. Regarding Henry Hub futures, the July 2024 NYMEX contract expired at the end of the report week at $2.628/MMBtu, down by $0.113 for the week. The August 2024 NYMEX contract price decreased by $2.745/MMBtu, down by $0.109 from the beginning to the end of the week. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.085 to $3.268/MMBtu.

Natural gas futures price changes in the international market were mixed for the report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.25 to a weekly average of $12.61/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 $0.27 to a weekly average of $10.75/MMBtu. In the week last year corresponding to this report week (from June 21 to June 28, 2023), the prices were $11.96/MMBtu in East Asia and $10.72/MMBtu at the TTF.

World Markets

The European stock market was lackluster this week. The pan-European STOXX Europe 600 Index ended lower by 0.72% due to heightened political uncertainty in France ahead of the snap election called by President Emmanuel Macron. The major regional stock indexes were mixed. France’s CAC 40 Index lost by 1.96%, Italy’s FTSE MIB slipped by 0.46%, and Germany’s DAX climbed by 0.40%. The UK’s FTSE 100 Index slid by 0.89%. Inflation in June slowed in France and Spain as the prices of fuel and food continued to increase, albeit at a slower rate. In Spain, inflation dropped to 3.5% from just over a one-year high of 3.8%. The annual rate in France fell to 2.5% in June from 2.6%. The German economy has exhibited difficulty in overcoming stagnation, as highlighted by a rise in unemployment and an unexpected deterioration in business confidence. The jobless rate hit its highest level in just over three years at 6.0% in June from 5.9% in May. The Ifo Institute’s think tank’s business confidence indicator softened from 89.3 in May to 88.6 in June, attributable to worsening expectations in marketing and trade.

In Japan, stocks rose over the week. The Nikkei 225 Index gained 2.6% while the broader TOPIX Index added 3.1%, mainly due to the historic weakness in the yen continuing to support Japan’s export-heavy industries. The yen fell to around JPY 160.6 against the USD from its week-ago exchange rate of JPY 159.7 to USD 1, which is close to its lowest level in 38 years. Contrary to expectations that authorities would intervene to support the yen and halt its sharp decline, only verbal reassurance was issued from Finance Minister Shunichi Suzuki. On the economic front, attention was focused on the Tokyo-area core consumer price index reading for June. Inflation was seen to rise by 2.1% year-on-year which is higher than consensus estimates and an acceleration from the May inflation rate of 1.9%. The increase was attributed mainly to services inflation and the growing speculation about Bank of Japan (BoJ) policy normalization. The BoJ aims to achieve its 2.0% inflation target sustainably. Both retail sales and industrial production grew in May at a faster rate than was anticipated.

A light economic calendar and concerns that the economy was slowing curbed investors’ risk appetite and brought Chinese stocks down for the week. The Shanghai Composite Index and the blue-chip CSI 300 Index both declined slightly over the week. The Hong Kong benchmark Hang Seng Index declined by 1.5%.  In May, industrial profits at large companies ascended by 0.7% from a year earlier, but it is down from April’s 4% gain according to the National Bureau of Statistics. The year-on-year earnings improvement was attributed by analysts to higher commodity prices, which boosted profits for mining companies. The month-on-month decline, however, reflected sluggish consumption amid the country’s prolonged property downturn and persistent deflationary pressure. In the future, investors will be keen to watch out for China’s official purchasing managers’ index (scheduled for release on Sunday), followed by the private sector Caixin factory survey on July 1. Also contributing to the week’s declines is foreign selling, with global funds unloading about RMB 49.4 billion of onshore shares via trading links with Hong Kong in June through last Wednesday.

The Week Ahead

The ISM manufacturing PMI, jobless claims, and the nonfarm payrolls report for June are among the important economic releases scheduled in the coming week.

Key Topics to Watch

• S&P final U.S. manufacturing PMI for June
• Construction spending for May
• ISM manufacturing for June
• Federal Reserve Chair Jerome Powell speech in Portugal (July 2)
• Job openings for May
• Auto sales for June
• New York Fed President John Williams speech in Portugal (July 3)
• ADP employment for June
• Initial jobless claims for June 29
• U.S. trade deficit for May
• S&P final U.S. services PMI for June
• Factory orders for May
• ISM services for June
• Minutes of Fed’s June FOMC meeting            
• New York Fed President John Williams speech in India (July 5)
• U.S. employment report for June
• U.S. unemployment rate for June
• U.S. hourly wages for June
• Hourly wages year over year

Markets Index Wrap-Up

Stock Markets

The major stock indexes are mostly up over the shortened trading week (markets were closed on Wednesday for the Juneteenth holiday) although the gains are modest. The Dow Jones Industrial Average, a 30-stock index, closed 1.45% higher than last week, while the Dow Jones Total Stock Market Index closed higher by 0.63%. The broad S&P 500 ended 0.61% higher, not surprisingly mirroring the Total Stock Market Index. The technology-heavy Nasdaq Stock Market Composite underperformed the other major indexes by moving sideways this week, neither climbing nor dipping. The NYSE Composite gained 1.00% for the week. The CBOE Volatility Index (VIX), the indicator of investors’ risk perception, moved higher by 4.27%.

There were modest signs of market broadening and rotation as value stocks outperformed growth stocks and, as seen above, most of the major benchmarks did better than the technology-tracking Nasdaq Composite. On Friday, roughly $5.5 trillion in options related to indexes, individual stocks, and exchange-traded funds were set to expire, earning for that day the term “triple-witching day.” In the bond markets, the lackluster retail sales data released during the week appeared to push longer-term Treasury yields lower. Friday’s stronger S&P Global readings, however, provided some support to bring them up and end the week modestly higher. Tax-exempt municipal bond yields remained relatively steady for most of the week.

U.S. Economy

Economic news releases at the start of the week suggested that easing labor demand and dwindling savings are pushing consumers to adopt greater caution. The Commerce Department reported on Tuesday that retail sales increased only by 0.1% in May based on advanced estimates, while falling by a downwardly revised 0.2% in April. Sales at bars and restaurants notably fell by 0.4%. This metric in particular is signaling less discretionary spending, but sales of grocery stores also fell 0.4%. Since retail sales data are not adjusted for inflation, the latter figures on grocery store sales perhaps reflect recent price cuts in certain food categories.

Manufacturing data released this week were somewhat stronger. In a reversal of recent trends, the Federal Reserve announced that industrial production expanded by 0.9% in May. This is well above consensus expectations and the fastest pace in almost a year. Factories were also operating a tick above expectations and at the highest level since last November, at 78.7% of capacity. Data released later in the week suggest that the economy was stronger than the retail sales data indicated. S&P Global announced on Friday that its composite index of business activity had climbed to 54.6 in June based on preliminary data, its best level in two years. Figures above 50.0 indicate expansion. With payrolls increasing at the best pace in five months and rebounding from two months of declines, the services sector appeared to be in rather good shape. Other good news shows selling price pressures in the services sector were among the lowest recorded since the start of the pandemic. However, there appears to be some pressure on operating margins in this sector as service providers continue to face higher wage bills.

Metals and Mining

Gold continues to churn within a narrow range between $2,300 to $2,350 per ounce, causing some frustration among investors. This may be perceived as a helpful consolidation that shakes out short-term players and allows investors to focus on the broader landscape. Its sojourn above the $2,300 support comes after an impressive run that began in March and rallied to a record high above $2,450 per ounce. While momentum has currently stalled, the factors behind the rally remain intact, suggesting that the rally may resume after gains have been consolidated. The present geopolitical uncertainty is an opportune time for the market to digest the gains so far, particularly with the November elections on the horizon.   

The spot prices of precious metals closed mixed for this week. Gold closed at $2,321.98 per troy ounce, lower by 0.47% from last week’s closing price of $2,333.04.  Silver was unchanged, closing the week at $29.55 per troy ounce, same as last week. Platinum gained 3.50% over its closing price last week at $961.30 to end at $994.90 per troy ounce. Palladium ended this week at $954.81 per troy ounce, 6.78% higher than last week’s close of $894.16. The three-month LME prices of base metals also ended mixed. Copper closed at $9,682.50 per metric ton, lower by 0.61% from last week’s close at $9,741.50. Aluminum, which closed last week at $2,517.50, descended by 0.16% to end this week at $2,513.50 per metric ton. Zinc, on the other hand, closed at $2,844.00 per metric ton, 2.76% higher than its last weekly close at $2,767.50. Tin gained by 1.09% from last week’s closing price of $32,318.00 to its closing price this week at $32,671.00 per metric ton.

Energy and Oil

Several factors have come together to lift oil prices to their highest levels since early May. These include improving demand figures corroborated by shrinking crude and product inventories, the onset of hurricane season in the U.S., and more visible Chinese buying. Regarding the weather system in America, a storm system has recently made landfall in northeast Mexico, becoming the first named tropical storm of the 2024 Atlantic hurricane season. Tropical Storm Alberto brings heavy rains that are disrupting lightering operations in Corpus Christi and Beaumont. Furthermore, the dysfunctional Red Sea navigation has once again caught the attention of the market, with the Houthis shrinking another bulker this week, thereby exerting upward pressure on oil prices.

Natural Gas

For the report week beginning Wednesday, June 12, and ending Wednesday, June 19, the Henry Hub spot price rose by $0.58 from $2.22 per million British thermal units (MMBtu) to $2.80/MMBtu. Regarding Henry Hub futures, the price of the July 2024 NYMEX contract increased by $0.288, from $2.757/MMBtu at the start of the report week to $3.045/MMBtu at the week’s end. Before Tuesday, when the front-month futures price settled at $3.129/MMBtu, the front-month price had not been above $3.00/MMBtu since January. The price of the 12-month strip averaging July 2024 through June 2025 futures contracts climbed by $0.236 to $3.459/MMBtu.

This report week, international natural gas futures price changes were mixed. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.01 to a weekly average of $11.99/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 $0.19 to a weekly average of $10.81/MMBtu. In the week last year corresponding to this report week (beginning June 7 and ending June 14, 2023), the prices were $9.29/MMBtu in East Asia and $10.40/MMBtu at the TTF.

World Markets

European stocks ended marginally higher this week, with the pan-European STOXX Europe 600 Index gaining by 0.79%.in local currency terms. The market rebound is seen as the result of abating worries about political uncertainty and the improving outlook of the monetary policy. Major stock indexes gained lost ground. Italy’s FTSE MIB surged by 1.67%, France’s CAC 40 Index gained by 1.67%, and Germany’s DAX climbed by 97%. The UK’s FTSE 100 put on 1.12%. In June, private security business activity in the eurozone slowed and performed short of expectations. Manufacturing contracted sharply while services lost momentum, according to purchasing managers’ surveys. According to preliminary figures compiled by S&P Global, the HCOB Composite Purchasing Managers’ Index (PMI), which combines activity in manufacturing and services, dropped from 52.2 in May to 50.8 in June, just a hairline above the 50.0 demarcation between expansion (above 50) and contraction (below 50). Overall business activity increased slightly, while the slowdown in the rate of expansion suggested weakness in manufacturing production. Meanwhile, a decrease in new orders in France caused output to contract for a second straight month.

Japan’s stock markets lost ground for this trading week. The Nikkei 225 Index fell by 0.6% while the broader TOPIX Index lost by 0.8%. The lackluster performance in the stock markets may be traced to uncertainty about the future trajectory of the monetary policy of the Bank of Japan (BoJ) which weighed on sentiment. As investors sought to digest data showing that inflation had speeded up in May and speculation grew rife that this may affect the BoJ’s decision about when to next raise interest rates, the yield on the 10-year Japanese government bond (JGB) rose from 0.93% in the preceding week to 0.97%, this week. Following a 2.2% uptick in April, the nationwide core consumer price index rose by 2.5% year-on-year in May, although this fell slightly short of consensus expectation for a 2.6% increase. In currencies, the yen softened to around JPY 158.8 against the USD from the week-ago JPY 157.4. The yen hovers near fresh 34-year lows as it continues to be weighed down by U.S.-Japan interest rate differentials. If speculative or excessive volatility materializes in the foreign exchange markets, Japanese authorities expressed their readiness to intervene and support the yen.

Chinese equities pulled back as investor sentiment was dampened by mixed economic news. The Shanghai Composite Index dropped by 1.14% even as the blue-chip CSI 300 slumped by 1.3%. The Hang Seng benchmark Hang Seng Index climbed by 0.48%. Industrial production advanced by a weaker-than-expected 5.6% in May compared to one year ago, slowing from the 6.7% April growth rate. In the calendar year to May, fixed asset investment grew by 4% compared with a year ago, but eased from the January to April period as real estate investment declined deepened. Retail sales increased by 3.7% in May year-on-year which exceeded consensus expectations and outpaced the 2.3% gain in April. The nationwide urban employment rate remained unchanged at 5%. China’s new home prices fell by 0.7% in May, accelerating from April’s 0.6% drop. According to the statistics bureau, this marks the deepest month-on-month contraction in almost a decade. This is the eleventh consecutive month that new home prices declined, and it comes after Beijing launched a historic rescue package in May intended to revive the property sector. The housing market slump remains a significant drag on the economy and analysts caution that the measures unveiled by the government may be insufficient to halt the further descent of the housing market slump.

The Week Ahead

The PCE inflation data, consumer confidence data, and new and pending home sales are among the important economic releases in the coming week.

Key Topics to Watch

• Fed Gov. Christopher Waller speech in Rome (June 24)
• Chicago Fed President Austan Goolsbee TV appearance (June 24)
• San Francisco Fed President Mary Daly speech (June 24)
• Fed Gov. Michelle Bowman speech in London (June 25)
• S&P Case-Shiller home price index (20 cities) for April
• Consumer confidence for May
• Fed Gov. Lisa Cook speech (June 25)
• New home sales for May
• Initial jobless claims for June 22
• GDP (2nd revision) for First Quarter
• Durable-goods orders for May
• Durable-goods minus transportation for May
• Pending home sales for May
• Richmond Fed President Tom Barkin speech in Paris (June 28)      
• Personal income (nominal) for May
• Personal spending (nominal) for May
• PCE index for May
• PCE (year-over-year)
• Core PCE index for May
• Core PCE (year-over-year)   
• Chicago Business Barometer (PMI) for June
• Consumer sentiment (final) for June
• Fed Gov. Michelle Bowman speech (June 28)

Markets Index Wrap-Up