Weekly Overview 30. Sep – 13. Oct 2024

The content of this post does not constitute financial advice. It is intended for information and education purposes only.

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The Week in Global Markets

Financial markets summary:

– EUROPE: Despite the declines in the week of the 30th of September, last week European stocks recovered somewhat, likely reflecting expectations for another ECB cut and a positive impact on international demand from the stimulus measures in China. PMI indices show that growth is slowing down and that is particularly true in Germany where think-tank and government forecasts point to a likely contraction for 2024 overall. The largest European economy is still suffering from a manufacturing shock, as factory orders keep falling quite materially. Industrial production did come in positive MoM, but is still negative YoY. ECB comments signal a faster pace of easing given that inflation has fallen below target while the economy keeps weakening. Governors of major European central banks have noted that they are open to a cut in October and perhaps even more cuts until the end of this year. In the UK, the economy is growing and output is rising across most major sectors. Bank of England is likely to continue with more rate cuts if inflation decelerates further, but the tone from the central bank remains cautious. The FTSE 100 declined this week while other countries’ major stock indices were up. German and British 10y government bond yields both rose, while the euro and the pound both depreciated against the US dollar.

– UNITED STATES: Despite tensions in the Middle East, US stocks have been up two weeks in a row, with both the S&P 500 and the Dow Jones Industrial Average reaching all-time highs last week. This likely reflected strong NFP increases that exceeded expectations and a declining unemployment rate, as well as upside PnL surprises at the start of the earnings cycle. However, the news was not all good – inflation came in higher than expected in both the headline and core measurements, weekly jobless claims went up unexpectedly and the ISM manufacturing PMI stayed firmly in the contraction zone. 10y Treasury yields rose following the inflation report and the implied probabilities for a Fed funds cut shifted, according to the CME FedWatch Tool, so there is a smaller likelihood for another 50bps cut.

– ASIA-PACIFIC: Japanese stocks recovered last week from their losses of the week before, as both the Nikkei 225 and the TOPIX advanced while the yen weakened and therefore boosted the profit prospects for Japan’s exporting companies. The country’s prime minister indicated that the economic and financial market environment is likely not ready for additional interest rate hikes. 10y JGB yields rose but remained below 1%. Comments from the BoJ once again signaled that there is no pre-determined path for policy rates. In China, in the week of the 30th of September stocks rose on investor optimism around the stimulus packages announced, while factory activity was contracting and services PMI declined. However, last week, this positive sentiment faded and the Shanghai Composite and CSI 300 dropped over 3%. The PBoC started a RMB 500bn swap facility aimed at flooding institutional nonbank investors with liquidity to purchase stocks. Consumer spending data showed that it remains below pre-pandemic levels.

– BITCOIN: BTC is currently hovering around $64.5k and technical analysts point to strong buying interest and consolidation around the $65k mark, with a potential breakout above that point that could signal further upward moves. According to Bitcoin.comNews, relative strength and stochastic indicators show neutral signals, while moving average convergence divergence (MACD) are bullish. Still, if it falls below the $63.5k support level, a short-term correction could be coming. There could be impact from a broader positive market sentiment due to economic news from the US and China, with US equities in particular reaching all-time highs again. As BTC climbed over the $64k mark, analysts reported that over $100m in short positions were liquidated.