Last week, the international market was volatile, and the conflict between Palestine and Israel sparked geopolitical risk concerns, exacerbating fluctuations in risky assets.
In terms of market performance, the US stock market is divided, with the Dow up 0.79% for the week, the Nasdaq down 0.18% for the week, and the S&P 500 index up 0.45% for the week. The three major European stock indices weakened overall, with the FTSE 100 index in the UK falling 0.59%, the DAX 30 index in Germany falling 1.55%, and the CAC40 index in France falling 1.42%.
There are many highlights to watch this week, and the situation in the Middle East will continue to attract attention from all sectors. The Federal Reserve will release the Brown Book, and the latest retail sales data may affect its economic judgment. The UK September employment and inflation data are also crucial for central bank decision-making. As the financial reporting season enters its second week, Tesla and Netflix will release their results.
According to the website of the Ministry of Foreign Affairs, the third "the Belt and Road" International Cooperation Summit Forum will be held in Beijing from October 17 to 18, with the theme of "jointly building the" the Belt and Road "with high quality and achieving common development and prosperity together". At present, representatives from over 130 countries and more than 30 international organizations have confirmed their participation. This forum is not only the most grand event to commemorate the 10th anniversary of the "the Belt and Road" initiative, but also an important platform for all parties to discuss and jointly build high-quality "the Belt and Road" cooperation.
US consumer resilience is facing a test
The latest World Economic Outlook report from the International Monetary Fund (IMF) predicts that the US economy will grow by 2.1% this year, an increase of 0.3 percentage points from previous expectations, and an increase of 0.5 percentage points to 1.5% next year. The IMF stated that the revised forecast is due to strong growth in US commercial investment and consumption in the second quarter.
Last week, US Treasury Secretary Yellen said, "I still believe that the baseline scenario for the US is a soft landing. The unemployment rate remains low, and the wage pressure that may lead to sustained high inflation has eased, while inflation itself is also declining." However, Yellen said that the US economy is still facing risks, with global external shocks being one of them, and the recent situation between Palestine and Israel has brought additional concerns.
The UAW strike will enter its fifth week. The strike caused bottlenecks in the supply chain, forcing Ford, General Motors, and Chrysler's parent company Stellantis to take leave and lay off hundreds of workers. The Federal Reserve also sees this incident as a new source of economic uncertainty. The situation has escalated as the Ford pickup truck factory in Kentucky joined the strike. UAW Chairman Shawn Fain stated that the union may call for additional workers from the three major factories to strike "at any time".
This week, Federal Reserve Chairman Powell will deliver a speech at the New York Economic Club and answer the host's questions. Several Federal Reserve officials will also give regular speeches, highlighting their views on inflation and US bond yields, as well as potential policy paths, which will attract attention from the outside world. The Federal Reserve will also release a brown book on economic conditions, showcasing the performance of the US economy since late August.
In terms of data, the monthly retail sales rate in September has become the focus. Since the beginning of this year, US consumer spending has remained resilient, mainly driven by a strong labor market and low unemployment rates. However, the increase in gasoline prices will undoubtedly lead to a slowdown in discretionary spending, and the market expects retail sales to fall back to 0.2% in September. Recent consumer credit data shows that American consumers are starting to reduce their spending, which increases the risk of unexpected data downturns. In addition, the manufacturing industry may continue to be weak, industrial output may continue to slow down, and the real estate market may be affected by the rise in mortgage interest rates. The monthly rate of construction permits and sales data are expected to show signs of the industry cooling down again.
As the financial reporting season enters its second week, major banks such as Bank of America, Goldman Sachs, and Morgan Stanley will release results, with tech stocks such as Tesla and Netflix reporting as the market focus. Other noteworthy companies include United Airlines, Procter&Gamble, TSMC, American Express, Schlumberger, and others.
Crude oil and gold
The escalation of tensions in the Middle East has pushed up international oil prices. WTI crude oil near month contract rose 5.92% to $87.69 per barrel, while Brent crude oil near month contract rose 7.46% to $90.89 per barrel.
After the Israeli military warned people to evacuate Gaza on the 12th, there were concerns that Israel was about to launch a ground attack, which increased the risk of oil supply disruptions in the Middle East. Almost one-third of the global oil supply comes from the Middle East, which has kept oil prices rising, and the tightening of US sanctions on Russian crude oil exports has also provided support for oil prices, "said Lukman Otunuga, FXTM's market analysis manager
Otunnuga stated that supply issues are still widespread, and people are increasingly concerned about the spread of conflict between Israel and Hamas, leading to significant disruptions in already tense markets. However, it should be noted that demand factors may have adverse effects in the future, especially concerns about global economic recession.
The international gold price has reached a new high in three weeks, and geopolitical risks have also stimulated demand for safe haven. The price of gold futures for December delivery on the New York Mercantile Exchange rose 5.2% for the week, closing at $1941.50 per ounce.
Stephen Innes, Managing Director of SPI Asset Management, said, "I think the fear of conflict is driving gold, so traders don't want to short oil or gold on weekends to prevent multiple regional powder kegs from exploding
On October 9th, the World Gold Council released a report stating that after entering the fourth quarter, the total annual gold reserves of global central banks will maintain a strong growth trend. The year-to-date pace of gold purchases is also sufficient to indicate that the central bank's demand for gold purchases for the entire year of 2023 will once again experience strong growth.
Pay attention to the UK job market
Last week, ECB President Lagarde stated that she believes the ECB will achieve its goal of reducing inflation to 2% and has relative confidence in Europe's natural gas reserves. "We hope to restore inflation to 2%, and we will achieve this goal.
At present, there are still significant differences within the European Central Bank on whether further tightening policies are needed. European Central Bank regulatory commission Casacas believes that the "narrow path" of inflation returning to 2% means that the possibility of an unprecedented series of interest rate hikes continuing to be extended cannot be ruled out. The European Central Bank's governing committee and Belgian central bank governor, Wen Shi, stated that although the latest inflation data in the eurozone is reassuring, the risk posed by oil prices may prompt the European Central Bank to raise interest rates again. However, the European Central Bank's governing committee, Villerova, stated that core inflation in the eurozone has reached its peak, and the current interest rate level is appropriate. It is more important to be patient with monetary policy.
This week, ECB President Lagarde will continue to make appearances and deliver speeches, and the final value of the September Consumer Price Index (CPI) in the eurozone is also worth paying attention to.
According to data from the UK Office for National Statistics, driven by service sector output, the economy rebounded moderately by 0.2% in August, recovering from a 0.6% contraction last month, indicating that the UK is expected to emerge from the recession quagmire. The core CPI of the UK slowed from 6.9% to 6.2% in August, while the overall CPI fell to 6.7%, prompting the Bank of England to suspend interest rate hikes last month. The latest interest rate futures show that the probability of the Bank of England continuing to raise interest rates within the year is 22%, and if the interest rate is not too high, it may be maintained for a longer period of time. The node for the first rate cut points to the second half of next year.
This week, the UK will release important indicators such as the August employment report, September CPI, and monthly retail sales rate. The most concerning issue for the Bank of England now is wage growth. In the past two months, hourly wage growth in the UK has been at a historic high of 7.8%. High inflation and high interest rates mean that consumers will continue to struggle with the cost of living crisis.
Highlights of this week