Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

Metals and Mining

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

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

Energy and Oil

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

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

Natural Gas

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

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $1.27/MMBtu to a weekly average of $13.90/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.16 to a weekly average of $12.60/MMBtu. In the week last year that corresponds to this report week (beginning August 16 and ending August 23, 2023), the prices were $14.09/MMBtu in East Asia and 12.35/MMBtu at the TTF.

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

Energy and Oil

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

Natural Gas

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

International natural gas futures prices increased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.12 to a weekly average of $12.62/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.98 to a weekly average of $12.76/MMBtu. In the week last year that corresponds to this report week (from August 9 to August 16, 2023), the prices were $11.76/MMBtu in East Asia and $11.75/MMBtu at the TTF.

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up

Stock Markets

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

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

U.S. Economy

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

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

Metals and Mining

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

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

Energy and Oil

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

Natural Gas

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

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

World Markets

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

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

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

The Week Ahead

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

Key Topics to Watch

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

Markets Index Wrap-Up