Weekly market recap

Your weekly global financial market newsletter

  • This week, we have a presidential election in the U.S. (though it's not the only event), and it is one of the most heated campaigns in history, with a potentially very close outcome. While investors and analysts expect a significant potential impact on markets, history shows that U.S. presidential elections are not usually major market movers, and this election is unlikely to be an exception.
  • There are, of course, risks associated with possible unrest if the results are very close and the announcement is delayed. However, in the long run, the election itself is not a factor likely to significantly impact the markets' direction. You can read more in our Friday article, where we discussed the potential market influences in detail.

Indices

After six weeks of gains and surpassing all-time highs, the major U.S. stock indices posted their second consecutive week of losses. The decline was attributed to uncertainty over the upcoming presidential election as well as sell-offs in tech giants Microsoft and Meta, which dropped sharply on Thursday due to the threat of rising AI costs despite strong results reported on Wednesday. Friday’s strength, despite bad news from the labor market, failed to offset the overall weekly losses.

European equities also declined, with losses concentrated mainly from Tuesday to Thursday, driven by the results of large companies and uncertainty surrounding events in the U.S. (elections), Ukraine, and the Middle East. The pan-European STOXX Europe 600 ended 1.52% lower, France’s CAC 40 lost 1.18%, Germany’s DAX dropped 1.07%, and the UK’s FTSE 100 Index declined 0.29%.

US30
-0.15%
US100
-1.57%
US500
-1.37%
GER30
-1.07%

Commodities

The price of Brent crude oil declined by more than three percent over the past week, despite three consecutive days of growth starting Tuesday. One of the main factors behind the volatility in oil prices remains the escalating conflict in the Middle East, with Israel and Iran exchanging threats of harsh retaliatory strikes if attacked. Monday’s sharp decline was driven by reports that Israel spared oil and nuclear infrastructure in its attack, alleviating fears of energy supply disruptions. Beyond geopolitical uncertainty, speculation about a possible postponement of oil production increases due to low demand and rising supply contributed to the price rise.

The price of gold also saw a slight weekly decline, despite reaching a new all-time high of $2,790 per troy ounce earlier in the week. Geopolitical uncertainty and the increasing likelihood of Donald Trump’s potential re-election contributed to the price increase, while the decline was driven by U.S. macroeconomic data, including unexpectedly weak labor market figures. Markets now await the Fed’s reaction and potential monetary policy adjustments.

Gold
-0.41%
Silver
-3.76%
BRENT
-3.88%
NATGAS
-13.87%

Forex

The euro hit two-week highs last week, reacting positively first to higher-than-expected preliminary data on third-quarter GDP in the euro area (Germany’s GDP also surprised, avoiding recession) and then to a higher-than-expected inflation rate. This has raised hopes among investors that the ECB will refrain from a sharp interest rate cut and instead ease monetary policy gradually. The weekly growth was not dampened by Friday’s decline, which occurred despite weak macro data in the U.S.

The U.S. dollar was relatively volatile, weakening for most of the week despite generally positive macro data, only to recover most of its losses on Friday. This occurred despite labor market data showing much worse-than-expected numbers regarding new jobs (which were impacted by hurricanes and strikes) and poor PMI numbers in the manufacturing sector.

EUR/USD
+0.35%
USD/JPY
+0.47%
GBP/USD
-0.35%
USD/CAD
+0.11%

Macro

The past week was quite eventful in terms of macro data, both in Europe and the U.S. Labor market data, in particular, were highly anticipated, but they delivered rather mixed results. According to Tuesday’s data from the Labor Department, job openings fell by 418,000 to 7.443 million in September from a downwardly revised 7.861 million in August, falling below market expectations of 7.99 million. This is the lowest reading since January 2021.

The new jobs data then appeared somewhat chaotic. On Wednesday, ADP surprised the markets by announcing that private sector jobs rose by 233,000 in October, nearly double the consensus estimate (forecast 110,000; previous 159,000, revised from 143,000).

The NFP report on Friday then showed the U.S. economy created only 12,000 new jobs in October (the lowest since December 2020), compared to the market expectation of 113,000 and September’s downwardly revised 223,000 jobs. Investors, however, considered that the data was affected by Hurricanes Helene and Milton as well as the Boeing strike. Unemployment remained at its three-month low of 4.1%.

The ISM manufacturing PMI fell short of forecasts (expected 47.6; actual 46.5; previous 47.2), its lowest level in 15 months, indicating a further significant decline in the manufacturing sector in October along with rising price pressures. Conversely, the S&P Global Flash U.S. Manufacturing PMI was revised to 48.5 points in October from a preliminary 47.8 points, following a 15-month low of 47.3 points in September, showing some signs of moderation in the downturn.

Annualized U.S. GDP growth reached 2.8% in Q3, slowing from 3% in Q2, according to the first advance estimate. The U.S. economy is thus slowing down, though growth remains stable. The personal consumption expenditures (PCE) index, the Fed’s preferred inflation gauge, rose by 2.1% year-over-year, in line with estimates (August: +2.3%), and the core PCE inflation index increased by 2.7% year-over-year (estimate: +2.6%; August: +2.7%).

In Europe, GDP and inflation data were closely monitored, particularly in Germany and the euro area. The eurozone economy doubled its growth in the third quarter from the previous three months to 0.4 percent, according to Eurostat’s flash estimate based on seasonally adjusted data. EU-wide gross domestic product growth was 0.3 percent, matching the quarter-on-quarter pace of the second quarter.

The annual rate of consumer price inflation in the euro area rose to 2% in October from 1.7% in September. The annual rate of core inflation, excluding energy, food, alcohol, and tobacco prices, remained at 2.7 percent in October.

The German economy unexpectedly grew in the third quarter, with gross domestic product increasing by 0.2 percent compared to the previous quarter, according to a flash estimate by the Federal Statistical Office. In the second quarter, the economy showed a decline, and most analysts had expected this trend to continue.

Consumer price inflation in Germany accelerated significantly in October, reaching 2.0%, according to the Federal Statistical Office’s preliminary report on Wednesday. Month-on-month, prices rose by 0.4 percent, following no change in September. Economists had anticipated a rise in prices, but only moderately; inflation was 1.6 percent in September.

What to watch out for this week

  • The most closely watched event of the coming week will be the American elections. On Tuesday, Americans will choose their head of state and significantly change the composition of Congress.
  • In addition, central bankers—who will announce monetary policy decisions on Thursday instead of the usual Wednesday—are expected to weigh in on economic data. A 0.25% rate cut is anticipated, and the subsequent press conference will be important, as it may provide insights into the Fed's future direction.
  • The ISM Services PMI is also expected to show continued growth in the services sector, albeit at a slower pace. Other key U.S. data next week will include the Michigan Consumer Sentiment Index, the S&P Global Services PMI, and the Composite PMI indices.
  • The next central bank to decide on rates will be the Bank of England, which is expected to cut rates by 0.25% after leaving them unchanged in September. Additionally, in the UK, the final S&P Global Services and Composite PMI indices will be closely monitored.
  • In Europe, the latest PMI data will be released, providing insights into October's economic performance in both services and manufacturing.

Disclaimer

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