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Market Recap.
Global markets were broadly lower last week, with the notable exception of China, which saw strong gains, as optimism around Beijing’s comprehensive support measures outweighed disappointing economic data. The Shanghai Composite Index jumped by 8.06%. The potential for a broader conflict in the Middle East pushed oil prices to their highest level in a month. This, coupled with news of a dockworkers’ strike at key Eastern seaports in the US, further weighed on global market sentiment.
Geopolitics.
Japan’s incoming Prime Minister Shigeru Ishiba said last Monday he plans to hold a general election on October 27. If the LDP fails to secure a majority, Japan could see a coalition government for the first time since the Democratic Party of Japan’s brief tenure from 2009 to 2012. This potential shift could significantly impact Japan’s domestic and foreign policy directions.
Central Banks.
Comments from ECB officials indicated that their gradualist approach to easing monetary policy may be shifting. ECB President Christine Lagarde, for example, hinted that borrowing costs might soon be lowered. Bank of England (BoE) Governor Andrew Bailey said in an interview with The Guardian newspaper that the bank could become “a bit more aggressive” in lowering borrowing costs if the inflation rate continues to fall.
News.
In a sign of economic strength, the US economy generated 254,000 new jobs in September, exceeding economists’ consensus forecast for around 140,000 and delivering the strongest result in six months. Moreover, the initially reported jobs growth figures for July and August were revised upward by a total of 72,000 and the unemployment rate slipped to 4.1% from 4.2% the previous month.
Inflation.
Paving the way for interest-rate cuts, Eurozone core inflation eased to +2.7% on a yearly basis in September 2024 (vs. 2.8% expected), down from +2.8% in August. The headline inflation rate, which includes volatile food and energy sectors, eased to +1.8% on a yearly basis, down from +2.2% in August and marking the lowest point since April 2021.
Commodities.
The price of oil jumped about 9% for the week to nearly $75 per barrel on Friday afternoon amid escalating geopolitical tensions in the Middle East. Friday’s price was the highest since late August, but it remained well below a recent high of around $83 in early July. Gold rose past $2,660 per ounce on Friday, trading at record levels, benefiting from its safe-haven status magnified by heightened geopolitical risks.
ESG.
The UK government has announced up to £21.7bn of support to get the country’s first carbon capture and storage projects up and running. Ministers said the funding, over 25 years, would support two undersea carbon storage sites and pipelines, with the capacity to store over 8.5mn tons of carbon dioxide per year combined, as well as carbon capture at three planned projects to produce hydrogen, power and energy-from-waste. The projects are in Teesside and Merseyside, northern England.
Week Ahead.
In the US, inflation figures, and the start of the earnings season will take centre stage. The annual inflation is expected to have slowed to 2.3% in September, marking a new low since February 2021. On the corporate front, Q3 earnings season will kick off with big banks JPMorgan, Wells Fargo and Bank of New York Mellon reporting on Friday. The ECB will release the minutes from its monetary policy meeting on Thursday. The UK will reveal its GDP growth and factory activity for August.
Source: Marlborough Multi-Asset, Morningstar, BBC News, Financial Times, PIMCO, John Hancock, ESG Today, Trading Economics
Risk Warning: These are Anthony’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
