Weekly market recap

Your weekly global financial market newsletter

  • Continued tensions in the Middle East affected all markets over the past week. The US stock markets were "saved" by the labour market data, but in Europe it was not enough.
  • Among commodities, oil was the best performer, with gold losing ground for the first time in a while. On the currency market, the dollar was the winner, while the Japanese yen lost significantly.

Indices

The mood in the stock markets was negatively affected last week by the ongoing tensions in the Middle East and Iran’s attack on Israel. Good labour market numbers, supported by Friday’s very good NFP data, eventually led to US equities securing their fourth weekly rise in a row. Unsurprisingly, energy companies were the biggest gainers, thanks to the strengthening oil price.

Tensions and the growing conflict in the Middle East had a much stronger impact on markets in Europe than in the US, so that European stocks, except for those in the UK, posted fairly significant losses. The pan-European STOXX Europe 600 ended 1.80% lower, Germany’s DAX lost 1.81%, France’s CAC 40 Index declined 3.21%, and the UK’s FTSE 100 Index eased 0.48%.

US30
+0.99%
US100
+0.13%
US500
+0.22%
GER30
-1.81%

Commodities

Gold has seen a slight decline recently after a prolonged period of regularly surpassing its all-time highs. Although gold, as a safe haven, has benefited from geopolitical uncertainty, strong labour market data makes it less likely that the US Fed will continue its rapid, interest rate cuts. Still, the potential for further appreciation is quite large, as further downside with an escalation in the conflict between Israel and Iran is very limited.

Developments in the Middle East, on the other hand, have been supportive of the rise in the price of oil, which has added over nine percent in the past week. Due to concerns about possible oil supply constraints in the region, but also due to expectations of increased fuel demand in the US, the oil price has thus reached its five-week high and has the potential to continue rising.

Gold
-0.21%
Silver
+1.78%
BRENT
+9.10%
NATGAS
-1.65%

Forex

Although the British pound strengthened against the US dollar during September to around 1.34, where it last traded in February 2022, the past week has seen a significant slide. Bank of England Governor, Andrew Bailey, made comments during the week suggesting that the central bank would consider a more “activist” and “aggressive” approach to cutting interest rates in November. With no expectations of a quick rate cut on the US side, the British pound fell to its three-week low against the dollar.

The change in approach to interest rates also led to a decline in the Japanese yen, which lost over 4.5% against the USD during the week. The main reason for this was comments from newly installed Prime Minister Shigeru Ishiba, who said it was too early to raise rates further given current economic conditions. Economy Minister Ryosei Akazawa also called for caution in raising rates.

EUR/USD
-1.68%
USD/JPY
+4.54%
GBP/USD
-1.90%
USD/CAD
+0.47%

Macro

The main news of the week was the NFP data, which came in much better than expected as the US economy added 254K jobs in September, well above forecasts of 140K. In addition, several months’ worth of NFP releases saw upside revisions, when figures for July were revised up by 55K from 89K to 144K and August’s previous NFP total was lifted by an additional 17K, from 142K to 159K. The unemployment rate fell again from 4.2% to 4.1%, confirming that the labour market is in good shape.

Earlier in the week, we got numbers that pointed to a strong labour market. First, on Tuesday, the numbers came out about the number of job openings, which rose by 329,000 to 8.040 million in August 2024 from an upwardly revised 7.711 million in July and above market expectations of 7.655 million. On Wednesday, ADP reported that private businesses in the US added 143K workers to their payrolls in September 2024, the most in three months, following an upwardly revised 103K in August and well above forecasts of 120K.

The annual inflation rate in the euro area fell to 1.8%, below the ECB’s inflation target and the lowest since April 2021. Core inflation fell to 2.7%, even, the lowest since February 2021.

PMI data from the ISM indicated that US services activity grew in September at the fastest pace since February last year, while the manufacturing PMI continued to point to a contraction in the manufacturing sector, which now extended for six straight months. PMIs in the euro area and the UK were similar, with service sector activity slipping slightly but remaining steady and at 50 points.

What to watch out for this week

  • This week offers limited significant macroeconomic data, but key focus will likely be on consumer inflation figures. Additionally, the release of producer price data and the University of Michigan's preliminary consumer confidence index will attract some attention.
  • The minutes of the September FOMC meeting will then offer a closer look at the decision to cut rates by 50 basis points and perhaps also clues to better gauge the US central bank's next steps.
  • In Europe, investors will be watching consumer inflation in Germany and the minutes of the ECB's latest monetary policy meeting will also be released.

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