2023 - Week 38
Alessandro Hor
Investment Manager | Fund Management | Compliance & AML | Capital Transactions | Asset Management | Risk Management
Markets’ overview:
It was the FOMC week with all its pros and cons! Global equity markets recorded a negative performance last week. The #S&P500 closed down 2.93% and the #NASDAQ -3.62%. Not far from the European markets with the #Stoxx600 recording a -1.87%. The #Nikkei with a -3.53% challenged the lead as the worst performing market to the US and the #HangSeng with a -0.84% was the least negative market of the lot.
The #VIX moved up sharply from 13.79 to 17.20 (+24.73%) and the #SKEW index moved down to 137.74 (-3.62%). It looks like the risk perceived by the relatively high level of the Skew Index over the past few weeks, is now moving into stock prices.
As mentioned above, the past week was the FED week, let me summarize the main decisions taken during the 2 days meeting: The Federal Reserve has made the decision to pause rate hikes, opting to keep interest rates unchanged for now. This means that the benchmark rate will remain within the target range of 5.25-5.5%. Among the 12 Federal Reserve officials, one member foresees a future rate hike, while seven members do not expect any further increases (One member has projected a rate of 6.125% by the end of 2024).
The Federal Reserve's outlook suggests that rates will stay “higher for longer”. This is evident from the "dot plot" projection, which indicates that policymakers still anticipate one more rate hike taking place this year. However, what's noteworthy is that the rate projections for both 2024 and 2025 have been adjusted upward by half a percentage point.
Looking at the economic projections, the Federal Reserve foresees inflation reaching 2.6% in 2024. Additionally, there has been a significant upward revision in the median projection of economic growth for 2023. Previously at 1% in June, it is now forecasted to reach 2.1%. Furthermore, the officials have revised their unemployment forecasts, now expecting the jobless rate to peak at 4.1% instead of the previously estimated 4.5%.
In their statement, the Federal Reserve reiterates that officials are carefully considering the need for potential additional policy adjustments. While acknowledging that job gains have slowed, they still describe the overall employment situation as strong. This indicates that the Federal Reserve is closely monitoring the economy and weighing the appropriate level of policy tightening required in the future.
US
The Housing Market Index, released by the National Association of Home Builders in collaboration with Wells Fargo, recorded a negative reading for the first time in seven months. In September, the index dropped by 5 points to reach 45, as all three components experienced declines. Current sales conditions slipped to 51, sales expectations for the next six months fell to 49, and buyer traffic dropped to 30.
The primary factor driving this weakness is the higher mortgage rates, which have remained above 7% since June. Additionally, the limited decrease in prices has negatively impacted demand, leading builders to introduce more incentives. In an effort to stimulate demand, 32% of builders reduced prices by an average of 6% this month.
On Thursday we got further data on the housing market: existing home sales in August experienced a 0.7% month-on-month decline, falling short of the expected 1.5% increase. Inventories also decreased by 0.9% month-on-month, while the median price of sold existing homes saw a year-on-year rise of 3.9% to reach $407,100. The news had a notable impact on the stock prices of Zillow, Redfin, Opendoor, and homebuilders, all of which dropped significantly.
Meanwhile, jobless claims in the United States continue to surprise on the downside, reaching an eight-month low. This trend is attributed to businesses showing reluctance in laying off employees due to industry-specific labor shortages.
The S&P Global Manufacturing PMI improved to 48.9 from 47.9 in August, indicating a continuing contraction in the manufacturing sector's business activity, albeit at a slower pace. The Services PMI, on the other hand, edged lower to 50.2 from 50.5 during the same period. The Composite PMI arrived at 50.1, showing a slight decrease from 50.2 in August.
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Europe
In August, Eurozone Consumer Price Index (CPI) was finalized at 5.2% year-on-year, slightly lower than the 5.3% recorded in July. The CPI core, which excludes energy, food, alcohol, and tobacco, also decreased from 5.5% in July to 5.3% in August. Services prices showed a slowdown, shifting from 5.6% year-on-year to 5.5% year-on-year. However, energy prices experienced a rise from -6.1% year-on-year to -3.3% year-on-year.
The Eurozone Purchasing Managers' Index (PMI) once again indicated a contraction in activity during September. The PMI saw a slight increase from 46.7 to 47.1, which is better than expected. However, concerns regarding a potential contraction in GDP during the second half of the year still persist.
China
The attention continues to be on the Chinese property market as Sunac, another prominent developer, has filed for U.S. bankruptcy protection.
In its efforts to revive the sluggish economy, China's central bank has decided to keep interest rates unchanged.
Definition
Housing Market Index
The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a widely-followed indicator in the United States that offers insights into the state of the housing market from the perspective of home builders. It is a monthly survey conducted by the NAHB, where home builders are asked to provide their perceptions of the current and future single-family housing market conditions. The index covers three main components: Current Sales Conditions, Sales Expectations and Buyer Traffic. The HMI is reported on a scale from 0 to 100, where a score above 50 indicates that more builders view conditions as good rather than poor, and a score below 50 suggests a negative sentiment. The HMI is a valuable tool for investors, policymakers, and economists to understand the current health and future prospects of the housing market as perceived by those who are actively engaged in home construction.
Upcoming events:
-????????? September 26: US Building Permits, CB Consumer Confidence (September), New Home Sales
-????????? September 28: Germany CPI, US GDP Q2, US Initial Jobless Claims, Caixin PMI (September)
-????????? September 29: EU CPI, US PCE (August), China PMI (September)
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1 年Until the issue with gas, food and fuels are addressed it means nothing to hear them talk.
VP at S & W Petroleum Services, Inc
1 年Ignoring two of the major benefactors for the economy while lying about jobs and unemployment is wrong. Many can not file anymore for unemployment and as more companies go bankrupt and close doors due to overhead being to high now. They can not get loans to try and survive without adding major extra cost and the downfall of the housing market has killed many jobs. They only keep mentioning about certain ones but what about the contractors reliant on building new homes. What future do they have right now as many can not afford or get loans to build and if builders and developers put out the cost adding a lot more to the sale price that many won’t afford to buy. Keep pushing up property values to make new home pricing to expensive will not end well. Job replacements happening with AI and illegals and migrants obtaining work permits will push pay rates way down across the board and leave many jobless. Right now we ne of the largest problems is the cost of insurances. Insirance companies are laughing all the way to the bank as taking advantage of everyone and everything, charging way more and paying out way less. Overhead costs are becoming to high for many companies and the push for more pay for less work is a bad affect!
Chief Technology Officer
1 年But, you can't ignore food & fuel, like that! That is regressive.