Stock Markets

All stock indexes were up this week in apparent reaction to inflation resuming its downward trajectory in October from its brief acceleration in late summer. The Dow Jones Industrial Average (DJIA) ended the week 1.94% higher than the week before, with the broader DJ Total Stock Market Index ending 2.55% up. The global S&P 500 Index closed 2.24% up for the week while the technology-heavy Nasdaq Stock Market Composite similarly surged by 2.37%. The NYSE Composite gained by 2.76%. The indicator for investors’ risk perception, the CBOE Volatility (VIX) Index ended lower by 2.61%.

This week’s performance saw the S&P 500 Index moving above the 4,500 barrier for the first time since September, thus building on its strong gains over the previous two weeks. The advance registered across the board as the equally weighted S&P 500 Index outperformed its market-weighted version by a full percentage point. The Russell 1000 Value Index likewise did better than its growth counterpart as it moved back into positive territory for the year to date. Similarly, outperforming were the small cap indexes. Strong performance results from retailers Target and Walmart seem to contribute to the rally, but since the third-quarter reporting season was winding down, the surge could be largely attributed to macroeconomic factors.

U.S. Economy

The Labor Department reported on Tuesday that its headline consumer price index remained unchanged in October, due in part to a sharp decrease in energy costs. Core CPI (excluding food and energy prices) rose 0.2%, which resulted in an increase in the year-over-year figure to 4.0%. This is the indicator’s slowest rate in two years. The producer price inflation rate, released the following day, was also surprisingly lower than expected. Another hopeful sign that inflation might have peaked was the American Farm Bureau’s annual Thanksgiving survey which it released on Wednesday. The report showed that a typical dinner was expected dinner to cost 4.5% less in 2023 compared to the year before, due to falling prices for seven out of 11 food items (including turkey). While the may be a bit of good news, the meal still costs significantly more than it had in 2021, totaling $61.17 compared to $53.31 two years ago.

Other news that lifted investor sentiments was contained in Wednesday’s retail sales report from the Commerce Department. Unadjusted for inflation, retail sales fell by 0.1% in October, which was lower than expected and partly due to a reduction in gasoline and auto sales. Home-related spending on furniture and building materials continued to decline, although consumer spending continued to increase at bars and restaurants and online. The signs of cooling inflation contributed to a further drop in long-term Treasury yields. The benchmark 10-year note briefly touched an intraday low of about 4.40% on Friday, its lowest level since mid-September. The falling yields confirm a change in Fed policy. Overall, economic data are reflecting the right balance, not too hot nor too cold, leaving the October correction as a thing of the past.

Metals and Mining

Solid bullish momentum was reflected in the gold market this week as prices bounced off a three-week low, but confirmation is still elusive as the precious metal has not yet sustained a convincing breakout above the $2,000 resistance level. In the right economic environment, gold’s price action hints at much potential. However, the consensus of analysts is that the conditions are not yet in place to sustain a rally to all-time highs. This week, gold’s 2% rally was helped by the U.S. CPI showing annual inflation rising 3.2% in October. Simultaneously, core inflation rose by 4.0%, the smallest 12-month increase since September 2021. Producer inflation also dropped by 0.5% in October, the biggest one-month decline since April 2020. The weak inflation figures drew investor attention once more to a potential change in the Fed’s monetary policy and the possibility of a rate cut by May. But until the Fed reverses its tightening bias, investors in gold should patiently look for tactical buying opportunities while waiting for the bullish market with the strong return of institutional investors.

The spot prices of precious metals are up this week. Gold gained 2.09% from last week’s closing price of $1,940.20 to this week’s closing price of $1,980.82 per troy ounce. Silver advanced by 6.51% from last week’s close at $22.27 to this week’s close at $23.72 per troy ounce. Platinum surged by 6.73% from its week-ago price of $845.83 to its latest close at $902.72 per troy ounce. Palladium soared by 9.88% from its prior weekly close at $961.77 to its close this week at $1,056.78 per troy ounce. The three-month LME prices of industrial metals were mixed this week. Copper went from its closing price last week of $8,035.50 to its closing price this week of $8,267.00 per metric ton for an appreciation of 2.88%. Zinc declined by 0.27% from last week’s close at $2,562.00 to this week’s close at $2,555.00 per metric ton. Aluminum slid by 0.36 from its price last week of $2,215.00 to its price this week of $2,207.00 per metric ton. Tin climbed by 1.01% from its closing price last week of $24,603.00 to its closing price this week of $24,852.00 per metric ton.

Energy and Oil

Oil prices saw their lowest prices this week since July. WTI fell to $73 per barrel on its fourth straight weekly loss. The decline resulted from a combination of weak U.S. economic data and CTA trading patterns that aggravated the decline. Labor market data out this week in the U.S. points to signs of cooling off, with initial jobless claims rising to their highest since August, and continuing jobless claims also on the rise, hitting their highest in two years. However, both remain below their historical averages over the past 50 years. The softening labor demand signals that companies will slow hiring to protect their profitability. In any case, the WTI has shed its previous levels of steep backwardation (a situation where future prices are lower than spot prices) and is now in contango (situation where future prices are higher than spot prices) in the prompt months (the calendar months when the arrival period ends). Oil prices did, however, begin to bounce back on Friday despite the negative sentiment, with Brent rising to $78.50 and WTI trading at $73.86.

Natural Gas

For the report week beginning Wednesday, November 8, and ending Wednesday, November 15, 2023, the Henry Hub spot price advanced by $0.66 from $2.21 per million British thermal units (MMBtu) when the week began to $2.87/MMBtu by the week’s end. In Henry Hub futures, the price of the December 2023 NYMEX contract increased by $0.003, from $3.106/MMBtu at the start of the report week to $3.109/MMBtu by the week’s end. The price of the 12-month strip averaging December 2023 through November 2024 futures contracts declined by $0.022 to $3.284/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 declined by $0.29 to a weekly average of $17.17/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 $0.33 to a weekly average of $14.97/MMBtu. In the week last year corresponding to this report week (November 9 to November 16, 2022) the prices were $27.06/MMBtu in East Asia and $34.10/MMBtu at the TTF. 

World Markets

European stocks ended higher for the week on hopes in financial markets that central banks would soon be cutting interest rates. The pan-European STOXX Europe 600 Index climbed for the week and ended 2.82% above last week’s close in local currency terms. Major stock indexes rose sharply in the region. France’s CAC 40 Index gained by 2.68%, Italy’s FTSE MIB added 3.49%, and Germany’s DAX surged by 4.49%. The UK’s FTSE 100 Index ascended by 1.95%. Bond yields throughout Europe declined as a result of data indicating that inflationary pressures have eased. The yield on the 10-year German government bond inched lower on the perception that central banks may embark on rate cuts next year. Similarly, Swiss, French, and Italian sovereign bond yields moved lower. The yield on the 10-year UK government bond slipped toward 4.1%. European Central Bank (ECB) President Christine Lagarde announced that policymakers expected that inflation may accelerate at the start of next year, but even if it did, another interest rate increase may not be needed.

In Japan, the stock market rose as risk appetite was boosted by the recent U.S. inflation data. The Nikkei 225 Index gained by 3.1% while the broader TOPIX Index advanced by 2.3%. Earnings announcements that surprised on the upside provided some of the momentum for stock price gains, while weak third-quarter gross domestic product (GDP) data had no impact on investor sentiment. The U.S. inflation report which came below expectations signaled the imminence of an economic soft landing, furthering hopes that interest rates have peaked. The yield on the 10-year Japanese government bond (JGB) plunged to 0.72% from 0.85% at the end of the previous week, following the growing weakness of U.S. bond yields. As a result, the Bank of Japan was prompted to reduce the offer amounts for its regular purchase of JGBs in an attempt to limit volatility in yield movements. Expectations of an end to U.S. monetary policy tightening provided support to the yen, which ended the week higher, at about JPY 149 to the U.S. dollar.

Chinese equities ended mixed after official indicators underscored the country’s economic fragility. The Shanghai Composite Index climbed by 0.51% while the blue-chip CSI 300 Index fell by 0.51%. Hong Kong’s benchmark Hang Seng Index gained by 1.46%. A mixed picture of China’s economy was reflected in the official data for October. Surprising on the plus side, industrial production and retail sales grew year-on-year by more than forecasted. On the other hand, fixed asset investment growth was poorer than expected due to weaker infrastructure growth and real estate investment. Unemployment remained unchanged from September. New bank loans rose by RMB 738.4 billion in October which was higher than consensus estimates, but which was lower than September’s reading of RMB 2.31 trillion due to seasonal downturn in corporate lending. Official data also showed that the slump in the housing market deepened in October. Investment in property development fell by 9.3% in the first 10 months of the year which exceeded consensus, compared to a 9,1 decline in the January to September period, as determined by the National Bureau of Statistics. Between January and October 2023, property sales slumped by 7.8% compared to the same period in 2022. New home prices in 70 of China’s largest cities fell by 0.38% last month from September, marking the largest month-on-month drop since February 2015.

The Week Ahead

This week, important economic data expected for release include the November S&P Global Purchasing Managers Index (PMI) data for service and manufacturing, and the U.S. leading economic indicators for October.

Key Topics to Watch

• U.S. leading economic indicators for October
• Richmond Fed President Tom Barkin TV appearance
• Existing home sales for October
• Minutes of Fed’s Oct. 31 – Nov. 1 FOMC meeting
• Initial jobless claims for Nov. 18
• Durable goods orders for October
• Durable goods minus transportation for October
• Consumer sentiment (final) for November
• S&P flash U.S services PMI for November
• S&P flash U.S. manufacturing PMI for November

Markets Index Wrap-Up

Stock Markets

After the stock market’s strong run-up over the past weeks when the S&P 500 Index came close to reprising its longest winning streak in nearly two decades, equities lost steam and ended mixed for the week. According to the Wall Street Journal Markets tracker, the Dow Jones Industrial Average (DJIA) eked out a 0.65% gain for the week, and its Total Stock Market Index a 0.91% return as well. The S&P 500 Index ascended by 1.31% while the technology-heavy Nasdaq Stock Market Composite climbed by 2.37%. However, the NYSE Composite declined by 0.56%. The risk perception metric CBOE Volatility Index (Vix) receded by 4.96%.

On Wednesday, the S&P 500 achieved its eighth consecutive gain and the Nasdaq Composite registered its ninth straight gain. The gains were extremely narrow, however. The equally weighted version of the S&P 500 trailed its market-weighted version by 190 basis points, or 1.90%. It was not surprising that the market ran out of momentum as this was one of the final weeks of major third-quarter corporate earnings releases. Some support to the growth counters was provided by upside surprises among some of the technology-oriented firms. Cloud monitoring and security firm Datadog surged 20% on Tuesday after it reported stronger-than-expected earnings and guidance, thus providing a general boost to high-valuation software stocks. However, the initial catalyst that ended the winning streak of major indexes appeared to be the $24 billion auction of 30-year U.S. Treasury bonds last Thursday, which was met with the weakest demand in two years.

U.S. Economy

Investors have been keeping close watch lately as to whether demand will be able to keep up with the government’s elevated borrowing needs, especially after the temporary lifting of the federal debt ceiling. Very few economic data were released this week, most of which were close to expectations. The lone exception was the release on Friday of the University of Michigan’s preliminary measure of consumer sentiment which, contrary to expectations, fell to its lowest level in six months. The survey’s chief researcher attributed this to the wars in Gaza and Ukraine exacerbating worries about the likelihood of higher interest rates. Also reaching higher than previous records was the expectation that long-run inflation rates would4.9 hit 3.2%, the highest level in the survey since 2011.

The economy has remained surprisingly resilient over the first three quarters of this year. The third-quarter GDP annualized growth rate of 4.9% was, in fact, the strongest since 2021 and significantly above what is considered the trend growth in the U.S. of 1.5% to 2.0%. The strong economic growth has so far been driven by personal consumption which so far this year has surprised on the upside. Historically, the U.S. economy has been driven by consumers, as attested to by consumer spending comprising approximately 70% of U.S. GDP.  The question remains as to whether this trend may be slowing in the weeks to come. Since the end of the pandemic period when households were flushed with stimulus cash, the household savings rate has declined to near post-pandemic lows as recent spending has eased pent-up demand. Consumers are spending less than usual due to rising costs and stimulus-era savings depletion. Credit card debt has risen fsto more than $1 trillion in the third quarter of 2023, its highest on record. Bank lending standards have remained tight and consumers continue to face higher interest rates.  As a result, businesses and consumers will face greater difficulty in securing loans.

Metals and Mining

During Thursday’s meeting conducted by Federal Reserve chair Jerome Powell, he warned markets that while inflation has come down from last y ear’s 40-year highs, the central bank is not confident that it has inflation well under control sufficiently to shift from its present tightening stance. He added that the Federal Reserve would not hesitate to raise interest rates further if inflation pressures continue to intensify. This sent negative signals to investors who hitherto were hoping that the Fed was ready to adopt a more dovish bias enough to reverse interest rates and bring them down. Gold investors did not like the message and dropped gold prices below their $1,950 per ounce support.

Over the past week, the spot prices of precious metals were significantly down. Gold, which held at $1,992.65 last week, well above the $1,950 support, ended this week below it at $1,940.20 per troy ounce for a drop of 2.63%.  Silver lost 4.05% of its value, dropping from $23.21 the week before to $22.27 per troy ounce this week. Platinum came from $934.75 on its previous week’s close to $845.83 per troy ounce this week, falling by 9.51%. Palladium took a 14.26% hit as it fell from the previous week’s closing price of $1,121.78 to this week’s closing price of $961.77 per troy ounce. The three-month LME prices of industrial metals ended mixed for the week. Copper ended the week at $8,035.50 per metric ton, lower by 1.32% from its price last week of $8,143.00. Zinc ended higher at $2,562.00 per metric ton, 3.39% up from its ending price the week before of $2,478.00. Aluminum closed this week at $2,215.00 per metric ton, slightly lower by 0.56% from last week’s close at $2,227.50. Tin ended the week at $24,603.00 per metric ton, 2.68% higher than the previous week’s closing price of $23,962.00.              

Energy and Oil

Oil prices struggled this week to maintain their levels as they were battered by inventory build-ups, the weaker=than-expected Chinese economic data, and weakening physical demand due to rising freight costs. ICE Brent was headed towards a week-on-week drop of $5 per barrel and is poised to settle at the $80 per barrel mark. Market sentiment is shifting towards a bearish outlook as investors pay close attention to OPEC+ and the actions it will take when it meets again on November 26 in Vienna after a prolonged break. In the meantime, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman blames falling oil prices on speculators. He attributes the decline in oil prices to a “ploy” hiding the true strength of the oil markets. Speculators are allegedly abusing export figures, failing to distinguish them from production numbers.    

Natural Gas

For the report week covering Wednesday, November 1, to Wednesday, November 8, 2023, the Henry Hub spot price fell by $0.98 from $3.19 per million British thermal units (MMBtu) to $2.21/MMBtu. In the futures market, the price of the December 2023 NYMEX contract decreased by $0.388, from $3.494/MMBtu at the start of the report week to $3.106 by the week’s end. The price of the 12-month strip averaging December 2023 through November 2024 futures contracts declined by $0.199 to $3.306/MMBtu.

International natural gas futures prices declined over this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.36 to a weekly average of $17.46/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 $0.73 to a weekly average of $14.63/MMBtu. In the week last year corresponding to this report week (the week covering November 2 to November 9, 2022), the prices were $27.91/MMBtu in East Asia and $33.95/MMBtu at the TTF.  

World Markets

European stocks ended lower largely on concerns that rising inflation will continue to push interest rates upward. The pan-European STOXX Europe 600 Index sank by 0.21% this week as optimism dimmed that interest rates have peaked. The major stock indexes in the region were mixed. Germany’s DAX added 0.30%, Italy’s FTSE MIB lost 0.59%, and France’s CAC 40 Index was virtually unchanged. The UK’s FTSE 100 Index slid by 0.77%. As markets struggled with concerns that the interest rates will remain “higher for longer” as policymakers hawkishly contended, European government bond yield broadly climbed. Christine Lagarde, the European Central Bank (ECB) president, pronounced that it will take longer than “the next couple of quarters” before the ECB begins to reverse rates downward. The yield on Germany’s 10-year government bond climbed higher than 2.7%. Likewise, Italian bond yields surged higher. After data showed that the UK’s economy stagnated in the third quarter, UK bond yields became volatile. The country’s gross domestic product (GDP) in the third quarter was in line with the BoE’s forecast for zero growth, after expanding by 0.2% in the previous three months. Governor Andrew Bailey of the Bank of England (BoE) affirmed that it was “really too early” to talk about cutting interest rates.

  In Japan, stocks climbed over the week. The Nikkei 225 Index ended 1.9% higher than last week, and the broader TOPIX Index gained by 0.6% over the same period. The optimistic performance was buoyed by strong corporate earnings, continued currency tailwinds, and the government’s commitment to additional economic stimulus. The yen softened further past the JPY 151 level to the U.S. dollar from JPY 149 the week before. This is the yen’s lowest level in 33 years. Toward the end of the week, investors’ risk appetite was dampened by the hawkish comments from Federal Reserve Chair Jerome Powell that the Fed will not hesitate to further tighten monetary policy to contain inflation and fueling expectations that interest rates will remain higher for longer. Bank of Japan (BoJ) Governor Kazuo Ueda, on the other hand, warned of possibly serious consequences if the BoJ normalized short-term interest rates. The yield on the 10-year Japanese government bond (JGB) fell to 0.85% from 0,91% at the end of the previous week.

Chinese equities climbed as investors remained generally unaffected by data showing that consumer prices slid back into contraction, thus reviving the prospect of deflation that continues to overshadow the economy. The Shanghai Composite Index rose 0.27%, and the blue-chip CSI 300 gained by 0.07% over the week. The Hong Kong benchmark Hang Seng Index dropped by 2.61%. China’s consumer price index pulled back by 0.2% in October year-on-year after remaining unchanged in September, the result of lower pork prices weighing down food prices. In the meantime, the producer price index descended by 2.6% from a year ago. This marks the 13^th consecutive month of decline. A mixed snapshot of China’s economy was shown by the country’s trade data. In October, overseas exports declined by 6.4% year-on-year, surpassing the 6.2% decline in September due to softening global demand. Imports rose by 3%, however, which reversed the 6.2% contraction in September and marked the first year-on-year growth since September 2022. The overall trade surplus declined to $56.5 billion which is below consensus and down from $77.71 billion in September. These developments suggest that China’s economy remains fragile and its growth has not yet bottomed.

The Week Ahead

Among the important economic data due for release in the coming week are the consumer price index (CPI), the producer price index (PPI), and retail sales.

Key Topics to Watch

• Fed Governor Lisa Cook speaks (Mon., Nov. 13)
• Monthly U.S. federal budget
• New York Fed President John Williams speaks (Tues., Nov. 14)
• Fed Vice Chair Philip Jefferson speaks
• NFIB optimism index for October
• Consumer price index for October
• Core CPI for October
• CPI year over year
• Core CPI year over year
• Fed Vice Chair for Supervision Michael Barr testifies to Senate panel
• Chicago Fed President Austan Goolsbee speaks (Tues., Nov. 14)
• Producer price index for October
• Core PPI for October
• PPI year over year
• Core PPI year over year
• U.S. retail sales for October
• Retail sales minus autos for October
• Empire State manufacturing survey for November
• New York Fed President John Williams speaks (Wed., Nov. 15)
• Business inventories for September
• Fed Vice Chair for Supervision Michael Barr testifies to House panel
• Richmond Fed President Tom Barkin speaks
• Fed Vice Chair for Supervision Michael Barr speaks (Thurs., Nov. 16, 7:10 am)
• Initial jobless claims for November 11
• Import price index for October
• Import price index minus fuel for October
• Philadelphia Fed manufacturing survey for November
• Cleveland Fed President Loretta Mester speaks
• Industrial production for October
• Capacity utilization for October
• New York Fed President John Williams speaks (Thurs., Nov. 16)
• Home builder confidence index for November
• Fed Governor Christopher Waller speaks
• Fed Chair for Supervision Michael Barr speaks (Thurs., Nov. 16, 10:35 am)
• Fed Governor Lisa Cook speaks (Thurs., Nov. 16)
• Housing starts for October
• Building permits for October
• Boston Fed President Susan Collins speaks
• Fed Vice Chair for Supervision Michael Barr speaks (Fri., Nov. 17)
• Chicago Fed President Goolsbee speaks (Fri., Nov. 17)
• San Francisco Fed President Daly speaks
• Boston Fed President Susan Collins TV appearance

Markets Index Wrap-Up

Stock Markets

A sharp rally in stocks last week was precipitated by economic data and Federal Reserve announcements that triggered a decline in interest rates. The Dow Jones Industrial Average (DJIA) rose by 5.07% and its Total Stock Market Index by 6.05%. The S&P 500 Index surged by 5.85%, its strongest weekly gain in almost a year. The Nasdaq Stock Market Composite jumped by 6.61% as growth and technology stocks outperformed the market somewhat, although the gains were broad-based. Gains were led by the small-cap Russell 2000 Index, which registered its best weekly gain since October 2022. The NYSE Composite climbed by 5.45%. Investors’ risk perception dipped as indicated by the CBOE Volatility Index (VIX) which pulled back by 29.9%.

Signs of a slowing economy and a statement by the Fed after its policy meeting on Wednesday that was perceived as dovish sent long-term bond yields into a sharp dive. After seven weeks of consecutive hikes in mortgage rates, the 30-year fixed-rate mortgage fell to an average of 7.76% in the week that ended on November 2, down from 7.79^% in the previous week. One year ago, this rate was 6.95%. This development came one day after the Fed said that it would leave its benchmark lending rate at status quo, its highest level in 22 years, as expected. While the Fed rates remained the same, it struck a more balanced tone regarding its upcoming rate decisions outlook that lends credence to the speculation that the policy-making body has completed its rate-hiking cycle.

U.S. Economy

The switch to a dovish outlook by the Fed suggested that the recent rise in long-term Treasury yields had achieved at least some of their intended tightening in financial conditions. The recent upside surprises in economic data also appeared to have satisfied the Fed which tweaked its description of the pace of economic growth from “solid” to “strong.” The closely watched payrolls report released on Friday appears to confirm that the labor market was cooling, which the market hopes to be soon followed by wage pressures. Some 150,000 jobs were added by employers in October, a number which was below expectations and the lowest level since June. September’s strong gain was also revised lower, and the unemployment rate rose to its highest level since January 2022 at 3.9%. \

Average hourly earnings ascended by 0.2%, which was short of expectations, but September’s gain in this regard was adjusted upwards to 0.3%. The 12-month gain fell to its lowest level in over two years at 4.1%, but it remained above the approximately 3% level that policymakers considered compatible with their overall inflation target of 2%. On Monday, the Labor Department released its quarterly employment cost Index which surprised modestly on the upside, reporting an annual increase of 4.3% in wages and benefits. In positive news for both investors and workers, the preliminary estimates of productivity growth in the third quarter were better than expected, indicating a decline in unit labor costs. Productivity gained by 4.7%, its best showing since businesses began to reopen in the third quarter of 2020 during the early stages of the pandemic.

Metals and Mining

While hostilities in the Middle East appear to be generally confined to the Gaza Strip as Israel wages its offensive against Hamas, the static geopolitical environment seems to take its toll on gold the prices of which are stuck at $2,000 per ounce. October’s monthly close was a record high for gold prices, although some investors appear to be somewhat frustrated that this precious metal does not have the momentum to remain at this level. The market remains at around 4% short of its 2020 all-time highs. $2,000 continues to remain a major long-term resistance level for gold, therefore, it is expected that prices may have to consolidate a bit longer at this level, or possibly fall back slightly to gain strength to push upwards to challenge the $2,100 per ounce level.

The spot prices of precious metals continue to move sideways for the week. Gold came from $2,006.37 last week to close this week at $1,992.65 per troy ounce, for a correction of 0.68%. Silver, which ended the week before at $23.12, concluded this week at $23.21 per troy ounce for an increment of 0.39%. Platinum closed the week before at $907.55 and this week at $934.75 per troy ounce for a gain of 3.00%. Palladium came from last week’s close at $1,124.56 to end this week at $1,121.78 per troy ounce for a modest slide of 0.25%. The three-month LME prices of base metals were likewise mixed. Copper ended this week at $8,143.00 per metric ton, higher by 0.54% from last week’s price of $8,099.00. Zinc closed this week at $2,478.00 per metric ton, slightly up by 0.26% from last week’s close at $2,471.50. Aluminum ended this week at $2,478.00 per metric ton, higher by 0.26% from last week’s closing price of $2,220.00. Tin ended the week at $23,962.00 per metric ton, lower by 3.77% from last week’s closing price of $24,902.00.              

Energy and Oil

This week, oil prices climbed, taking their cue from interest rates remaining unchanged after the Fed meeting on Wednesday this week. Oil prices fell for three straight days, after which it received some much-needed boost from federal banks due to their inaction regarding interest rates. Both the Federal Reserve and the Bank of England did not hike interest rates this week, causing Brent to jump back to $87 per barrel as investors were encouraged by the possibility that monetary tightening has reached its peak. In the meantime, U.S. oil production also hit an all-time high as crude and condensate production in the country climbed to a record 13.1 million barrels per day (b/d) in August. This volume surpassed the previous 13.0 million b/d record dating way back in November 2019, with EIA reporting a year-on-year surge in production by 955,000 b/d from the lower 48 states.

Natural Gas

For the report week beginning Wednesday, October 26, and ending Wednesday, November 1, 2023, the Henry Hub spot price rose by $0.33 from $2.86 per million British thermal units (MMBtu) to $3.19/MMBtu. Regarding Henry Hub futures prices, the November 2023 NYMEX contract expired Friday at $3.164/MMBtu, higher by $0.15 from the start of the report week. The December 2023 NYMEX contract price increased to $3.494/MMBtu, up by $0.12 from the beginning to the end of the report week. The price of the 12-month strip averaging December 2023 to November 2024 futures contracts climbed by $0.12 to $3.505/MMBtu.\

The international natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.39 to a weekly average of $17.82/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 $0.29 to a weekly average of $15.36/MMBtu. In the week last year corresponding to this report week (the week from October 26 to November 2, 2022), the prices were $28.97/MMBtu and $33.96/MMBtu in East Asia and at the TTF, respectively.

World Markets

European stocks were up this week on expectations that interest rates may have reached their peak and would start to descend. The pan-European STOXX Europe 600 Index rebounded from the losses of the previous week and closed 3.14% higher for this week. Major stock indexes in the region also rallied. Germany’s DAX rose by 3.42%, France’s CAC 40 Index surged by 3.71%, and Italy’s FTSE MIB jumped by 5.08%. The UK’s FTSE 100 Index climbed by 1.73%. As expectations rose that major central banks have completed their monetary policy tightening cycles, European bond yields broadly declined. The yield on the 10-year German sovereign bond slumped to its lowest levels in more than two months. The yield on the UK 10-year government bond also declined, as did the Swiss and French bond yields. The Bank of England (BoE) maintained interest rates at 5.25%, a 15-year high, for the second consecutive meeting. Despite the absence of an increase, the bank warned that rates would have to stay at a restrictive level for
“an extended period of time.”

Japan’s equities market registered gains for the week. The Nikkei 225 Index as well as the broader TOPIX Index both returned 3%. The Bank of Japan (BoJ) tweaked its yield curve control framework to allow yields to rise more freely which has raised inflation forecasts. Nevertheless, monetary policy remained highly accommodative consistent with the BoJ’s stance so far. The dovish stance weighed on the yen, though, which weakened briefly past the JPY 151 to the U.S. dollar level. The Japanese currency continues to remain under pressure due to the interest rate differential between the U.S. and Japan resulting from their divergent policies. In the Outlook for Economic Activity and Prices, BoJ policymakers have increased their consumer price index (CPI) forecast substantially for the next two years, both to 2.8% year-on-year and higher than BoJ’s 2% target. The outlook for price growth depends on assumptions regarding crude oil prices and the government’s economic measures. The bank asserts that underlying CPI inflation is likely to increase gradually toward achieving the price stability target.  

Chinese stocks rose on speculation that U.S. interest rates may have reached their peak, thus offsetting the broader concerns about China’s slowing growth. The Shanghai Composite Index inched higher by 0.43% while the blue-chip CSI 300 climbed higher by 0.61%. The Hong Kong benchmark Hang Seng Index advanced by 1.53%. China’s factory activity contracted once more in October. The official manufacturing Purchasing Manager’s Index (PMI) plunged to 49.5 in October which is below 50 which is the border between contraction and expansion. The same indicator registered 50.2 in September, resulting in a descent that signaled a slowing in production growth. The nonmanufacturing PMI descended to a slower-than-expected 50.6 from 51.7 in September, although it remained in expansion territory. The private Caixin/S&P Global survey of manufacturing activity declined to a lower-than-forecasted 49.5 in October from 50.6 in September. The private survey of services activity moved up slightly but lagged the consensus estimate. Further evidence of China’s property dilemma dogged investor concerns regarding this key economic growth driver. New home sales by the country’s top 100 developers fell from September to August, and real estate loans declined in September from the previous year.

The Week Ahead

Among the important economic data scheduled for release in the coming week are consumer credit data for September, wholesale inventories for September, and the Michigan Consumer Sentiment index.

Key Topics to Watch

• Fed Gov. Cook speaks
• Federal Reserve senior loan survey for October
• U.S. trade deficit for September
• Fed Vice Chair for Supervision Barr speaks (Nov. 7)
• Fed Gov. Waller speaks
• Consumer credit for September
• Fed Gov. Cook speaks
• Fed Chair Jerome Powell delivers opening remarks
• Wholesale inventories for September
• Fed Vice Chair for Supervision Barr speaks (Nov. 8)
• Fed Vice Chair Jefferson speaks
• Initial jobless claims (Nov. 4)
• Fed Chair Jerome Powell on panel at IMF

Markets Index Wrap-Up

Stock Markets

Stocks continued their slide this week to enter into correction territory, 10% down from their highest in late July. The Dow Jones Industrial Average (DJIA) lost 2.14% for the week while its Total Stock Market Index was not far behind with a loss of 2.60%. The broad-based S&P 500 Index is likewise down by 2.53% and the technology-heavy Nasdaq Stock Market plunged by 2.62%. The NYSE Composite fell by 2.38% while the Russell indexes all plummeted by approximately 2.60% for the week. The sell-down appears attributed to the renewed rise in long-term government bond yields as well as mixed earnings reports by large-cap technology counters.

Despite the pullback, the CBOE Volatility (VIX) risk perception indicator came down by 2.03%, signifying how investors retain confidence that the market is not once more turning bearish. The underlying optimism is driven by sentiment that inflationary headwinds are weakening and it is unlikely that the Federal Reserve will declare any further rate hikes. In the meantime, while the tech giants (Amazon, Apple, Alphabet, Meta, Microsoft, NVIDIA, Tesla) had been the major drivers since last year’s bear market low, their disappointing earnings reports have been the cause of market softness since mid-October. At present, however, the current slump appears to be merely a correction since the U-shaped recovery scenario remains in play. If the price action remains intact, the rounded bottom promises a more stable recovery than if a V-shaped reversal had taken place. Seasonal factors may improve the outlook for the coming two months.

U.S. Economy

Economic news released this week was spearheaded by a better-expected gross domestic product (GDP) report. The U.S. economy expanded in the third quarter by an annualized rate of 4.9% on the back of strong consumer spending. This was the fastest growth recorded since the end of 2021 and exceeded the level seen in the second quarter by more than twice. Home sales reached their highest level in 19 months and S&P Global’s flash U.S. Composite Purchasing Managers’ Index (PMI) inched upward from September, presenting an overall benign economic picture. The Fed’s preferred inflation gauge, the core personal consumption expenditure (PCE), showed a mixed indication as to whether inflation is moderating. Core PCE (excluding the volatile components, food and energy costs) increased to 0.3% in September on a monthly basis, from 0.1% in August. The year-over-year growth of core PCE, however, inched down to 3.7% in September from 3.8% in August. The latest data still showed that inflation remains well north of the Federal Reserve’s long-term target of 2%, but the central bank is nevertheless still expected to hold interest rates steady at its policy meeting scheduled for October 31-November 1.

In the meanwhile, the heightened geopolitical uncertainty briefly elevated WTI oil above $90 per barrel due to worries about possible disruption in the oil supply. However, prices have subsided slightly below that of last year, suggesting that energy will exert a neutral to slightly negative influence on the inflation reading for October.

Metals and Mining

Gold prices were once more propelled up to $2,000 per ounce as investors chased safe-haven assets in reaction to the chaos in the Middle East. The Israel-Hamas conflict that broke at the start of October seems headed for escalation, thus providing gold solid momentum. There is more, however, behind the flight to precious metals than just risk aversion to geopolitical uncertainties. While economic growth reported this week was better than expected, there remains a great deal of economic uncertainty, in the face of the core PCE index rising by 3.7% in the last 12 months. While inflation has indeed fallen to its lowest level since August 2021, it is still almost twice the Fed’s 2% target. Another yellow flag is the updated University of Michigan consumer survey released last Friday which showed a sharp rise in inflation expectations. Survey respondents see consumer prices rising by 4.2% 12 months hence, up from an initial estimate of 3.8%. In this environment, gold prices should be treading about $1,900, and yet it saw its highest weekly close on record at higher than $2,000 per ounce, demonstrating a nascent demand for the precious metal.

The spot prices of precious metals were generally up this week. Gold, coming from $1,981.40 last week, ended at $2,006.37 per troy ounce this week for an increase of 1.26%. Silver, previously at $23.37, ended this week at $23.12 per troy ounce, a loss of 1.07%. Platinum ended this week at $907.55 per troy ounce, an increase of 0.88% from the previous week’s close at $899.61. Palladium closed this week at $1,124.56, with a 2.11% gain over the previous week’s close at $1,101.28. The three-month LME prices of industrial metals also mostly went up. Copper, which closed a week ago at $7,948.50, ended this week at $8,099.00 per metric ton for a gain of $1.89%. Zinc, coming from $2,438.00 the previous week, closed this week at $2,471.50 per metric ton, rising by 1.37%. Aluminum ended this week at $2,220.00 per metric ton, gaining by 1.76% from the prior week’s close at $2,181.50. Tin closed this week at $24,902.00 per metric ton, for a slight loss of 0.33% from the previous week’s closing price of $24,985.00.      

Energy and Oil

Oil prices this week moved within a narrow range. ICE Brent was bound between $88 and $90 per barrel, moving in a seesaw pattern in day-to-day trading due to the ebb and flow of geopolitical concerns. The military airstrikes conducted by the U.S. on Syrian territory close to the week’s end pushed Brent above $90 per barrel on Friday’s trading before slightly receding. As Israel begins raids into Northern Gaza, market participants are anticipating a possible Iranian retaliation and possible escalation across the broader region. Despite the volatile situation, however, oil prices as expected to record their first week-on-week decline since early October.

Natural Gas

For the report week beginning Wednesday, October 18, to Wednesday, October 25, 2023, the Henry Hub spot price fell by $0.04 from $2.90 per million British thermal units (MMBtu) to $2.86/MMBtu. Regarding the Henry Hub futures, the price of the November 2023 NYMEX contract decreased by $0.046, from $3.056/MMBtu at the start of the report week to $3.010/MMBtu by the week’s end. The price of the 12-month strip averaging November 2023 through October 2024 futures contracts declined by $0.06 to $3.315/MMBtu. Across the United States, the natural gas spot prices declined modestly this report week, except for the West Coast where prices changed substantially.

The 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 $1.71 to a weekly average of $18.21/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 $0.12 to a weekly average of $15.65/MMBtu. By comparison, during the week last year corresponding to this week (the week from October 19 to October 26, 2022), the prices were $31.52/MMBtu in East Asia and $31.61/MMBtu at the TTF.    

World Markets

Amid uncertainty about the economy, inflation, rising interest rates, and the possible escalation of conflicts in the Middle East, the pan-European STOXX Europe 600 Index ended the week lower by 0.96%. Major stock indexes also descended – the U.K.’s FTSE 100 Index by 1.50%. Italy’s FTSE MIB slipped by 0.25%, France’s CAC 40 Index dipped by 0.31%, and Germany’s DAX eased by 0.75%. After the European Central Bank (ECB) kept short-term interest rates on hold, Eurozone government bond yields also moderated slightly, giving rise to speculations that rates in the eurozone have at last reached their peak. The 10-year Italian government bond fell to around 4.81% while the 10-year German bund slipped to around 2.84%. The ECB finally left its key deposit rate unchanged at 4.0% after increasing interest rates 10 consecutive times. The ECB reiterated that by maintaining this level for a long enough period, inflation would be brought down to its medium-term target of 2%. Previous tightening of monetary policy is already spreading into financial conditions and dampening demand, according to the Governing Council. The Eurozone is perceived to remain weak for the remainder of this year.

Japan’s stock markets calmed during the past week as the Nikkei 225 Index eased by 0.86% while the broader TOPIX Index moved sideways. Market sentiment was weighed down at the beginning of the week by rising bond yields and growing political tensions. However, it lifted slightly as a result of investor bottom-fishing at the lows, technology stocks rebounding, and a fresh injection of Chinese economic stimulus, allowing the local bourses to recoup their losses. A pickup in inflation and moves in the foreign exchange and bond markets somewhat drove speculation of potential intervention by the government and a likely adjustment to the yield curve control policy by the Bank of Japan (BoJ) in its upcoming meeting. The 10-year Japanese government bond’s yield rate climbed to a 10-year high of 0.87%, approaching the BoJ’s upper bound of 1.0% at the start of the week. The yen weakened past the closely monitored JPY 150 to the U.S. dollar but Finance Minister Shunichi Suzuki declined to comment as to whether the BoJ intervened.

In China, equities ascended in response to the improvement in industrial profits which suggests that the economy may be stabilizing. The blue-chip CSI 300 gained 1.48% while the Shanghai Composite Index climbed by 1.16%. The Hong Kong benchmark Hang Seng Index advanced by 1.32% during the holiday-shortened week as Hong Kong stock markets were closed on Monday for the Chung Yeung Festival. In September, profits at industrial firms in China increased by 11.9% year-on-year, marking the second consecutive monthly increase. However, it slowed from the 17.2% rise in August. Profits fell by 9% from a year ago for the first nine months of 2023, following a contraction of 11.7% recorded in the first eight months of this year. Demand improved during September, leading credence to the possibility that segments of China’s economy may have bottomed.

The Week Ahead

For the coming week, important economic data scheduled for release includes the FOMC meeting, labor market data, and the home price index.

Key Topics to Watch

• Employment cost index for Q3
• S&P Case-Shiller home price index (20 cities) of August
• Chicago Business Barometer for October
• Consumer confidence for October
• ADP employment for October
• S&P U.S. manufacturing PMI for October
• Job Openings for September
• ISM manufacturing for October
• Construction spending for September
• Federal Reserve decision on interest rates
• Fed Chairman Powell press conference
• Initial jobless claims for October 28, 2023
• U.S. productivity for Q3
• U.S. unit-labor costs for Q3
• Factory orders for September
• U.S. nonfarm payrolls for October
• U.S. unemployment rate for October
• U.S. hourly wages for October
• Hourly wages year-over-year
• S&P U.S. services PMI for October
• ISM services for October

Markets Index Wrap-Up

Stock Markets

Equities lost some ground this week due to the continued rise of Treasury bond yields. The 10-year Treasury yield in particular is attracting investors’ attention as it approaches 5%, a rate last seen in 2007. All major indexes are down for the week. The Dow Jones Industrial Average (DJIA) corrected by 1.61% and the D.J. Total Stock Market Index fell by 2.41%. The broad-based S&P 500 Index similarly plunged by 2.39% while the technology tracker Nasdaq Stock Market Composite fell even deeper by 3.16%. The NYSE Composite Index dropped by 1.90%. The risk perception indicator CBOE Volatility (VIX) Index shot up by 12.37%, according to data from the Wall Street Journal Markets tracker.

Simultaneous with the rise in long-term bond yields, a host of macro and geopolitical concerns have pushed stock markets down and the Nasdaq almost into bear market territory, ending the week 19.91% below its intraday highs in early 2022. Investor sentiment weighed down on the S&P 500 Index which saw its biggest weekly decline in a month. The stock market began its week on a strong note, however, as it recorded the S&P 500 Index’s 15^th straight Monday gain. The opening rally was helped by limited negative news coming from the Middle East turmoil over the weekend. The early gains were supplanted by deepening tensions as the week progressed. Share prices sharply fell on Thursday afternoon after news reports that a U.S. Navy destroyer shot down a cruise missile heading towards Israel and that a drone attack took place on a U.S. base in Iraq.

U.S. Economy

Officials of the Federal Reserve this week were markedly less dovish in their pronouncements about the direction inflation is expected to take. Richmond Fed Reserve President Thomas Barkin commented before real estate conference attendees in Washington that he still needs to see further confirmation of slowing demand and cooling inflation. While Fed Chair Jerome Powell admitted before the Economic Club of New York on Thursday that there appeared to be encouraging signs of a clear tightening in financial conditions, the Wall Street Journal nevertheless reported a sharp pullback in the markets after Powell admitted that there were no signs that the current stance of the Fed would result in a possible push into an economic recession.

Some economic data suggest that interest rates will remain higher for longer. The Commerce Department reported on Tuesday that retail sales rose 0.7% in October, amounting to almost double the consensus expectations. Online retailers, restaurants and bars accounted for most of the increase, suggesting that discretionary spending continued to remain strong. Sales rose 3.8% over the preceding 12 months which is roughly in line with consumer inflation. In any case, weekly jobless claims fell below 200,000 for the first time since January, thus surprising on the downside. Commerce data also indicated that the industrial side of the economy remained significantly weaker. Although overall industrial production remained roughly flat over the preceding year (up 0.8%), it rose by 0.3% in September. The impact of rising rates was further evident in the tight labor supply and the housing sector. September housing starts rose more than expected while building permits, a more forward-looking indicator, fell by 4.4%, its sharpest decline in 10 months.   

Metals and Mining

Gold’s move in the last two weeks is pleasantly surprising to those who decided to accumulate during the low phase. The yellow metal fell to a seven-month low on October 6, testing the $1.820 per ounce support briefly, and has bounced back with a fury without once looking back since. It rallied more than 9% in the last two weeks as prices pushed above $2,000 per ounce before the weekend. Silver is likewise remarkable, briefly dropping below $21 per ounce two weeks ago and now ending the week slightly short of $23.50, resulting in a 13% rally. Throughout the summer, bearish sentiment dogged the gold market as investors continued to react to the aggressive monetary policy stance of the Fed which will continue to restrict interest rates through the first semester of 2024. What ignited the new rally, however, appears to be the news of Hamas’s surprise attack that killed more than 1,000 Israelis. Gold is thus performing its role as a safe-haven asset during chaotic times

Precious metal spot prices were generally higher this week. Gold rose by 2.51% from its week-ago close of $1,932.82 to its closing price this week of $1,981.40 per troy ounce. Silver, which came from $22.72 the previous week, ended at $23.37 per troy ounce this week for a gain of 2.86%. Platinum closed this week at $899.61 per troy ounce for an increase of $1.75% over its previous week’s close of $884.13. Palladium ended lower by 4.28% this week to close at $1,150.56 per troy ounce from its previous week’s price of $1,101.28. The three-month LME prices of industrial metals generally closed lower for the week. Copper lost 0.01% from its previous week’s close at $7,949.00 to this week’s close at $7,948.50 per metric ton. Zinc closed lower by 0.33% from its previous week’s closing price of $2,446.00 to this week’s closing price of $2,438.00 per metric ton. Aluminum ended the week lower by 0.82% from last week’s close at $2,199.50 to this week’s close at $2,181.50 per metric ton. Tin lost 0.41% from last week’s close at $25,087.00 to this week’s close at $24,985.00 per metric ton.

Energy and Oil

The U.S. government was one of the key players who influenced oil prices this week. It announced the easing of Venezuelan sanctions as well as a possible replenishment of the U.S. Special Petroleum Reserve (SPR). The announcement of the easing of sanctions against Venezuela first sent oil prices downward, but the potential replenishment of the US SPR drove prices sharply upward. The U.S. Department of Energy announced that it would seek to purchase 6 million barrels of crude oil for delivery to the SPR in December to January and that it seeks to sign purchase contracts at $79 per barrel or less. Coupled with these announcements is the escalation of the Israel-Gaza crisis that further stoked fears that it may spread into a wider regional war. The geopolitical risk premium added further upside to prices. On Friday morning, WTI traded above the $90 per barrel level while ICE Brent neared the $94 per barrel mark.

Natural Gas

For the report week beginning Wednesday, October 11, and ending Wednesday, October 18, 2023, the Henry Hub spot price fell by $0.28 from $3.18 per million British thermal units (MMBtu) to $2.90/MMBtu. Making the Henry Hub price among the highest of all major U.S. hubs outside of California. The price of the November 2023 NYMEX contract decreased by $0.321, from $3.337/MMBtu at the start of the report week to $3.056 at the week’s end. The price of the 12-month strip averaging November 2023 through October 2024 futures contracts retreated by $0.154 to $3.375/MMBtu.

International natural gas futures prices advanced this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $2.32 to a weekly average of $16.50/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 $2.49 to a weekly average of $15.78/MMBtu. In the week last year corresponding to this week (from October 12 to October 19, 2022), the prices were $32.11/MMBtu in East Asia and $37.30/MMBtu at the TTF.

World Markets

The European stock markets retracted amid uncertainty concerning the interest rate outlook and fears of a possible escalation of the Middle East conflict. The pan-European STOXX Europe 600 Index ended 3.44% lower for the week. A series of disappointing earnings reports exacerbated the worsening investor mood as all major Continental stock indexes also closed significantly downward. Germany’s DAX fell by 2.56%, France’s CAC 40 Index plunged by 2.67%, and Italy’s FTSE MIB plummeted by 3.12%. The UK’s FTSE 100 Index dropped by 2.60%. As investors weighed the prospects that interest rates would remain higher due to sticky inflation, European bond yields broadly climbed. The yield on the benchmark government bonds in the U.K. rose after inflation data was reported as unchanged instead of slowing further. Germany’s benchmark 10-year government bond yield rose and closed the week just short of 2.9%. Italian bond yields advanced, with the yield differential between German and Italian 10-year debt increasing to more than 200 basis points.

Japanese bourses fell over the week as the Nikkei 225 Index dropped by 3.3% and the broader TOPIX Index declined by 2.3%. The disappointing market performance occurred despite a slight easing of inflationary pressure in Japan, however, wage growth drew attention amid signs of a move higher in pay demands for next year. The news that the interest rates in the U.S. may remain higher for longer prompted a surge in bond yields. The yield on the 10-year Japanese government bond rose to its highest level in around 10 years at 0.83%, from 0.76% at the end of the previous week. The Bank of Japan (BoJ) announced an unscheduled bond-purchase operation during the week in an attempt to intervene to slow the pace of increases, The yen traded within the upper end of the JPY 149 against the U.S. dollar range, approaching the JPY 150 threshold that many speculate could prompt the Japanese authorities to intervene to arrest the currency’s slide. If the government fails to take action, such an excessive swing may cause harm to the real economy, causing regular people and businesses to suffer.

China’s stock prices also fell sharply mainly due to deepening property sector concerns that offset optimism of a better-than-expected gross domestic product report. The Shanghai Composite Index lost 3.4% of its value while the blue-chip CSI 300 plunged by 4.17%, obliterating the gains made from the reopening rally earlier this year. The Hong Kong benchmark Hang Seng Index declined by 3.6%. Despite receiving a 30-day grace period in August, China’s largest property developer, Country Garden, announced this week that it was unable to meet all of its offshore debt payments. The company’s missed dollar bond interest payment signifies that it will almost certainly default on a dollar bond for the first time, underscoring the troubles faced by China’s real estate market. Home price data, in the meantime, indicates no improvement in the ongoing property market slump. In 70 of China’s largest cities, new home prices fell by 0.3% in September from August. This is the third consecutive month of home price declines. Also announced during the week is a surprisingly strong GDP performance, with China’s economy expanding by an above-forecast 4.9% in the third quarter year-over-year, slowing from a 6.3% rise recorded in the second quarter.    

The Week Ahead

Important economic data scheduled to be released this week include PCE inflation data and third-quarter GDP.

Key Topics to Watch

• S&P Case-Shiller home price index (20 cities) for August
• S&P flash U.S. services PMI for October
• S&P flash U.S. manufacturing PMI for October
• New home sales for September
• Gross Domestic Product for Q3
• Initial jobless claims for Oct. 21
• Durable goods orders for September
• Durable goods minus transportation for September
• Advanced U.S. trade balance in goods for September
• Advanced retail inventories in September
• Advanced wholesale inventories in September
• Pending home sales
• Personal income (nominal) for September
• Personal spending (nominal) in September
• PCE index for September
• Core PCE index for September
• PCE (year-over-year)
• Core PCE (year-over-year)
• Consumer sentiment (final)

Markets Index Wrap-Up

Stock Markets

The major stock markets closed this week with mixed results, with investors tentatively assessing inflation data and dovish signals from Federal Reserve officials. According to the Wall Street Journal Markets report, markets ending with gains for the week were the Dow Jones Industrial Average (+0.79%), the DJ Total Stock Market Index (+0.24%), the S&P 500 Index (+0.45%) and the NYSE Composite Index (+0.72%). Ending lower for the week is the technology-heavy Nasdaq Stock Market Composite Index (-0.18%). The CBOE Volatility Index (VIX), which indicates investors’ risk perception, went up by 10.72% for the week. Large-cap value stocks performed well due to positive earnings news from Citigroup, Wells Fargo, and JP Morgan Chase. The banking giants realized healthy profits due to higher interest rates and their releases this week kicked off the start of the third-quarter earnings report season.

Energy shares and defense stocks received a boost from news about the likelihood of a broader Middle East war due to Hamas’ attack on Israel. Prospects of its escalation, however, weighed down airlines and cruise operators. News of Nordisk’s new dialysis drug, widely used to treat obesity, also demonstrated success in treating kidney disease caused Dialysis provider Da Vita to fall sharply. In a broader sense, however, the market seemed to gain optimism from an apparent shift in the official thinking of the Feds regarding inflation and the likelihood of a recession. The minutes of the Fed’s September meeting released midweek suggested that while rates will remain restrictive for some time, the communication has evolved from “how high to raise rates” to “how long to hold rates.” During the week’s end, federal fund futures were pricing in only a 5.7% probability of a rate hike when the Fed meets next in November, as against 27.1% likelihood during the week before.

U.S. Economy

The recent reading on the inflation rate has come below the Fed’s policy rate and will likely continue to moderate, providing further hope that the rates have peaked. Even the slightly higher-than-expected inflation reading did not cause investors to panic, given the volatility of the global geopolitical developments this week. The Labor Department reported on Wednesday that core (excluding food and energy) producer prices increased by 0.3% in September which is a tick above expectations. However, the 2.7% increase in year-over-year core producer prices surprised analysts as it was the highest level since May. This resulted from a significant upward revision in the previous month. The core consumer price index (CPI) inflation data that was released on Thursday, which rose by 4.1% for the year ended September 30, was in line with expectations and its slowest pace in two years.

Metals and Mining

This week, gold prices registered their strongest performance since early spring as it was driven by short covering and a strong safe-haven bid at the start and the end of the week. during a survey conducted this week, market analysts and retail investors have expressed an almost identical bullish consensus about gold’s prospects for the coming week, ending October 20. The massive price surge in the morning of Friday is evidence of when the market opens with full participation, possibly taking a long position in the yellow metal. In the coming week, there may be some slight pullback as some players take profits, but this precious metal will likely move back and forth as it consolidates before another possible breakout.

The spot prices for precious metals rose mostly for this week. Gold surged by 5.45% from its previous week’s close at $1,833.01 to this week’s close at $1,932.82 per troy ounce. Silver also climbed by 5.19% from its close last week at $21.60 to its close this week at $22.72 per troy ounce. Platinum gained by 0.29% from its closing price last week at $881.56 to this week’s closing price of $884.13 per troy ounce. Palladium bucked the trend, losing by 1.05% from its price last week of $1,162.78 to its price this week of $1,150.56 per troy ounce. The three-month LME prices of base metals were mostly down this week. Copper ended 1.21% lower from last week’s close at $8,046.00 to this week’s close at $7,949.00 per metric ton. Zinc lost 2.51% of its previous week’s price of $2,509.00 to this week’s closing price of $2,446.00 per metric ton. Aluminum gave up 1.79% of last week’s price of $2,239.50 to end this week with the price of $2,199.50 per metric ton. Tin defied the odds and gained 1.80% from last week’s closing price of $24,644.00 to end this week at the price of $25,087.00 per metric ton.

Energy and Oil

Sanctions imposed by the Biden administration this week had the unintentional effect of supporting oil prices. The U.S. government has slapped sanctions on two tanker owners (one based in Turkey and the other in the UAE) that allegedly transported Russian oil above the G7 price cap of $800 per barrel. ICE As the U.S. seeks to close loopholes in its sanctions mechanisms, Brent was set to finish the week at the unlikely price of $88 per barrel given the large U.S. inventory builds reported in the middle of the week. On the other hand, a promised increase in Russia’s oil price cap enforcement kicked off with two sanctioned tankers, and the rising market expectation that more sanctions will emerge on Iran in light of the Israel-Palestinian conflict have raised geopolitical risks and increased the possibility that the $90-per-barrel is once more within reach.

Natural Gas

For the report week beginning Wednesday, October 4, and ending Wednesday, October 11, 2023, the Henry Hub spot price rose by $0.27 from $2.91 per million British thermal units (MMBtu) to $3.18/MMBtu. The Henry Hub spot price rose above $3.00/MMBtu for the first time since January of this year. Regarding the Henry Hub futures price, the price of the November 2023 New York Mercantile Exchange (NYMEX) contract increased by $0.415, from $2.962/MMBtu at the start of the report week to $3.377/MMBtu at the end of the week. The price of the 12-month strip averaging November 2023 through October 2024 futures contracts climbed by $0,269 to $3.529/MMBtu. The NYMEX futures price at the Henry Hub has been steadily increasing since September 21 when the front-month contract settled at $2.61/MMBtu.

The international natural gas futures price changes were mixed for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.26 to a weekly average of $14.18/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 $1.17 to a weekly average of $13.28/MMBtu. In the week last year corresponding to this report week (from October 5 to October 12, 2022), the prices were $34.81/MMBtu and $45.83/MMBtu in East Asia and at the TTF, respectively.

World Markets

Optimism from dovish comments from the Federal Reserve policymakers and reports that China was considering more economic stimulus measures drove European stocks up this week to end three consecutive weeks of losses. The pan-European STOXX Europe 600 Index closed 0.95% for the week in local currency terms. However, major stock indexes were mixed in the region. Italy’s FTSE MIB rallied by 1.53% higher. Germany’s DAX slid by 0.28%, while France’s CAC 40 Index fell by 0.80%. The UK’s FTSE 100 Index tacked on an additional 1.41%. European bond yields declined as investors flocked to safe-haven assets after the eruption of Hamas violence in the Middle East. Strong U.S. inflation data slowed the drop in yields. The benchmark 10-year German government bond yield closed near 2.75%. Furthermore, the minutes of the European Central Bank’s (ECB’s) September meeting showed that a solid majority of policymakers cast their votes in favor of raising the key deposit rate to 4.0%, a record high. The increase was intended to show the ECB’s determination to rein in inflation since headline and core inflation remained above 5%.

Japan’s stock markets rose over the week as they continued their strong year-to-date gains. The Nikkei 225 Index climbed by 4.3% while the broader TOPIX Index gained by 2.0%.  Historic weakness in the yen lent ongoing support, particularly for stocks whose companies are raking in higher dollar-denominated earnings. The yen weakened from about JPY 149.2 the week before to approximately JPY 149.6 against the U.S. dollar this week. The currency continued on its downward spiral despite attracting some support from investor demand for safe-haven currencies in light of the increased geopolitical uncertainties in the Middle East. Japanese authorities continued to emphasize that they would not hesitate to intervene if excess currency volatility develops, without ruling out any options. However, there has been no evidence of the government’s intervention in the markets to stem the yen’s drop. In other developments, the International Monetary Fund (IMF) revised its forecast for Japan’s economic growth in 2023 to 2.0% from 1.4% previously, as published this week in its October World Economic Outlook. A range of factors including pent-up demand, rebounding inbound tourism, accommodative monetary policy, and easing supply chain constraints boosting auto-expansion, are seen to support the country’s economic expansion.

In China’s first full week of trading after the Golden Week holiday, stocks declined as softer inflation and trade data renewed concerns that the economy may once more approach deflation. The Hong Kong benchmark Hang Seng climbed by 1.87%. Following August’s 0.1% rise, China’s year-on-year CPI remained unchanged in September mainly due to weaker food prices. Producer prices fell year-on-year by 2.5%, more than consensus estimates, although it eased from the 3.0% drop the previous month. Although trade and lending data remained weak, they nevertheless came in above expectations. Overseas exports fell by 6.2% in September from their year-ago figures, which was slower than the 8.8% August drop. Imports fell by 6.2% which was still better than the August contraction of 7.3%, marking the seventh consecutive monthly decline. The data shows that while some segments of China’s economy are stabilizing, it remains insufficient to dispel concerns about China’s weakening growth prospects.

The Week Ahead

This week, among the important economic data to be released are the retail sales, housing starts, industrial production, and capacity utilization reports.

Key Topics to Watch

• Empire State manufacturing survey for October
• Philadelphia Fed President Patrick Harker speaks (a.m.)
• Philadelphia Fed President Patrick Harker speaks (p.m.)
• U.S. retail sales for September
• Retail sales minus autos for September
• Industrial production for September
• Capacity utilization for September
• Fed Gov. Michelle Bowman speaks
• Business inventories for August
• Home builder confidence index for October
• Richmond Fed President Tom Barkin speaks
• Minneapolis Fed President Noel Kashkari speaks
• Housing starts for September
• Building permits for September
• Fed Gov. Chris Weller speaks
• New York Fed President John Williams speaks
• Fed Beige Book
• Fed Gov. Lisa Cook speaks
• Initial jobless claims for Oct. 14
• Philadelphia Fed manufacturing survey for October
• Existing home sales for September
• U.S. leading economic indicators
• Fed Chairman Jerome Powell speaks
• Chicago Fed President Austan Goolsbee speaks
• Fed Vice-Chair for Banking Michael Barr speaks
• Atlanta Fed President Raphael Bostic speaks
• Dallas Fed President Lorie Logan speaks
• Cleveland Fed President Loretta Mester speaks

Markets Index Wrap-Up

Stock Markets

Another week of directionless trading ended in mixed major indexes. The Dow Jones Industrial Average (DJIA) closed down by 0.30% over the week while its Total Stock Market counterpart ended up by 0.19%.  The broad-based S&P 500 Index was slightly up by 0.48% while the midcap and small-cap stocks were down by 1.87% and 2.37%, respectively. The technology-heavy Nasdaq Stock Market Composite was up by 1.60%, while the NYSE Composite Index was down by 1.20%. The risk perception indicator, CBOE Volatility Index (VIX) ended the week lower by 0.40%.

During the week, the mega-cap information technology and internet stocks which constitute the bulk of the large-cap growth stocks outperformed the rest of the market. The Russel Index also showed how large caps outpaced the small-caps by the widest margin since March. Volumes were muted for most of the week as investors sought confirmation from economic indicators regarding the market’s direction. Investors were hoping that the official nonfarm payrolls report, due for release on Friday, would show another decline in hiring. This development was expected to convince the Federal Reserve to forego another rate hike in their monetary policy as such would be a welcome sign of cooling inflation. Before the equity market opened, however, stocks fell sharply on the news that more than double the expected new jobs created was reported by the Labor Department, suggesting that the economy was heating up and, therefore, inflation may be on the rise again.

U.S. Economy

The Labor Department reported an additional 336,000 nonfarm jobs added in September, a number double the consensus estimate and an acceleration from the previous three-month-average of 190,000. The closely watched official nonfarm payrolls report revealed that the average hourly earnings rose by 0.2% in the month, pulling the year-over-year gain down to 4.2%, the lowest level it has been since June 2021. The workforce participation rate likewise remained at the best level it has been since the beginning of the pandemic lockdowns in February 2020, at 62.8%.

The figures indicated a more nuanced bigger picture, that increasing supply was driving the labor market rather than a rampant demand for workers, thus reflecting a more benign inflationary environment. The unemployment rate held steady at 3.8%, accompanied by a growing number of workers joining the workforce. The ongoing health of the labor market is viewed as categorically positive for consumers and GDP growth. Unfortunately, the market is seeing it through the lens of the upcoming Fed monetary policy as a reason for the policymaking body to hike rates. This caused yields to move up and stocks to pull back.

Metals and Mining

After seeing nine consecutive months of losses, the gold market did not start the fourth quarter with a good performance, continuing the precious metal’s longest daily losing streak in seven years. The yellow metal still ended this week with an almost 1% loss, although its closing price was still off its seven-month lows. As it looks to hold critical near-term support levels, there is still hope for gold, even though it will continue to be sensitive to rising bond yields. The U.S. bond market saw a significant selloff in long bonds while gold was treading its March lows, thus driving yields higher. The 30-year yield rose to 5% this week for the first time since 2007. Simultaneously, the yield on 10-year notes rose to a new 16-year high at 4.8%.

The spot prices for precious metals closed lower for the week. Gold closed at $1,833.01 per troy ounce this week, down by 0.84% from last week’s close at $1,848.63. Silver closed at $21.60 per troy ounce this week, down by 2.61% from the previous week’s close at $22.18. Platinum ended the week at $881.56 per troy ounce, down by 2.90% from last week’s close at $907.90. Palladium closed this week at $1,162.78 per troy ounce, 6.84% down from last week’s close at $1,248.19.  The three-month LME prices of industrial metals were generally down for the week. Copper, which ended the previous week at $8,270.50, closed this week at $8,046.00 per metric ton, down by 2.71%. Zinc, which closed one week ago at $2,649.50, ended this week at $2,509.00 per metric ton, down by 5.30%. Aluminum, which ended last week at $2,347.00, closed this week at $2,239.50 per metric ton, down by 4.58%. Bucking the trend is Tin, which rose by 2.92% from its previous close at $23,944.00 to its close this week at $24,644.00 per metric ton.

Energy and Oil

The week just ended was the worst week for crude since March. Pressured by the U.S. bond selloff that cast a shadow over the economic outlook for 2024, oil prices have receded by $10 per barrel. This week’s EIA numbers indicated a steep drop in gasoline demand across the U.S., thus dealing another blow to crude prices. On the supply side, Saudi Arabia announced that it is maintaining its 1 million barrel per day production cut until the end of the year 2023 and signaled it would review its decision again next month and deepen the cut if required. With focus directed at the U.S. non-farm payroll data released on Friday, the chances of ICE Brent, currently hovering at $84 per barrel, climbing to triple digits is firmly out of the question for now.

Natural Gas

For the report week beginning Wednesday, September 27, and ending Wednesday, October 4, 2023, the Henry Hub spot price rose by $0.20 from $2.71 per million British thermal units (MMBtu) to $2.91/MMBtu. The October 2023 NYMEX contract expired on October 4 at $2.764/MMBtu. The November 2023 NYMEX contract price increased to $2.962/MMBtu, up by $0.06 from the start to the end of the report week. The price of the 12-month strip averaging November 2023 through October 2024 futures contracts rose by $0.04 to $3.260/MMBtu.

International natural gas futures prices were mixed for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.20 to a weekly average of $14.44/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 $0.50 to a weekly average of $12.11/MMBtu. In the week last year corresponding to this week (the week beginning September 28 and ending October 5, 2022), the prices were $37.99/MMBtu and $51.00/MMBtu in East Asia and at the TTF, respectively. Stocks of natural gas in storage in the European Union reached 96.3% of capacity on Tuesday, compared with 89.7% on the same day last year.

World Markets

In reaction to the surge in bond yields amid worries about an extended period of higher interest rates, the pan-European STOXX Europe 600 Index ended lower by 1.18% in local currency terms. The major stock indexes likewise lost ground. Germany’s DAX fell by 1.02%, France’s CAC 40 Index dipped by 1.05%, and Italy’s FTSE MIB plunged by 1.53%. The UK’s FTSE 100 Index fell by 1.49%. At the end of a volatile week in the European bond markets, the yield on Germany’s 10-year government bond fell below 3% but remained near its highest in more than a decade. Amid cautious sentiment, French and Italian bond yields ticked up. In the UK, the yield on the benchmark 10-year UK government bond stayed close to its highest levels going all the way back to August 2008 on signs of sticky inflationary pressures.

In Japan, stocks fell over the week. The Nikkei 225 Index came down by 2.7% while the broader TOPIX Index slid by 2.6%. Amid surging U.S. bond yields and concerns that central banks will remain defensive for a longer period, Japanese equities came under pressure. The country’s economic data signaled that real wages and consumer spending continued to plummet in August, thus further weighing on investor sentiment. On the contrary, business sentiment among Japanese companies was boosted by a weak yen, as shown by the Bank of Japan’s (BoJ’s) latest quarterly Tankan survey, thus lending some support to equities. There was widespread speculation that Japan’s Ministry of Finance (MoF) intervened in the foreign exchange market to arrest the freefall of the yen, following the currency’s almost instantaneous surge after it breached the JPY 150 level versus the U.S. dollar. Many participants anticipated that this breach could serve as a trigger for monetary authorities to take action. After the yen fell to its lowest level in 11 months, the MoF officials neither confirmed nor denied whether they intervened. However, they continued to stress that they would act to control excess volatility without ruling out any options. The yen closed the week stronger at around JPY 149 against the greenback.

China’s financial markets were closed this week in celebration of the Mid-Autumn Festival and National Day holiday. They are scheduled to reopen on Monday, October 9. The Hong Kong benchmark Hang Seng Index declined by 0.14% for the holiday-shortened weekend. On the economic front, China’s factor activity entered into expansion territory for the first time since March, the most recent indication that the economy may have at last bottomed out. The official manufacturing PMI rose to 50.2 in September, an optimistic outcome since above 50 signals expansion, and the reading was better than expected as well as higher than the 49.7 reading for August. The nonmanufacturing PMI was also higher than consensus, at 51.7 in September from 51.0 in August. A separate indicator, the private Caixin/S&P Global survey of manufacturing and services activity both came down slightly from the previous month although they remain in expansion. During the eight-day holiday, domestic activity in China picked up significantly. During the first four days of the holiday, about 395 million trips were taken by road, rail, air, and waterways which reckoned as 76% higher than the same period the previous year. Box office sales reached RMB 1.2 billion in the first three days, also higher than corresponding sales last year. The offshore gambling hub of Macau recorded more than 160,000 visitors from mainland China and Hong Kong on Saturday, the highest single-day total since the pandemic.

The Week Ahead

Among the important economic news scheduled for release this week are the minutes of the Federal Reserve’s September FOMC meeting, the consumer price index (CPI), and producer price index (PPI) inflation data.

Key Topics to Watch

• Dallas Fed President Logan speaks
• Fed Gov. Jefferson speaks
• KFIB optimism index for September
• Wholesale inventories for August
• Producer price index for September
• Core PPI for September
• PPI year over year
• Core PPI year over year
• Minutes of Fed’s September FOMC meeting
• Initial jobless claims for October 7, 2023
• Consumer price index for September
• Core CPI for September
• CPI year over year
• Core CPI year over year
• Import price index for September
• Import price index minus fuel for September
• Consumer sentiment (preliminary) for October

Markets Index Wrap-Up

Stock Markets

Several geopolitical issues weighed on investor sentiment this week, including higher oil prices pushing inflation worries and the looming U.S. government shutdown in the absence of a bill raising the debt ceiling by September 30. The S&P 500 Index suffered a fourth consecutive weekly decline, closing lower this week by 0.74%. The Dow Jones Industrial Average (DJIA) also fell for the week, by 1.34%, while the D.J. Total Stock Market Index slid by 0.54%. The NYSE Composite was also down by 1.10%. The S&P midcaps and small caps gained some ground, rising by 0.26% and 0.42% respectively, even as the Nasdaq Stock Market Composite Index inched upward by a slim 0.06%. The sector that lost the most ground within the index was utilities, although bucking the trend were energy stocks which outperformed the rest.

Fear that inflation will prove more difficult for central banks to rein in spurred a sell-off in bonds. On Wednesday, the yield on the benchmark 10-year U.S. Treasury note peaked above 4.6%, sending bond prices on a downward spiral (since bond prices and yields move opposite to each other). On the other hand, 10-year Treasury yields inched modestly lower after the release of encouraging eurozone and U.S. inflation data. Also coming under strong selling pressure were tax-exempt municipal bonds and high-yield bonds.

U.S. Economy

The core personal consumption expenditure (PCE) index for August increased 3.9% year-on-year. This is a key inflation indicator that is closely watched by the Federal Reserve as it excludes the volatile food and energy categories. Presently, it is at the lowest annual inflation rate in around two years but still above the central bank’s 2% target rate. The latest reading is a moderation from the upwardly revised 4.3% annual inflation rate recorded in July. The core PCE inflation came in below expectations at 0.1% month-over-month. With all items included, the monthly inflation was driven by high energy prices to rise to 0.4% from 0.2% in July.

Durable goods orders and shipments surprised on the upside, increasing month-over-month in August, despite the weakness in new orders signaled by recent manufacturing surveys. Paced by strength in machinery, headline orders increased by 0.2% whereas consensus expectations had called for a decline. Durable goods orders, excluding transportation, increased by 0.4% from July. This measure is considered to reflect the near-term indicator of the economy’s health. It excludes the transportation category because the big price tags on aircraft and other equipment can distort underlying trends by creating the potential for large orders.

On another front, the Conference Board’s gauge of U.S. consumer confidence slid to 103.0 in September. This outcome is below expectations and is lower than the preceding month’s upwardly revised reading of 108.7. The survey’s expectations component accounts for much of the weakness in this indicator. The component declined by 9.6 points to 73.7, as the percentage of respondents who thought a recession was “somewhat” or “very likely” ticked up after declining in August.   

Metals and Mining

The gold market had a significant sell-off this week which dropped the spot price of gold by 4% from Friday the week before. This was the worst week for gold since June 2021. While this looks bad, there is still room for the yellow metal to descend further. Some analysts mentioned that they would not be surprised to see gold prices test once more prices close to the $1,800 per ounce level. Since mid-June, the market has been consolidating between the tight band from $1,900 to $1,980; since the consolidation was relatively lengthy, the breakdown will tend to be violent. Furthermore, the surging momentum in the bond yields and the U.S. dollar pointed to the eventual breakdown in precious metals.

The spot prices of precious metals have exhibited weakness this week. Gold plummeted by 3.98% this week, from its closing price one week ago at $1,925.24 to its closing price this week at $1,848.63 per troy ounce. Silver rose slightly by 0.27% from its closing price last week at $22.12 to its closing price this week at $22.18 per troy ounce. Platinum ended the week lower by 2.45%, from its previous price of $930.73 to its price this week at $907.90 per troy ounce. Palladium closed this week slightly lower by 0.48%, from last week’s closing price of $1,254.23 to this week’s closing price of $1,248.19 per troy ounce. The three-month LME prices of base metals ended mixed. Copper ended this week at $8,270.50 per metric ton, up by 0.93% from the previous price of $8,194.00. Zinc also ended up closing at $2,649.50 per metric ton, gaining by 5.39% from its week-go closing at $2,514.00. Aluminum closed this week at $2,347.00 per metric ton, rising by 6.10% from last week’s close at $2,212.00. Tin ended this week at $23,944.00 per metric ton, falling by 6.52%            from last week’s price of $25,613.00.

Energy and Oil

Despite some very bullish news this week, ranging from improving macroeconomic outlook in China to wafer-thin Cushing stocks, oil prices have been trading within a tight range as crude remains overbought and potential surges above $95 per barrel meet with stiff resistance. Crude inventories at the key U.S. storage hub of Cushing, Oklahoma fell to their lowest since July 2022, at 22.0 million barrels. At this level, operators fear operational risks as oil becomes difficult to remove if tank storage holds less than 20 million barrels. Meanwhile, the expiry of November ICE Brent futures has seen backwardation between the expiring month and the December contract shoot up to an astounding $2 per barrel. In the week to come, focus will once more pivot towards Saudi Arabia as OPEC+ meets next week and the market anticipates the announcement of another round of potential production cuts.

Natural Gas

For the report week from Wednesday, September 20 to Wednesday, September 27, 2023, the Henry Hub spot price fell by $0.06 from $2.77 per million British thermal units (MMBtu) to $2.71/MMBtu. The October 2023 NYMEX contract expired by the end of the report week at $2.764/MMBtu, up by $0.03 from the start of the report week. The price of the November 2023 NYMEX contract, which represents the first month of sales of natural gas for winter heating season delivery, decreased to $2.899/MMBtu, down by $0.02 from the start to the end of the report week. The price of the 12-month strip averaging November 2023 through October 2024 futures contracts declined by $0.01 to $3.220/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 $0.80 to a weekly average of $14.63/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 $1.32 to a weekly average of $12.61/MMBtu, the highest weekly average since late April. In the week last year corresponding to this report week (the week beginning September 21 and ending September 28, 2022), the prices were $39.77/MMBtu in East Asia and $53.45/MMBtu at the TTF.   

World Markets

Stocks fell across Europe over the just-concluded week amid concerns about a prolonged period of higher interest rates and a weak Chinese economy. The pan-European STOXX Europe 600 Index ended 0.67% lower in local currency terms. Major stock markets followed the same trend. Italy’s FTSE MIB fell by 1.16%, Germany’s DAX descended by 1.10%, and France’s CAC 40 declined by 0.69%. The UK’s FTSE 100 Index slid by 0.99%. Bond investors focused on the higher-for-longer rates narrative in financial markets, sending European government bond yields broadly up. Germany’s benchmark 10-year government bond yield rose to almost 3%, a level it had not seen in more than ten years, before backing off its peak on Friday. In Italy, amid concerns that the government would need to increase debt issuance next year to finance a bigger deficit, bond yield also advanced. The yield on the UK benchmark 10-year bond climbed above 4.5% before falling back slightly on Friday. In the meantime, Eurozone inflation dropped to 4.3%, its lowest level in two years and weaker than forecasted. This was a marked improvement from August’s 5.2%. The core rate’s initial estimate (excluding food, energy, alcohol, and tobacco) likewise declined from 5.3% to 4.5%.

Japan’s stock market pulled back for the week. The Nikkei declined by 1.7% while the broader TOPIX Index descended by 2.2%. The market reacted to concerns that the U.S. interest rates may potentially remain higher for a longer period, simultaneous with a surge in the price of oil. However, investors welcomed the announcement by the Japanese government that a new economic stimulus plan is about to be launched. Meantime, the Bank of Japan remained staunchly committed to its ultra-accommodative monetary policy stance to keep its inflation target in check, to which the slowing core inflation in the Tokyo area lent support. Regarding the national currency, the yen traded mostly within the JPY 148 range against the U.S. dollar, although it briefly weakened beyond the JPY 149 level and touched an 11-month low before recovering. The move fueled further speculation that the Japanese monetary authorities could intervene in the foreign exchange market to prop up the yen under its repeated declaration that they would respond appropriately to sudden currency fluctuations. The yield on the 10-year Japanese government bond (JGB) rose to 0.76% this week from 0.74% at the end of the previous week.

Chinese stocks declined over the holiday-shortened trading week, during which investor sentiment was dampened by a lack of uplifting economic news. The blue-chip CSI 300 Index and Shanghai Composite Index both lost ground during the week that ended Thursday. Stock Markets in mainland China were closed on Friday which was the start of the 10-day holiday for the Mid-Autumn Festival and National Day. The markets will reopen on Monday, October 9. The Hong Kong benchmark Hang Seng Index fell by 1.37% for the week ended Friday. There were no official economic news released in China during the week. However, a private survey showed that prices in China are recovering, allaying fears of a prolonged deflation. The World Economics survey reported that its all-sector price index for China ascended to a 14-month high in September. The survey was the latest data point indicating that China’s economy may have bottomed out after losing momentum following a post-lockdown recovery in this year’s first quarter. Signs of stabilization in the Chinese economy also appeared to be indicated by official data for August released earlier in September. Retail sales and the industrial economy grew faster than expected year-on-year while unemployment fell unexpectedly from July. On the other hand, fixed-asset investment growth failed to meet expectations due to a steeper decline in property investment.

The Week Ahead

Included in the important economic data for release this week are the unemployment rate for September and other labor market readings including the JOLTS Job Openings report.

Key Topics to Watch

• S&P final U.S. manufacturing PMI
• ISM manufacturing
• Construction spending
• Job openings
• ADP employment
• S&P final U.S. services PMI
• Factory orders
• ISM services
• Initial jobless claims
• U.S. trade deficit
• U.S. employment report
• U.S. employment rate
• U,S. hourly wages
• Hourly wages year-over-year
• Consumer credit

Markets Index Wrap Up

Stock Markets

Investors’ reaction to rising U.S. Treasury yields and hawkish forecasts from the Federal Reserve’s latest meeting weighed on the major U.S. stock market benchmarks in the trading week just concluded. The Dow Jones Industrial Average (DJIA) descended by 1.89% while the D.J. Total Stock Market recorded a 3.03% loss. The broad-based S&P 500 Index came down by 2.93% while the technology-tracking Nasdaq Stock Market Composite fell by 3.62%. The NYSE Composite Index slid by 2.53%. The investor risk perception indicator CBOE Volatility Index (VIX) shot up by 24.73%. On Thursday, the S&P 500 Index suffered its worst single-day loss in six months. This week was its third consecutive week of losses.

Additionally, investors are concerned about the repercussions of the United Auto Workers’ strike that began with three plants on September 15 and has now expanded to include 20 states nationwide. There is also the potential that the U.S. government will shut down for failure to pass the 12 annual appropriation bills that fund government operations before the current fiscal year ends on September 30. The market sell-down may also have been worsened by tax-loss harvesting before the fiscal year-end. The Fed maintained its short-term lending benchmark rate at a target level set during the previous meeting in July of 5.25% to 5.50%. The market was surprised, however, when policymakers declared an outlook for rates in 2024 that was significantly higher than expected, with a correspondingly higher rate prediction for 2025. The Fed raised its growth forecast which is an admission that the economy has been more resilient than expected.

U.S. Economy

The next move by the Federal Reserve regarding future rate cuts will depend upon the trajectory of the economy. It forecasts stronger growth in 2023 to 2024 which led to the likelihood of raising interest rates once more to intercept a further increase in inflation due to the heating economy. But if growth is maintained while inflation eases up, then the Fed may gradually normalize rates by gradually reversing it to a neutral level. The biggest surprise out of this week’s meeting is that the Fed sees only two potential rate increases next year, down from the initial four rate cuts it projected in June.

Early signs are evident of easing in consumption and the labor market, but the Fed’s forecast of 2024 growth indicates only moderate cooling, to 1.5% annual growth, before returning to 1.8% in 2025. It places the unemployment rate at a constant 3.8% for the current year, and growing to no higher than 4.1% for the cycle, well below the 10-year average of 5.0% unemployment. The initial reaction in the market has been a greater than proportional move higher in Treasury yields and a rapid descent in stocks. Both the 2-year and the 10-year U.S. Treasury yields hit highs of this cycle after the Fed meeting. The laggards in recent days have been the longer-duration parts of both fixed-income and equity markets. Since a rapid rise in yields has weighed particularly on higher valuation growth parts of the market historically, this trend may continue in the short term.

Metals and Mining

While the gold market may not just yet have the momentum to break out of its neutral trading channel around $1,950, it nevertheless remains well-positioned to benefit if and when sentiment turns, a possibility that may materialize sooner than expected. The U.S. has so far been able to avoid a recession and expectations of a soft landing are gradually firming up, but many analysts continue to doubt whether this optimistic goal can be realistically achieved. Gold’s price action is proving that investors are more cautious about protecting themselves against a downturn. Gold’s resilience is more remarkable considering how, in the past week, the Federal Reserve decided against raising interest rates during its meeting but maintained its hawkish stance.

The spot price of precious metals moved sideways for the week. Gold went up by only 0.07% from the previous week’s close at $1,923.91 to close at $1,925.24 per troy ounce this week. Silver went down significantly by 3.99% from the earlier week’s closing price of $23.04 to the recent closing price of $22.12 per troy ounce. Platinum, which was formerly at $29.69, ended this week at $930.73 per troy ounce, for an increase of 0.11%. Palladium gained 0.27% from last week’s closing price of $1,250.89 to close this week at the price of $1,254.23 per troy ounce. The three-month LME prices of industrial metals are generally down. Copper receded by 2.66% from last week’s closing price of $8,417.50 to end this week at the price of $8,194.00 per metric ton. Zinc declined by 2.18% from its previous price of $2,570.00 to end this week at $2,514.00 per metric ton. Aluminum inched down by 0.56% from its closing price last week of $2,224.50 to its close this week at $2,212.00 per metric ton. Tin ended this week 1.09% lower from its previous week’s close at $25,895.00 to close at $25,613.00 per metric ton.

Energy and Oil

Diesel price were once again boosted by Russia’s decision to ban fuel exports for an undetermined period. Moscow has temporarily banned exports of gasoline and diesel to all countries except for Belarus, Kazakhstan, Armenia, and Kyrgyzstan, to stabilize runaway fuel prices that have been hitting record highs almost every day in September. As a consequence, Europe is experiencing a stunning $45 per metric ton day-to-day surge on its middle distillates. The rise in distillates likewise pushed oil prices higher, offsetting the downward pressure caused by economic developments. Europe is almost certain to head into contraction in the third quarter of this year, while the U.S. Fed reiterated its “higher for longer” interest rate policy, Oil prices were kept largely unchanged by the worsening macroeconomic outlook compared to a week ago, with ICE Brent still hovering around the $94 per barrel price level.

Natural Gas

For the report week beginning on Wednesday, September 13, and ending on Wednesday, September 20, the Henry Hub spot price increased by $0.01 from $2.76 per million British thermal units (MMBtu) to $2.77/MMBtu. Regarding the Henry Hub futures market, the price of the October 2023 NYMEX contract increased by $0.053, from $2.680/MMBtu at the start of the week to $2.733/MMBtu at the end of the week. the price of the 12-month strip averaging October 2023 through September 2024 futures contracts declined by $0.06 to $3.180/MMBtu.

International natural gas futures prices ascended this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia rose by $0.47 to a weekly average of $13.83/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 $0.31 to a weekly average of $11.29/MMBtu. In the week last year corresponding to this report week (from September 14 to September 21, 2022), the prices were $43.97/MMBtu in East Asia and $56.63/MMBtu at the TTF.

World Markets

European stocks followed the cue in the U.S. markets. The pan-European STOXX Europe 600 Index ended lower by 1.98% as the region’s central banks signaled that interest rates will remain elevated for some time into the future. The economic outlook was further clouded by higher oil prices and poor business activity data. Major country stock indexes likewise went south. Italy’s FTSE MIB dipped by 1.13%, Germany’s DAX declined by 2.26%, and France’s CAC 40 slumped by 2.67%. The UK’s FTSE 100 Index hardly changed either way in local currency terms as investor perception of equities earning in dollars was propped up by a depreciation of the UK pound’s exchange rate to the U.S. dollar. Since many UK-listed firms are multinationals with overseas revenues, a weaker British pound sterling provides support to the index. After European Central Bank (ECB) officials announced that they could not rule out another interest rate increase, and after the Fed indicated they would maintain their rates higher for longer, Eurozone government bond yields increased.

Japan’s stock markets also fell for the week. The Nikkei Index ended lower by 3.4% week-on-week and the broader TOPIX declined 2.2% for the same period. The signals sent by the US. Federal Reserve regarding keeping its interest rates higher for longer to bring inflation under control impacted heavily on investor sentiment in Japan. Japan, on the other hand, continued to maintain its ultra-loose monetary policy as expected by market players. This, in turn, dashed hopes that the central bank would hint at an exit from negative interest rates. The continued monetary policy divergence between the Fed’s hawkish stance and the dovish Bank of Japan (BoJ) pushed the yen lower against the U.S. dollar, from around JPY 147.8 the previous week to about JPY 148.3 per greenback this week. Finance officials signified that it would not rule out any options to respond to excessive currency volatility on the occasion that speculators take advantage of the situation regarding concerns about potential intervention in the foreign exchange markets to prop up the yen.

Chinese stocks climbed as investors grew increasingly optimistic about the brighter economic future of the country. The blue-chip CSI 300 Index gained by 0.81% while the Shanghai Composite Index added 0.47%. Hong Kong’s benchmark Hang Seng Index lost by 0.7%. The official data for August which was released the prior week provided some evidence of economic stabilization, although no major economic indicators were released in China this week, Retail sales, industrial production, and lending activity increased more than forecasted last month compared to one year ago. However, fixed-asset investment grew less than expected as the drop in property investment worsened. On Thursday, the State Council, which is China’s cabinet, promised to accelerate measures to consolidate China’s recovery and continue supporting growth in 2024, according to state media. Senior officials acknowledged that China is facing economic challenges, but are optimistic that historical trends point to the country’s economic improvement over the long-term. In the meantime, Chinese banks kept their one- and five-year loan prime rates unchanged after the People’s Bank of China (PBOC) kept its medium-term lending facility rate on hold the week before simultaneous with reducing the reserve requirement ratio for the second time this year. PBOC officials feel there is sufficient policy room to support China’s recovery, signaling that there may be further easing following this month’s pause.

The Week Ahead

Included among the important economic data scheduled for release in the coming week are a read on consumer confidence, new home sales, and PCE inflation data for August.

Key Topics to Watch

• New home sales
• S&P Case Shiller home price index (20 cities)
• Consumer confidence
• Fed Gov. Bowman speaks
• Durable goods orders
• Durable goods minus transportation
• Initial jobless claims
• GDP (revision)
• Fed Gov. Cook speaks
• Fed Chairman Powell speaks
• Personal income
• Personal spending
• PCE Index
• Core PCE Index
• PCE (year-over-year)
• Core PCE (year-over-year)
• Advanced U.S. trade balance in goods
• Advanced retail inventories
• Advanced wholesale inventories
• Chicago Business Barometer
• Consumer sentiment (final)

Markets Index Wrap Up

Stock Markets

Stock indexes ended up mixed this week as investors waited on the sidelines for confirmation of a clearer trend. The Dow Jones Industrial Average (DJIA) ended slightly up by 0.12% although the DJ Total Stock Market lost 0.21%. The broad-based S&P 500 Index inched down by 0.16% and the technology-tracking Nasdaq Stock Market Composite dipped even lower, losing 0.39% of its value. The NYSE Composite, like the DJIA, added 0.60% at the week’s close. The CBOE Volatility Index, the market’s risk perception indicator, descended by 0.36%. Value stocks led the gains while large-cap shares outperformed small caps. The investors’ rush to value is a reaction to the U.S. benchmark West Texas Intermediate oil prices surging above $90 per barrel for the first time since November 2022.

Meanwhile, Apple’s new product introduction event on Tuesday included a price increase on its top-of-the-line iPhone 15, causing technology and growth stocks to pull back. Sentiment towards the technology sector was further dampened through the week after Apple’s products received mixed reviews. The broad market was boosted, however, by the initial public offering of 2023 triggering a first-day price jump as shares of a UK microchip designer started trading on the Nasdaq on Tuesday. Positive economic data released on Wednesday further sent optimistic waves across the markets.

U.S. Economy

On Wednesday, the eagerly anticipated August consumer price index (CPI) data was released. It showed that the Federal Reserve has achieved some progress in its attempt to control inflation. Unfortunately, the recent resumption of increases in energy prices may result in further tightening monetary policy by the central bank. The widely expected effect of higher gasoline prices materialized as headline CPI number showed the largest monthly increase since August 2022. Nevertheless, the markets took in stride the news that the core CPI increase, which excluded food and energy, was marginally higher than expected. On Thursday, the August producer price index (PPI) data similarly indicated that the headline producer prices rose more than expected while the core PPI fell in line with expectations.

In the meantime, the retail sales for August were strong which further demonstrated that consumers remain willing to spend.  Overall, the week’s economic data hardly impacted the market’s expectations that the Fed will hold rates steady at its policy meeting scheduled for September 19-20. Much of the economic data seems to affirm the growing expectation for a soft-landing scenario that inflation will gradually cool and the Fed’s target rate will be achieved without a deep recession. Affirming this outlook, Wall Street’s widely-followed “fear gauge,” the Chicago Board Options Exchange (CBOE) Volatility Index, or VIX, descended to its lowest level since before the onset of the pandemic in early 2020. U.S. Treasury yields, on the other hand, experienced a modest increase over most maturities as prices were little changed in the secondary markets, with investor attention being focused on the primary market.

Metals and Mining

The gold market appears to have broken out of the $1,800 support only to be stuck in directionless range trading between $1,900 and $1,980 per ounce. Trading in this market may be difficult as well as unexciting, but there is a silver lining. Prices have so far not broken down below the $1,900 level, which is building fresh support at this price. Despite the Fed’s hawkish position on monetary policy, the bond yields holding above 4% and the U.S. dollar index near a six-month high above 105 points, the gold market appears unaffected and remains resilient above the August lows. One of the reasons for gold’s ability to withstand the assault of higher yields and the U.S. dollar is that central banks continue to buy substantial quantities of gold. Data from the World Gold Council, the central banks of Poland, Czechia, and India extended their months-long buying spree in August. The National Bank of Poland dovetails Singapore and China as the third-largest gold buyer this year. The central banks constitute a significant demand factor in the gold market, making it difficult to be bearish on this precious metal.

The spot market for precious metals moved up this week. Gold climbed by 0.25% from last week’s close at $1,919.08 to end this week at $1,923.91 per troy ounce. Silver ascended by 0.48% from the previous week’s closing price of $22.93 to this week’s closing price of $23.04 per troy ounce. Platinum, which closed last week at $896.60, ended this week at $929.69 per troy ounce to gain by 3.69%. Palladium came from its price last week at $1,199.23 to end this week at $1,250.89 per troy ounce for an upward leap of 4.31%. The three-month LME prices of industrial metals also moved up collectively. Copper, which closed last week at $8,242.50, ended this week at $8,417.50 per metric ton for a gain of 2.12%. Zinc was worth $2,443.50 last week and this week was worth $2,570.00 per metric ton, thus gaining 5.18% for the week. Aluminum closed last week at $2,183.50 and this week at $2,224.50 per metric ton, rising by 1.88%. Tin closed the previous week at $25,573.00, while its closing price this week was $25,895.00 per metric ton for a gain of 1.26%.

Energy and Oil

A string of positive macroeconomic reports on China suggesting that both manufacturing output and retail sales grew by 4.5-4.6% year-on-year triggered a bull run in oil prices that continued throughout this week. The new data surpassed analysts’ expectations and buoyed investor expectations in the oil market that a resumption of China’s economic recovery will enhance the demand for crude and other energy sources. Chinese refinery runs reached an all-time high in August at 15.23 million barrels per day (b/d), transforming the country from an underperforming bearish factor to the largest bullish upside for oil prices.

Demand optimism was lifted by the news from China despite both Europe and the United States struggling with refinery maintenance. Furthermore, OPEC reiterated its bullish outlook for 2024 oil demand, forecasting that it will rise by 2.24 million b/d on the back of a faster economic recovery in major economies. The outlook overrides the concerns regarding high-interest rates and elevated inflation, with global GDP growth forecasted to come in at 2.5% next year.

Natural Gas

The U.S. exported a record volume of natural gas in the first half of this year than in any other previous semi-annual period. It averaged 12.5 billion cubic feet per day (Bcf/d), exceeding the same period in 2022 by 11%. In May, U.S. natural gas exports as liquefied natural gas (LNG) and by pipeline averaged a monthly record high of 13.6 Bcf/d. Since 1957, the U.S. once more became a natural gas net exporter (i.e. natural gas exporters exceeded natural gas imports) for the first time in 2017, due primarily to increased LNG exports.

For the report week starting Wednesday, September 6, and ending Wednesday, September 13, the Henry Hub spot price rose by $0.27 from $2.49 per million British thermal units (MMBtu)to $2.76/MMBtu. The price of the October 2023 NYMEX contract increased by $0.17, from $2.510/MMBtu at the start of the report week to $2.680/MMBtu by the week’s end. The price of the 12-month strip averaging October 2023 through September 2024 futures contracts rose by $0.032 to $3.240/MMBtu.  

International natural gas futures prices ascended this report week. the weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.10 to a weekly average of $13.36/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 $0.23 to a weekly average of $10.98/MMBtu. In the week last year corresponding to this week (i.e., from September 7 to September 14, 2022), the prices were $53.19/MMBtu in East Asia and $60.81/MMBtu at the TTF.

World Markets

European equities ended higher this week, with the pan-European STOXX Europe 600 Index gaining by 1.60%. Germany’s DAX gained by 0.94%, France’s CAC 40 Index climbed by 1.91%, and Italy’s FTSE MIB surged by 2.35%. The UK’s FTSE 100 Index jumped by 3.12%, helped by the depreciation of the UK pound versus the U.S. dollar. A decline in the pound translates to higher earnings for dollar-earning multinational companies listed on the exchange that generate overseas revenue. Investor sentiment also appeared to have been lifted by better economic data out of China indicating that it has resumed its path towards economic recovery, and Europe’s as well. While the European Central Bank (ECB) raised interest rates, it nevertheless signaled that borrowing costs may have reached a peak. The ECB raised interest rates for the 10^th consecutive time. The ECB president proclaimed that a “solid majority” of policymakers backed the quarter-point rate hike that took the key deposit rate to a record high of 4.0%. The interest rate has reached a level that will return inflation to the target if maintained for a sufficiently long duration.

Japan’s stock markets rose during the week. The Nikkei 225 Index climbed by 2.8% while the broader TOPIX Index surged by 2.9%. Investor optimism was helped by good news about China’s macroeconomic situation, dispelling the uncertainty about the impact of the country’s stimulus efforts on its economic growth and markets. The strong U.S. bourses and the weakness in the yen also drove the stock markets, since a weak currency is perceived to be beneficial to Japan’s export industry. The Bank of Japan’s (BoJ’s) governor suggested that the central bank could have sufficient data by the end of the year to determine if wages will continue to rise and lead to the end of the policy of negative interest rates. Japan’s policy is anchored on the principle that sustained wage growth is key to the achievement of the country’s inflation target of 2%. While Gov. Kazuo Ueda was careful to stress that policy normalization is still some distance away, his comments were perceived as hawkish by investors. They were also taken to be a verbal intervention in response to the historic weakness in the yen.

Chinese stock markets ended mixed in reaction to official indicators that revealed that the country’s economy may have bottomed despite data also pointing to ongoing weakness in the property market. The Shanghai Composite Index moved sideways with neither gain nor loss for the week while the blue-chip CSI 300 Index slid down by 0.83%. The Hang Seng Index, Hong Kong’s benchmark, gave up 0.1%. The official data for August indicated that the country was well on its way towards economic stabilization. Indicators of industrial production and retail sales grew more than forecast last month from a year ago. Unemployment fell unexpectedly from July. On the other hand, fixed-asset investment growth fell short of forecasts because of a steeper decline in real estate investment. New bank loans rose higher than the consensus estimate, topping RMB 1.36 trillion in August. This was higher than July’s RMB 345.9 billion. Corporate demand largely drove credit expansion, while household and longer-term loans also grew.

The Week Ahead

Included in the important economic data expected to be released next week are the FOMC meeting, housing and home builder data, and preliminary S&P Global PMI data for September.

Key Topics to Watch

• Home builder confidence index
• Housing starts
• Building permits
• Fed interest rate decision
• Fed Chair Powell press conference
• Initial jobless claims
• Philadelphia Fed manufacturing survey
• U.S. current account deficit
• U.S. leading economic indicators
• Existing home sales
• Fed Gov. Lisa Cook speaks
• S&P flash U.S. services PMI
• S&P flash U.S. manufacturing PMI
• Minneapolis Fed President Neel Kashkari speaks
• San Francisco Fed President Mary Daly speaks

Markets Index Wrap Up