This is our weekly market update, where we start in the US, cross to Europe, and Asia, and end in Australia covering crypto and commodities on the way.
My earlier call of enhanced market volatility proved correct, as a gauge of global stocks took its biggest weekly drop in two months driven by market euphoria after the Trump win now turning, as the implications in terms of tariffs and staff appointments sink in and as trading profits are made. MSCI’s gauge of stocks across the globe lost 1.11%, to 842.61 for its fourth straight decline, following five straight advances. In Europe, the STOXX 600 index closed down 0.77% on the day and down 0.69% across the week. The 10-year U.S. Treasury yield hit its highest level in 5-1/2 months on Friday as economic data and comments from Federal Reserve officials indicated a slower pace of interest rate cuts ahead.
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In this week’s market update I am going to focus on the path of interest rates, as over this past week midst the US election we got a swathe of Central Bank rate decisions. The RBA held the cash rate on Tuesday, but the Fed, the Bank of England, Sweden’s Riksbank and the Hong Kong Monetary Authority all cut.
While Donald Trump won’t return to the White House for another 10 weeks, he’s already casting a shadow over central banks and with Trump 2.0 expected to boost growth and risk returning inflation, and actually there was (reasonable) speculation that the Fed might not cut rates after all, or at least hint heavily that it would pause at next month’s meeting. Certainly, some economists now expect fewer rate cuts from the Fed next year as trade tariffs may boost US inflation. That could reshape the easing path for central banks around the world, and add currency pressure on emerging markets.
Australia’s economic output could fall between 0.8% and 1.5%, or $20 billion to $37 billion if Trump imposed a suite of his economic policies including slashing America’s 21 per cent corporate tax rate to 15% KPMG estimated.
So all up, the level of uncertainly ahead has been amplified by the Trump victory, and the consequences will spill over into other markets. But we can expect higher interest rates in the months ahead, which is not good for those holding on by the skin of their teeth. This is going to get messy.
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This is an edited version of a live discussion with Head of Investments at Nucleus Wealth and Walk The World Funds, Damien Klassen. As the US election closes out, and the RBA releases the latest decision, how are markets shaping up, which segments are risk exposed, and what strategies need to be considered given the international cross currents and economic uncertainties.
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This is our weekly market update, where we start in the UK, cross to Europe and Asia, and end in Australia, covering commodities and crypto along the way. And yes folks, this is a dense data-rich show, so be warned!
On Friday, global stocks slipped, finishing the week lower amid U.S. election jitters, while oil prices rose due to concerns about fighting in the Middle East. Israel hit back with further if somewhat restrained strikes on military targets in Iran overnight, so that may change sentiment next week, we will see.
Republican former President Donald Trump and Democratic Vice President Kamala Harris are polling neck-and-neck in crucial swing states ahead of the Nov. 5 election. Investors are anxious about a contested result roiling world markets and unleashing fresh geopolitical uncertainty.
But a rally in stocks faded as banks dragged down the broader market despite gains in tech shares. And bitcoin slumped after a news report that federal investigators are probing cryptocurrency firm Tether.
As the earnings season rolled in, traders also braced for the US presidential election and key economic data — including next week’s jobs report — for clues on the scope for Federal Reserve rate cuts. We are coming up to a couple of pivotal weeks which could well shape the markets for months ahead.
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The Washington-based IMF just published In its biannual world economic outlook, which said that central banks had scored a major achievement to return inflation to the pre-pandemic average without inflicting a global recession.
They go one to say that economic developments over the past four years have had a lot to do with how individual countries have deployed fiscal and monetary policies since the pandemic.
Australia’s choice to hold rates lower, whilst lifting government debt (across states and federally) with most new jobs created in the public sector, thus crimping productivity. This plus high migration has kept inflation well above band, and with little prospect of cuts any time soon, but so far have avoided a technical recession, although many households still are feeling the pinch.
New Zealand lifted rate faster and higher, and hit a recession, but is now cutting, has cut migration, and did not pump-up jobs in the public sector as Australia did. It will be interesting to see which strategy provides the better long-term outcomes.
But for now, the fear of entrenched inflation and higher interest rates for longer suggests that the inflation battle in Australia has yet to be won. And with an election due by May next year, this could well spell trouble for the current Government, though I am not sure the other mob are any better!
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This is our weekly market update, a data-packed show where we start in the US, cross to Europe and Asia and end in Australia, covering crypto and commodities along the way.
The wild ride on the markets continued this week, with the S&P 500 and the Dow scoring record closing highs on Friday, thanks to big boosts from financial stocks after banks reported strong quarterly results despite the fact the latest inflation data fueled expectations for a smaller U.S. Federal Reserve rate cut in November. Traders kept bets steady for a roughly 88% probability the Fed would cut rates by 25 basis points at its November meeting, and a 12% chance it will leave rates unchanged. A slower pace of interest rate cuts potentially presents pressure on Wall Street, given that U.S. stock valuations scaled record highs on expectations of a sharp reduction in rates.
Major financial companies kicked off earnings season with upbeat comments from their top executives that should further ease investor worries that elevated borrowing costs were weighing on consumers and pushing the economy to the cusp of a downturn.
The US reporting season will gather momentum over the next three weeks amid general optimism. Still, concerns persist that stock prices have risen too fast, that the labour market is weakening fast and investors are on alert for geopolitical and US presidential election shocks.
European stock markets traded marginally higher on Friday, as investors digested lackluster British growth data.
China’s highly anticipated announcement of financial stimulus plans on Saturday was big on intent but low on the measurable details that investors need to ratify their recent return to the world’s second-biggest stock market. Saturday’s news conference by Finance Minister Lan Foan reiterated Beijing’s broad plans to revive the ailing economy, with promises made on significant increases to government debt and support for consumers and the property sector.
The Australian share market edged lower on Friday as traders awaited further signs of direction in the global economy after evidence of weakness once again reared its head in the US.
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This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto on the way. To remind our loyal viewer, this is a data rich show, as I get the weeks developments into perspective.
Market trends are rarely linear for long, they naturally ebb and flow. Despite the flaring conflict in the middle east, and the US election just a month away now, MSCI’s global equities index rose on Friday, though for the week, it showed a roughly 0.7% decline, while the Dow closed at fresh record highs and the US dollar climbed to its highest level since mid-August as investors heaved a sigh of relief after a surprisingly strong U.S. labor market report.
Oil prices rose and settled with their biggest weekly gains in over a year on the mounting threat of a region-wide war in the Middle East, but gains were limited as U.S. President Joe Biden discouraged Israel from targeting Iranian oil facilities. Investors remained anxious about how Israel would respond after Iran fired missiles at it on Tuesday. Supreme Leader Ayatollah Ali Khamenei said earlier that Iran and its regional allies will not back down.
The Australian sharemarket snapped a three-week winning streak on Friday, as the escalating conflict in the Middle East sent traders fleeing equities and pulled shares down from record highs touched a week earlier. The S&P/ASX 200 ended Friday’s 0.7 per cent lower at 8150 points, dragging the score to a weekly loss of 0.8 per cent, its first since early September. Of the ASX’s 11 sectors, nine ended the session lower.
The IMF this week gave a mixed assessment of recent government budgets and whether Treasurer Jim Chalmers and his state counterparts were helping the RBA to tame Australia’s worst inflation outbreak in decades.
Finally, in crypto, Bitcoin (BTC) dropped over 5% this week as the escalating conflict in Gaza and Lebanon fuelled flows into safe-haven assets.
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This is an edited version of a live discussion with Damien Klassen, Head of Investments at Nucleus Wealth and Walk The World Funds. Given the strength of the markets in recent days, and the China stimulus programme, what’s ahead, and how should you position given the level of volatility and uncertainty out there?
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This is our weekly market update where we review the market action starting in the US, then Europe, Asia, and Australia and also cover commodities and crypto along the way. This is a data packed segment, so be warned!
This week markets drove higher, pretty much across the board, thanks to the fall out from the Federal Reserve is slashing interest rates, more benign US economic data and China finally moving more determinedly to bolster growth as China’s central bank lowered interest rates and injected liquidity into the banking system, and with more fiscal measures expected to be announced before a week-long Chinese holiday starting on Oct. 1. Listed shares of Chinese companies jumped on the latest series of stimulus measures from Beijing to boost the domestic economy, including those on international markets.
As a result, we saw upswings in markets across the globe, and this despite weaker oil prices and rising conflict in the middle east. MSCI’s gauge of stocks across the globe rose 0.25%, to an intraday record high. Europe’s benchmark STOXX 600 index closed at a record high, ending up 0.5% at 528.08. China’s blue chips jumped 4.5%, bringing their weekly rise to 15.7%, the most since November 2008. Hong Kong’s Hang Seng index also gained 3.6% and was up 13% for the week, its best performance since 1998.
The Dow Jones Industrial Average rose 0.33%, to 42,313.00, the S&P 500 fell 0.13%, to 5,738.17 and the Nasdaq Composite fell 0.39%, to 18,119.59. All three major U.S. stock indexes posted a third straight week of gains. Nvidia’s 2.2 per cent decline was the reason for the S&P 500 and Nasdaq slipping on Friday, pointing to a report that China is urging local companies to stay away from its chips. The NASDAQ Golden Dragon shot to 7.236.16 while the Russell 2000 was at 220.33.
The best performer of the session on the Dow Jones Industrial Average was Chevron Corp (NYSE:CVX), which rose 2.47% while the worst performers of the session was Amazon.com Inc (NASDAQ:AMZN), which fell 1.67 and International Business Machines (NYSE:IBM) was down 1.16% to 220.84.
“It’s a bubble dream,” according to Bank of America equity strategist Michael Hartnett. His data had another $US10.9 billion flowing into US equities in the week ended September 25.
“Fed cutting into recession is negative for risk assets, but Fed cutting with no recession is positive and investors firmly of the view Fed and China is sufficient policy easing to short-circuit recession risk,” Hartnett wrote.
So in the context of overvalued stocks, markets are still betting on higher ahead, which is quite possible but before the surface there are significant cross currents and risks. So volatility will remain the watch word, and the bubble dream might yet turn to nightmare. We will see.
This is our weekly market update, designed to help me digest what is happening, starting in the US, probably the most consequential market in the world, then we move to Europe, Asia and end in Australia and also cover commodities and crypto on the way.
On Friday shares on Wall Street were mixed in a narrow range as investors continued to assess the outlook for US interest rates. Why 50 basis points, not 25, and was this a minor course correction, aimed at bringing a soft economic landing, or a sign the FED had left things too long and was trying to head off a lurking recession risk? And was there a hint of political here ahead of the US election? It’s really not clear. And as for that mythical R star – the level at which rate neither detract from, or add to growth, remains like the quest for the holy grail.
One top Federal Reserve policymaker signalled a willingness to cut rates at a fast pace. Federal Reserve governor Christopher Waller told CNBC that “inflation is running softer than I thought”. He’s now estimating that the Fed’s favoured gauge of inflation — the personal consumption expenditures price index — has risen over the last three months at an annualised rate of less than 1.8 per cent, which is below the Fed’s target of 2 per cent.
But separately, Federal Reserve governor Michelle Bowman said she was concerned this week’s 50-basis-point rate cut was “premature”, countering expectations of another similar move anytime soon. “I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2 per cent target.” Bowman dissented at this week’s meeting, the sole policymaker to do so, voting for a quarter of a percentage point reduction instead.
We know the FED will continue to be data dependent and next week’s US data highlight will arrive on Friday with August’s PCE report.
Gold’s reaction to the most-dovish Fed decision in years proved lackluster. Futures were last at 2647.20, up 1.39% across the week. Plenty of traders thought gold would surge after an outsized rate cut birthing a new cutting cycle. And with top Fed officials projecting many more cuts, it is going to be big. Gold did rally initially on that revelation, but quickly reversed into a larger intraday loss. Fed rate cuts are bullish for gold, but speculators’ gold-futures positioning is overextended.
Australian shares scaled another record high on Friday, tracking a global wave of optimism that the US Federal Reserve will deliver a much-hoped-for soft landing for the world’s largest economy. The S&P/ASX 200 Index added 0.2 per cent to 8209.5, the highest closing level in its history. It climbed to an intraday peak of 8246.2 – setting a record for the sixth straight session. On the week, it gained 1.3 per cent.
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