Weekly market recap

Your weekly global financial market newsletter

  • August's US Personal Consumption Expenditure Price Index (PCE), recorded the lowest print of the key inflation metric since March of 2021 (2.2% YoY). It may therefore appear that the Fed's battle with inflation in the US is coming to a victorious end.
  • However, given that core PCE, which excludes volatile food and energy prices, rose to 2.7% in August, things may not be so rosy. And with the Fed giving the PCE index more weight than traditional inflation in its rate decisions, the next PCE Price Index may be more important than ever.

Indices

US equities gained again in the past week, with the DJIA and S&P 500 indexes again surpassing their all-time highs. Despite Friday’s sell-off, technology titles in particular fared well, led by Nvidia, whose CEO halted the sale of the company’s own shares. Also positive news for investors was the news that China has adopted a package to support its economy.

News of the Chinese stimulus program also helped European stocks significantly, plus news of falling inflation in the Eurozone was well received, raising the possibility of further rate cuts by the ECB. The pan-European STOXX Europe 600 ended 2.69% higher, Germany’s DAX surged 4.03%, France’s CAC 40 Index climbed 3.89 and the UK’s FTSE 100 Index advanced 1.10%.

US30
+0.59%
US100
+1.10%
US500
+0.62%
GER30
+4.03%

Commodities

Gold was again surpassing its historical highs during the week, when on Thursday it was above the $2 680 per troy ounce level, but on Friday it stopped its growth. Despite the positive news on inflation in the US, it seems that investors are beginning to see a less dovish approach from some of the world’s central banks and are in no hurry to cut their interest rates.

The price of US Natural Gas has experienced increased volatility over the past week, accompanied by a significant price increase as a result of Hurricane Helene, which may have a negative impact on production of the commodity in the Gulf of Mexico. As a result, the price broke through the $2.9/MMBtu level, the highest level in the last 3 months. However, despite investor concerns, Gulf of Mexico production does not appear to have been significantly affected and according to the EIA report, US inventories remain above the 5-year average, limiting further potential price increases.

Gold
+1.40%
Silver
+1.43%
BRENT
-3.37%
NATGAS
+19.23%

Forex

The Australian dollar and the New Zealand dollar in particular made significant gains against the US dollar during the past week. The Aussie Dollar rose to 19-month highs thanks to the announcement of the Chinese stimulus package, as China is one of the country’s main trading partners, so this could lead to a rise in Australian exports. Moreover, the Reserve Bank of Australia left the cash rate unchanged at 4.35% at its September meeting. It also hinted that it could keep policy at the current level for longer, which also plays in favor of AUD appreciation against the USD. While the New Zealand Dollar also strengthened during the week, its gains were ultimately capped by news that the Reserve Bank of New Zealand will cut interest rates again in October, with markets estimating the probability of a half percentage point cut at 67%.

EUR/USD
+0.00%
USD/JPY
-1.13%
GBP/USD
+0.38%
USD/CAD
-0.44%

Macro

The data over the weekend was quite mixed. Monday’s flash PMI data in US showed that activity in the manufacturing sector continues to decline, while in the service sector we saw better than expected numbers despite a slight decline, holding near long term highs.

On Tuesday, Conference Board’s index of U.S. consumer confidence fell sharply in August, putting it back near the bottom (98.7) of its range over the past two years. The Commerce Department reported on Wednesday that new home sales declined 4.7% in August, while building permits data were revised lower.

On Thursday, US initial jobless claims showed a drop to 218,000, and the final estimate of gross domestic product (GDP) growth for Q2 stayed in line with previous estimates at a relatively sound 3.0% annualized rate. And finaly, Durable goods orders beat estimates.

On Friday, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index (PCE), came in at 2.2% YoY, down from 2.5% a month earlier and slightly lower than the consensus estimate. Meanwhile, core PCE increased by a tenth of a percentage point compared to July’s data.

In Europe, business activity unexpectedly declined in September due to a sharp drop in new orders, the HCOB Eurozone Composite PMI Index fell to 48.9 points from 51.0 points in August, activity in the services sector also fell to near 50 points and the index in the manufacturing sector fell to 44.8 points, a year’s lowest.

In contrast, UK private sector activity is in expansionary territory for the eleventh month in a row, despite declines in both the manufacturing and services sectors.

What to watch out for this week

  • The new week will be marked by data from the US labour market and purchasing managers' indices. We will get the final PMI numbers, both from S&P and PMI, on Tuesday (manufacturing) and Thursday (services, composite).
  • Tuesday will also see the release of preliminary September inflation data in the Eurozone, which will be closely watched by the European Central Bank (ECB) in the context of possible further interest rate cuts. Annual inflation is expected to reach 1.9%, which would represent the first drop below the ECB's 2% target since June 2021.
  • From the US labour market, we first get the JOLTs job openings numbers on Tuesday, followed by nonfarm employment from ADP on Wednesday and the weekly initial jobless claims report on Thursday. Then on Friday, the US Department of Labor will release the October nonfarm payroll jobs report, with an expected addition of around 144,000 new jobs.

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