Market and Macro Overview for the Week (20th – 27th Sep 2024)

Macro Trends

Ahead of the major Golden Week holiday, China unleashed a surprise large-scale stimulus plan, announced in multiple phases, significantly boosting global financial markets. The measures sparked enthusiasm among traders, leading to substantial gains in Chinese and Hong Kong equities and Western markets, particularly in luxury goods and technology stocks, while the banking and oil sectors lagged. The sectoral rotation could persist in the coming sessions, with earnings season set to begin in mid-October, further influencing market trends. Additionally, the Chinese Yuan saw a boost alongside these developments.

Stock Markets

Major U.S. stock indexes extended their gains for the third consecutive week, with the DOW and S&P 500 both rising approximately 0.6% to new record highs, while the NASDAQ saw a strong 1% increase, driven by optimism surrounding ongoing disinflation trends as the latest PCE inflation data showed continued improvement. In Europe, the EuroSTOXX50 closed 4% higher, as signs of slowing business activity fueled expectations for interest rate cuts. Other major European stock indexes also posted gains, with Germany’s DAX jumping 4.03%, France’s CAC 40 climbing 3.89%, and Italy’s FTSE MIB rising 2.86%. The UK’s FTSE 100 advanced by 1.10%. Meanwhile, Japan’s stock markets performed well throughout the week, with the Nikkei 225 increasing by 5.6% and the broader TOPIX Index gaining 3.7%. However, following the close of Japan’s markets on Friday, Shigeru Ishiba's victory in the Liberal Democratic Party leadership race—securing his position as Japan’s next prime minister— caused Nikkei futures to drop over 2,000 points, with the cash index expected to open significantly lower on Monday.

Fixed Income and STIRs

Sweden's Riksbank reduced its policy rate by 0.25 to 3.25%. The central bank also suggested that if the inflation and economic activity outlooks remain stable, additional rate cuts may be considered during the two remaining Executive Board meetings this year. Similarly, as anticipated, the Swiss National Bank lowered its borrowing rate by 0.25 to 1.00%. Governor Thomas Jordan indicated that further rate reductions could be on the table, given the significant decline in inflationary pressures. In Europe, economic data continued to disappoint, prompting the market to quickly factor in another rate cut from the European Central Bank in October, a notable move with just 21 days remaining until the decision. Meanwhile, in the U.S., the yield on the 10-year Treasury note remained relatively unchanged over the week.

FOREX Markets

Last week's outcome of Japan's LDP leadership race surprised markets. Investors had primarily anticipated a victory for Sanae Takaichi, known for her reflationary policies, but the unexpected win by Ishiba altered market expectations significantly. In response, the Yen surged as investors reacted to Ishiba's critical stance on the Bank of Japan’s previous monetary stimulus measures. Ishiba has publicly endorsed the BoJ's current rate hikes, fueling speculation that another rate increase could be on the horizon in December. In contrast, economic difficulties in Europe were underscored by disappointing PMI figures, which increased the likelihood of the European Central Bank cutting rates in October. This led to a sharp decline in the Euro, making it the weakest among the major currencies for the week. Over in the U.S., the Dollar also faced pressure due to inflation data that reinforced expectations for further easing by the Federal Reserve. Meanwhile, currencies like the British Pound, Swiss Franc, and Canadian Dollar displayed mixed trends.

Cryptocurrency

Bitcoin (BTC) continued to gain momentum, rising over 4% to surpass the $65,000 mark, a level not seen since July and now just 12% below its all-time high of $73,830 set in March. Bitcoin Spot ETFs also experienced strong inflows, with over $600 million added last week, including $385 million on Thursday alone. The rise of digital currencies were supported by a more favourable macroeconomic environment for risky assets, which benefitted both traditional financial markets and the broader crypto ecosystem. Other cryptocurrencies also saw gains, with Ether (ETH) up 5% and Solana (SOL) rising 7.5%.

Commodities & Energy

Despite Beijing's efforts to stimulate its economy and boost oil demand, prices remained under pressure. Brent crude dropped close to the $70 mark, losing around 4.3% in the past five days, while US WTI fell 4.6%, testing $67.6. The pressure stems from supply concerns, as OPEC+ producers reportedly prepare to increase production, potentially ending their price control strategy. In contrast, industrial metals enjoyed a rally driven by China's stimulus measures, especially those targeting the property sector. Copper surged nearly 6%, while Zinc saw the most significant rise, climbing 7% to $3,038. Precious metals also gained with gold continuing its ascent to a record $2,660.

What to watch next week

MON – Chinese NBS & Composite PMIs (Sep), Caixin PMIs (Sep), Japanese Retail Sales (Aug), German Retail Sales (Jun), UK GDP (Q2), Swiss KOF (Sep), German Flash CPI (Sep), UK Mortgage Approvals/Lending (Aug), US Dallas Fed Index (Sep), New Zealand NZIER (Q3); Canada Holiday. / Speakers: Fed's Bowman, ECB President Lagarde, Fed Chair Powell, BoE's Greene. TUE - Riksbank Minutes, EZ/UK/US Final Manufacturing PMI (Sep), EZ Flash CPI (Sep), US ISM Manufacturing PMI (Sep), US JOLTS (Aug), Mainland China and Hong Kong market holiday. / Speakers: ECB's de Guindos, Rehn, Schnabel, BoE's Pill, Fed's Bostic, Barkin and Cook. WED - NBP Announcement, US ADP National Employment (Sep), EZ Unemployment Rate (Sep), Mainland China market holiday. / Speakers: ECB's de Guindos, Lane, Buch, Elderson, Schnabel, Fed's Hammack, Musalem, Bowman and Barkin THU - Swiss CPI (Sep), EZ/UK/US Final Services and Composite PMIs (Sep), US Durable Goods R (Aug), US ISM Services PMI (Sep), Mainland China and South Korea market holidays / Speakers: Fed's Bostic and Kashkari FRI – US Jobs Report (Sep), Mainland China market holidays. / Speakers: BoE's Pill, ECB's de Guindos and Elderson, Fed's Williams.

MARKETS WEEKLY PRICING COMPARISON