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Key data to move markets
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Global market indices
US Stock Indices Price Performance
Nasdaq 100 -1.43% MTD +17.52% YTD
Dow Jones Industrial Average -0.32% MTD +11.96% YTD
NYSE -0.18% MTD +15.60% YTD
S&P 500 -0.92% MTD +19.70% YTD
The S&P 500 is -0.22% over the past week, with 4 of the 11 sectors down MTD. The Equally Weighted version of the S&P 500 posted a +0.66% gain this week, its performance is -0.69% MTD and +12.75% YTD.
The S&P 500 Energy sector is the leading sector MTD, up +3.38% MTD +9.26% YTD, while Information Technology is the weakest at -2.09% MTD +26.93% YTD.
This week, Energy outperformed within the S&P 500 at +4.31%, followed by Utilities and Communication Services at +1.57% and +1.56%, respectively. Conversely, Information Technology underperformed at -1.60%, followed by Consumer Discretionary and Real Estate, -1.50% and -1.13%, respectively.
Market sentiment stabilised on Wednesday as investor attention shifted, at least temporarily, from the escalating conflict in the Middle East back towards the US economy.
The previous day, the prospect of intensified hostilities between Israel and Iran had triggered a decline in stock prices and a surge in oil prices. While oil prices maintained their upward trajectory on Wednesday, movements in major stock indices were relatively muted. All three major US indices registered modest gains of 0.1% or less, with the Dow Jones Industrial Average rising by 40 points.
In corporate news, Tesla's Q3 delivery figures fell slightly short of consensus estimates, while Nike's performance weakened after a minor miss on fiscal Q1 sales. Despite exceeding earnings per share expectations due to improved gross margins and lower selling, general, and administrative expenses, Nike issued guidance below expectations for fiscal Q2 and withdrew its fiscal year 2025 guidance.
Humana experienced a significant decline in its stock price following a negative impact attributed to changes in its Centres for Medicare & Medicaid Services (CMS) star performance rating.
Conagra Brands also faced challenges, missing estimates for organic growth and gross margins.
US stocks
Mega caps: A mostly negative week for the ‘Magnificent Seven’ due to an ongoing rotation to sectors that are more sensitive to economic cycles. Alphabet +2.71%, Amazon -4.04%, Apple +0.18%, Meta Platforms +0.79%, Microsoft -3.47%, Nvidia -3.77%, and Tesla -3.11%.
Energy stocks had a positive week, as the Energy sector itself was +4.31%. The sector’s YTD performance is +9.26%. Over the week ExxonMobil +5.88%, Energy Fuels +5.17%, Chevron +4.85%, Apa Corp (US) +4.84%, Occidental Petroleum +4.54%, ConocoPhillips +4.38%, Phillips 66 +3.56%, Halliburton +3.46%, Baker Hughes +3.25%, and Marathon Petroleum +2.30%, while Shell -0.43%.
Chevron-Hess merger clears FTC antitrust review. Chevron announced that the Federal Trade Commission (FTC) has completed its antitrust review of the company's proposed merger with Hess. This satisfies a key condition for the transaction to proceed.
To address concerns raised by the FTC, Hess and Chevron have mutually agreed that John Hess, CEO of Hess, will not be appointed to the Chevron board of directors. Instead, Mr. Hess will serve in an advisory capacity to Chevron, focusing on government relations and social investments in Guyana, as well as supporting the Salk Institute's Harnessing Plants Initiative.
While this marks significant progress, the completion of the merger remains subject to other conditions. These include the satisfactory resolution of ongoing arbitration proceedings related to preemptive rights within the Stabroek Block joint operating agreement. Chevron expressed confidence in its position and expects a favourable outcome from the arbitration process.
Hess shareholders had already approved the merger agreement in May.
Materials and Mining stocks had a positive week, as the materials sector was +0.47%, bringing the sector’s YTD performance to +11.89%. Albemarle +8.65%, Mosaic +6.90%, Yara International +6.40%, Sibanye Stillwater +6.01%, Freeport-McMoRan +5.20%, CF Industries +5.14%, and Nucor +1.73%, while Newmont Corporation -2.28%.
Mosaic announces hurricane Helene impacts. Mosaic provided an update on Monday regarding the impact of Hurricane Helene on its North American Phosphates operations. The Tampa port, which had been closed in anticipation of the hurricane, reopened on Sunday. Preliminary assessments indicate that the facilities sustained limited damage. However, the Riverview facility is currently offline due to water intrusion from the storm surge. Cleanup and water mitigation efforts are underway, and the facility is expected to return to full production capacity within approximately 10 days.
European Stock Indices Price Performance
Stoxx 600 -0.33% MTD +8.80% YTD
DAX -0.83% MTD +14.41% YTD
CAC 40 -0.76% MTD +0.46% YTD
IBEX 35 -2.25% MTD +14.92% YTD
FTSE MIB -1.32% MTD +10.95% YTD
FTSE 100 +0.65% MTD +7.21% YTD
This week, the pan-European Stoxx Europe 600 index was +0.39%, closing at 521.14. It was +0.05% on Wednesday.
In the STOXX Europe 600, Oil & Gas is the leading sector so far this month, up +2.94% MTD -3.20% YTD, while Retail is the weakest at -2.22% MTD +16.07% YTD.
This week Basic Resources outperformed within the STOXX Europe 600 with a +5.63% gain, followed by Personal & Household Goods and Technology at +3.53% and +3.00%, respectively. Conversely, Travel & Leisure underperformed at -3.09%, followed by Retail and Autos & Parts, -1.92% and -1.50%, respectively.
Germany's DAX index was -0.25% on Wednesday and closed at 19,164.75. It was +1.30% for the week. France's CAC 40 index was +0.05% on Wednesday, closing at 7,577.59. It was +0.16% for the week.
The UK's FTSE 100 index +0.27% this week to 8,290.86. It was +0.17% on Wednesday.
Other Global Stock Indices Price Performance
MSCI World Index -1.00% MTD +16.31% YTD
Hang Seng +6.20% MTD +31.65% YTD
This week, the Hang Seng Index was +17.33%, while the MSCI World Index was -0.27%.
Currencies
EUR -0.87% MTD +0.02% YTD to $1.1046
GBP -0.85% MTD +4.15% YTD to $1.3261
The euro was -0.76% against the USD over the past week, while the British Pound was -0.42%. The Dollar Index was +0.67% this week, +0.96% MTD, and +0.41% YTD.
The US dollar appreciated to a three-week high against the euro on Wednesday, buoyed by the ADP National Employment Report, which indicated stronger-than-expected growth in US private payrolls for September. This development comes ahead of the highly anticipated nonfarm payrolls report scheduled for release on Friday.
The ADP report revealed an increase of 143,000 private sector jobs in September, following an upwardly revised 103,000 increase in August, exceeding economists' forecasts of 120,000 job additions.
Friday's nonfarm payrolls report is projected to show an increase of 140,000 jobs for September, with the unemployment rate holding steady at 4.2%.
The US dollar index climbed +0.67% to 101.62, its highest level since 11th September. Concurrently, the euro depreciated by -0.19% to $1.1046, its lowest point since the same date. The euro's weakness reflects growing expectations of an interest rate cut by the ECB later this month in response to easing inflationary pressures.
In contrast to the euro, the British pound stabilised on Wednesday, recovering from a sharp decline against the dollar the previous day. The pound's earlier depreciation was triggered by the escalating conflict in the Middle East, which fueled demand for safe-haven assets like the US dollar.
The pound was last observed trading -0.13% lower at $1.3261, after experiencing a -0.67% drop on Tuesday. Despite the recent decline, the pound remains one percentage point below the two-and-a-half-year high reached last Thursday. The euro/sterling exchange rate remained relatively unchanged at 83.29 pence per euro.
Current market pricing suggests a 36 bps reduction in UK interest rates by the end of the year. This implies at least one 25 bps cut by the BoE, with a roughly 45% probability of a further reduction.
Several BoE officials are scheduled to deliver public remarks this week, including Chief Economist Huw Pill on Friday. Additionally, key economic data releases are expected, with the service sector PMI due on Thursday and house building figures on Friday.
The dollar also strengthened significantly against the Japanese yen, appreciating by +2.15% to reach ¥146.59. The yen's decline followed comments by Prime Minister Shigeru Ishiba, who stated that Japan is not currently in a position to implement further interest rate hikes. This statement, seemingly aimed at distancing himself from his reputation as a monetary hawk, was made after a meeting with BoJ Governor Kazuo Ueda on Wednesday.
Note: As of 5:00 pm EDT 2 October 2024
Cryptocurrencies
Bitcoin -3.38% MTD +45.46% YTD to $60,832.99.
Ethereum -8.54% MTD +3.30% YTD to $2,381.59.
It was a negative week for the two major cryptocurrencies. Bitcoin lost -3.84% over the week, while Ethereum posted a -7.41% loss. According to SoSoValue, Bitcoin Spot ETFs experienced a collective net outflow of $91.76 million on Wednesday. Grayscale's GBTC ETF saw a net outflow of $27.31 million, contributing to its substantial historical net outflow, which now totals $20.12 billion. In contrast, Fidelity's FBTC ETF emerged as the day's leader in net inflows, attracting $21.08 million in new investments. This inflow brings FBTC's total historical net inflow to $9.87 billion.
Ethereum Spot ETFs experienced a net inflow of $14.45 million on Wednesday. Despite the overall positive trend, Grayscale Ethereum Trust ETF recorded a net outflow of $5.40 million, contributing to its cumulative historical net outflow of $2.94 billion. Conversely, BlackRock ETF (ETHA) attracted significant investor interest with a net inflow of $18.04 million, bringing its total historical net inflow to $1.16 billion. Franklin Templeton ETF (EZET) also experienced positive flows, recording a net inflow of $1.81 million and increasing its historical total net inflow to $37.12 million.
While the total net asset value of Spot Ethereum ETFs currently stands at $6.51 billion, representing a net asset ratio of 2.27%, the historical cumulative net outflow for this investment category has reached $558 million.
Note: As of 5:00 pm EDT 2 October 2024
Fixed Income
US 10-year yield +3.4 bps MTD -9.3 bps YTD to 3.788%.
German 10-year yield -3.7 bps MTD +8.9 bps YTD to 2.098%.
UK 10-year yield +4.6 bps MTD +48.6 bps YTD to 4.025%.
US Treasury 10-year bond yields are +0.4 basis points (bps) up this week.
US Treasury yields with longer maturities experienced an upward trend on Wednesday, influenced by economic data that indicated a resilient labour market. This movement occurred amidst investors' close attention to the escalating conflict in the Middle East, following Iran's missile strikes against Israel.
The yield on the 10-year Treasury note increased by +5.1 bps to reach 3.788%. It is noteworthy that this yield has been declining for the past five months, with a significant drop of over 50 bps in Q3, fueled by investor expectations of a more accommodative monetary policy from the Fed. Similarly, the 30-year Treasury bond yield climbed +5.2 bps to 4.133%.
In contrast to the longer-term yields, the two-year US Treasury yield, which is highly sensitive to interest rate expectations, exhibited a more modest increase of +1.4 bps, reaching 3.635%.
According to CME Group's FedWatch Tool, the probability of a 50 basis point cut at the November meeting is 35.9% from 57.4% a week ago.
The German 10-year yield was -8.7 bps this week, while the UK 10-year yield was +3.4 bps this week. The spread between US 10-year Treasuries and German Bunds currently stands at 169.0 bps, +9.1 bps from last week.
Italian bond yields, a benchmark for the eurozone periphery, were -10.8 bps this week to 3.438%. Consequently, the spread between Italian and German 10-year yields -2.1 bps to 134.0 bps from 136.1 bps last week.
Euro area government bond yields rebounded on Wednesday, following a significant decline in long-dated yields the previous day, which marked their most substantial daily drop since mid-June. This earlier decline was driven by concerns surrounding economic growth prospects.
The yield on Germany's 10-year Bund rose +5.6 bps to 2.098%, rebounding from Tuesday's low of 2.011%, a level not seen since January. While fears of an escalating regional conflict in the Middle East initially exerted downward pressure on yields as investors sought the safety of government bonds, the impact remained limited.
Market expectations for ECB policy shifted, with a 90% probability now priced in for a 25 bps rate cut in October, up from 80% late last week. This influenced the two-year German Bund yield, which is highly sensitive to ECB rate expectations. Despite already reflecting a rapid easing trajectory, the yield increased by +3 bps to 2.05%, recovering from its lowest point since December 2022 at 1.987% on Tuesday.
Meanwhile, the spread between French and German 10-year yields, a key indicator of the risk premium associated with French government bonds (OATs), narrowed by 0.9 bps to 77.5 bps. This tightening followed Prime Minister Michel Barnier's announcement on Tuesday of significant public spending cuts and targeted tax increases for large corporations and high-income individuals, aimed at addressing France's substantial budget deficit.
Italy's 10-year government bond yield also saw an increase of +5.9 bps, settling at 3.438%.
Commodities
Gold spot +0.42% MTD +28.35% YTD to $2,659.44 per ounce.
Silver spot +1.93% MTD +33.13% YTD to $31.84 per ounce.
West Texas Intermediate crude +1.54% MTD -2.89% YTD to $70.96 a barrel.
Brent crude +3.92% MTD -3.28% YTD to $74.66 a barrel.
Spot gold prices are up +0.05% this week. However, gold prices experienced a modest decline on Wednesday, pausing after a rally of more than 1% in the previous session. This moderation occurred as market participants awaited further US economic data and monitored developments in the Middle East conflict.
Spot gold prices were down -0.09%, trading at $2,659.44 per ounce on Wednesday. The previous day, prices had surged over 1% following Iran's missile strikes on Israel.
Contributing to the subdued performance of gold was the strength of the US dollar, which serves as a competing safe-haven asset. A stronger dollar increases the cost of dollar-denominated gold for holders of other currencies, potentially dampening demand.
Oil was up this week on concerns that the escalating conflict in the Middle East could disrupt oil supply. WTI is up +1.98%, while Brent is up +1.34%.
Oil prices experienced a moderate increase on Wednesday, however, the upward movement in prices was tempered by a significant build in US crude inventories, which added downward pressure.
The geopolitical risk intensified from Iran's launch of over 180 missiles at Israel on Tuesday, representing its largest direct attack on the nation to date. In response, both Israel and the US have pledged retaliatory measures, signalling a potential intensification of the conflict.
According to reports from Axios, citing Israeli officials, Israel's response could involve targeting Iranian oil production facilities among other strategic assets. Such a development could have significant implications for global oil supply.
Despite the heightened geopolitical risks, OPEC+ opted to maintain its current oil output policy during a meeting of key ministers on Wednesday. The group is scheduled to increase production by 180,000 barrels per day (bpd) each month starting in December.
EIA report: increase in US crude inventories and decline in refinery runs. According to data released on Wednesday by the Energy Information Administration (EIA), US crude oil inventories increased in the week ending 27th September, while refinery utilisation rates declined amid weakening fuel demand.
Specifically, crude inventories rose by 3.9 million barrels to reach 417 million barrels. Additionally, crude stocks at the Cushing, Oklahoma delivery hub experienced an increase of 840,000 barrels.
Refinery activity decreased, with crude runs falling by 662,000 barrels per day and refinery utilisation rates declining by 3.3 percentage points to 87.6%. This reduction in activity is typical for this time of year, as many refineries commence seasonal maintenance following the end of the summer driving season.
In contrast to the rise in crude oil inventories, US gasoline stocks increased by 1.1 million barrels, reaching 221 million barrels.
The EIA data also revealed a decline in gasoline product supply, a proxy for demand, which fell to 8.5 million bpd from 9.2 million bpd the previous week. Similarly, distillate fuel supplied, which encompasses diesel and heating oil, decreased to 3.6 million bpd from 4 million bpd the prior week.
Despite the decrease in demand, distillate stockpiles fell by 1.3 million barrels to 122 million barrels.
Note: As of 5:00 pm EDT 2 October 2024
Key data to move markets
EUROPE
Thursday: Spanish HCOB Services PMI, German HCOB Services and Composite PMI, Eurozone HCOB Services and Composite PMI, and PPI. Bundesbank Monthly report, and speeches by Bundesbank President Joachim Hagel and ECB Executive Board member Isabel Schnabel.
Friday: Speeches by ECB Vice President Luis de Guindos and ECB’s Executive Board Member Frank Elderson.
Monday: German Factory Orders, Eurozone’s Sentix Investor Confidence and Retail Sales.
Tuesday: German Industrial Production, and Eurogroup Meeting.
Wednesday: Trade Balance.
UK
Thursday: S&P Global/CIPS Services and Composite PMIs.
Friday: A speech by BoE’s Chief Economist Huw Pill.
Monday: BRC Like-For-Like Retail Sales.
US
Thursday: Initial and Continuing Jobless Claims, S&P Global Services and Composite PMIs, ISM Services PMI, Prices Paid, Employment Index and New Orders, and speeches by Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari.
Friday: Nonfarm Payrolls, Employment Rate, Labor Force Participation, Average Hourly Earnings, and a speech by New York Fed President John Williams.
Monday: Speeches by Atlanta Fed President Raphael Bostic, St. Louis Fed President Alberto Musalem, and Minneapolis Fed President Neel Kashkari.
Tuesday: Speech by Atlanta Fed President Raphael Bostic.
Wednesday: FOMC Minutes, and a speech by San Francisco Fed President Mary Daly.
JAPAN
Monday: Current Account.
Global Macro Updates
East coast port strike raises fears of economic paralysis. Approximately 45,000 dockworkers across 36 East and Gulf Coast ports commenced a strike on Tuesday, marking the largest labour stoppage of its kind since 1977. Key points of contention in the negotiations include wage levels and safeguards against job displacement due to automation. The duration of the strike remains uncertain, with analysts projecting a timeframe ranging from a few days to several weeks.
While the White House has the authority to impose an 80-day cooling-off period, President Biden has expressed reluctance to utilise this option. However, according to Axios, the administration has been actively involved in encouraging a negotiated settlement.
Nevertheless, even a short-lived strike could lead to significant disruptions and economic repercussions. JPMorgan anticipates that the strike will primarily affect container and automobile trade, with a relatively limited impact on bulk agricultural and commodity products. Barclays estimates that 60 - 70% of imports in certain major retail categories are routed through the impacted ports, though they note that some importers expedited shipments earlier this year in anticipation of potential disruptions. A Jefferies analysis from last week highlighted the economic cost of a similar port strike in 2002, which lasted 10 days and resulted in losses of $600 million to $2 billion per day, equivalent to 0.05 - 0.2% of GDP.
Analysts cited by Reuters indicate that automakers are anticipated to be among the most severely impacted by the ongoing dockworkers' strike at US East and Gulf Coast ports. This vulnerability stems from the industry's significant reliance on these shipping routes for the transportation of vehicles and components.
Barclays highlights the auto industry's dependence on these ports, noting that 70% of US auto parts imports are routed through them. European automakers such as BMW, Volkswagen, and Volvo are considered particularly vulnerable due to their reliance on transatlantic trade. While many companies have proactively built up inventories in anticipation of potential disruptions, costs could escalate significantly if air transport becomes necessary to maintain parts supply.
Growing backlogs of vessels awaiting offloading are already evident, and concerns are mounting that a protracted strike could lead to economic paralysis, disrupting a range of global industries. The transportation and warehousing sectors are expected to be among the first and most severely affected.
Maersk has issued a warning that a one-week shutdown caused by port strikes could result in 4-6 weeks of recovery time, with delays compounding over time. This disruption comes at a time when global supply chains are already facing challenges due to rising shipping costs, which surged approximately 300% in early 2024, and disruptions in the Red Sea stemming from geopolitical conflict, as reported by CNBC.
In response to these challenges, some companies are implementing mitigation strategies to minimise supply chain disruptions, although these measures may entail higher costs. Stellantis and pharmaceutical company Novo Nordisk have both announced mitigation plans to address potential impacts, with Novo Nordisk opting for air freight to circumvent potential disruptions.
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