On Week 42, equities achieved new ATHs driven by a tech rally and positive economic indicators, including a surprising rise in retail sales. The dollar index advanced on expectations of slower Fed rate cuts connected to robust job and inflation data. The ECB lowered interest rates by 25 basis points, while the Eurozone reported a 2.5% YoY drop in construction output. India’s inflation climbed to 5.49%, exceeding targets, and the Brazilian real and Mexican peso weakened amid foreign exchange concerns and geopolitical tensions. Gold and silver prices soared to new highs, fueled by safe-haven demand amid election uncertainty. BTC is poised for new highs, contrasting with ETH’s underperformance.
On Monday, equities rose, with the Dow and S&P reaching new ATHs. The Nasdaq also gained. Tech, utilities, and real estate sectors led the gains, while energy declined. The dollar reached a 2-month high. China’s exports hit a 5-month low as India’s inflation jumped to its highest in 9 months. ETH outperformed BTC (66K), reaching 2.6K, fueled by enthusiasm following a narrowing in the presidential race.
Crypto
- Crypto investors are more bullish on BTC, pouring $419M into ETF funds previous week. This shift from negative flows is attributed to a perceived increase in the likelihood of a GOP-led White House. Investors are now prioritizing presidential politics over economic data. (source)
World Markets
- China’s trade surplus widened to $81.71 billion in September, exceeding expectations but slowing from August. Exports grew, though at the slowest pace in five months. Imports fell due to weak domestic demand. The surplus with the US narrowed to $33.33 billion. For the first nine months, the overall surplus was $689.5 billion, with exports up 4.3% and imports up 2.2%. The surplus with the US was $257.87 billion. 1Y trend: “Down” (CN)
- China’s banks extended $1.59 trillion in new loans in September, exceeding August but falling short of expectations. It was the lowest September loan total since 2018, raising concerns about Beijing’s ability to stimulate the economy and achieve its 5% growth target. Total social financing met expectations, but outstanding loan growth slowed to 8.1% from 8.5% in August. 1Y trend: “Down” (source)
- India’s inflation rose to 5.49% in September, exceeding expectations and the RBI’s target of 4%. Food prices surged, contributing significantly to the increase. Housing costs rose, while fuel prices fell less sharply. The CPI rose 0.6% from August. 1Y trend: “Down” (IN)
Currencies
- The dollar index rose, nearing its highest levels in two months. Expectations for smaller Fed rate cuts increased after strong jobs and inflation data. While higher jobless claims and slowing producer inflation offered some counterargument, markets still see an 87% chance of a 25 basis point cut in November. Investors await retail sales, jobless claims, and Waller’s remarks. 1Y trend: “Side”
Commodities
- Natural gas prices dropped to $2.48/MMBtu, extending a decline from a three-month high. Hurricane Milton reduced demand in Florida due to power outages, while mild weather curbed demand elsewhere. A smaller-than-expected storage injection offered some support, but robust supply and uncertainty about hurricane’s impact kept prices low. Cooler weather forecasts in some regions provided short-term stabilization. 1Y trend: “Up”
- Sugar prices rose slightly, recovering from a three-week low. Concerns about low supply due to drought in Brazil and geopolitical tensions supported prices. Brazilian sugar output fell 16% in late September, and traders lowered production estimates for the year. The diversion of sugarcane for ethanol production also limited sugar supply. 1Y trend: “Down”
On Tuesday, equities fell, led by the energy, technology, and healthcare sectors. Megacap chip stocks like Nvidia, AMD, and Broadcom declined significantly. Apple rose due to strong demand for older models. New York manufacturing activity is sharply down. Oil prices are down, while gold prices are up. European investor sentiment improved as EU industrial output rebounded. BTC and ETH stumbled at 67K and 2.6K, but remain in a bullish trend.
Details
- The NY Empire State Manufacturing Index fell to -11.9 in October, surprising analysts. This is the worst reading since May, indicating a contraction in New York State. New orders, shipments, and inventories fell. Delivery times shortened, but supply availability worsened. Labor market conditions improved slightly. Input and selling price increases remained modest but rose. Future business activity rose to a multi-year high. 1Y trend: “Up” (NYF)
World Markets
- The ZEW Indicator for the Euro Area rose to 20.1 in October, exceeding expectations. This follows three months of decline and is the highest point since July. Improved sentiment is driven by stable inflation expectations, potential ECB rate cuts, and stronger economic forecasts. Analysts are mostly optimistic about the economy. The current economic situation indicator fell, and inflation expectations rose. 1Y trend: “Up” (Zew)
- Germany’s ZEW Current Conditions Index fell to -86.9 in October, the lowest since May 2020. This indicates a rapidly worsening economic situation in Germany. 1Y trend: “Down” (Zew)
- South Korea’s unemployment rate rose slightly to 2.5% in September from 2.4% in August but still stays on a decades lows as Korea is one of the major beneficiaries of rising geopolitical tensions over Taiwan and CCP policies. The number of unemployed people fell, while the number of employed people rose. The labor force participation rate remained unchanged. 1Y trend: “Down” (KR)
- The Brazilian real weakened to a one-month low of 5.65 per USD in October. Concerns about reduced foreign exchange inflows and a stronger US dollar contributed to the decline. Lack of details on Chinese stimulus dampened demand for Brazilian exports, impacting key industries. Soybean, corn, and iron ore prices fell, further weakening the real. Selling pressure was capped by stronger economic data, favoring a hawkish stance by the Brazilian central bank. 1Y trend: “Up, Weakening”
Commodities
- Gold prices rose slightly to $2,665 per ounce, supported by declining Treasury yields. Weaker New York manufacturing data increased the appeal of gold as a non-yielding asset. The dollar eased, but remained near recent highs. Markets expect a 25-basis-point Fed rate cut in November. Investors await retail sales, industrial production, and jobless claims data. Gold remains a safe haven, though easing Middle East tensions could limit its rise. 1Y trend: “Up”
- WTI crude oil futures fell 4.4% to $70.6 per barrel due to reduced supply disruption fears (about energy targets in Iran). The IEA cut demand forecasts, and Chinese oil demand declined. Crude production in the Americas is expected to rise. OPEC lowered its global oil demand forecast. 1Y trend: “Side”
On Wednesday, equities rose as utilities and financials outperformed, while communication services and consumer staples lagged. Gold reached a new ATH as the Mexican peso weakened following Trump’s comments about re-shoring car production. BTC is edging towards 68K as the presidential race appears to be heading in a pro-crypto direction, while ETH is still stuck at 2.6K.
Details
- Export prices fell 0.7% in September, exceeding expectations. Non-agricultural export prices fell 0.9%, while agricultural export prices rose 0.6%. For Q3, export prices fell 1.1%, the most since December 2023. YoY, export prices fell 2.1%, the most since January. 1Y trend: “Up” (BLS)
- 30-year fixed-rate mortgage rates rose to 6.52% in the week ended October 11th, the highest in two months. This follows three straight increases after hotter-than-expected inflation reinforced expectations for slower Fed rate cuts. Jumbo mortgage rates rose to 6.76%, and FHA mortgage rates rose to 6.42%. 1Y trend: “Down” (MBA)
Crypto
- The a16z State of Crypto report reveals trends in the digital asset industry, noting a significant overlap between crypto and AI users. Thirty-four percent of crypto projects utilize AI, up from 27% last year. Monthly active addresses exceed 220 million, a 300% increase since September 2023. Solana leads with 100 million active addresses, while stablecoins show continuous growth despite declining trading volumes. The report also highlights crypto’s influence on U.S. elections, with notable interest in battleground states like Pennsylvania and Wisconsin. (source)
World Markets
- India’s merchandise trade deficit was $20.8B in September, the lowest since April and below expectations of $24.6B. Imports rose 1.6% to $55.4B, while exports grew 0.5% to $34.6B. (IN)
- The Bank of Indonesia maintained its interest rate at 6% during its October meeting to achieve an inflation target of 2.5% ± 1% while supporting economic growth. Mr. Warjiyo (BoI head) said it was influenced by rising global uncertainties. This decision followed a surprise 25 basis points cut in September, the first decrease since January 2021. The annual inflation rate fell to 1.84% in September, near a three-year low. Meanwhile, the Rupiah depreciated 2.82% as of October 15, 2024, and the central bank kept its economic growth forecast at 4.7–5.5% for the year. 1Y trend: “Up” (ID)
Currencies
- The Mexican peso weakened to 19.9 per USD in October, reaching a one-month low. Trump’s threat of tariffs on Mexican cars raised concerns about disruptions to the automotive sector. The IMF forecast a slowing economy, projecting growth to decelerate to 1.5%. Bank of Mexico minutes highlighted the need for a less restrictive monetary policy, and economists estimate a 50 basis point rate cut for the rest of the year. 1Y trend: “Up”
Commodities
- Gold surged to $2,680 per ounce, reaching a record high as Treasury yields fell. The Fed is anticipated to implement rate cuts in its last two meetings this year, continuing into 2025 amid a slowing economy. 1Y trend: “Up”
Comment: What Does “Data Depended Fed” Mean?
Since Powell’s anointment to the Fed throne, all we keep hearing from him is that he’s ‘data dependent.’ Ask yourself: what does that mean? Were previous Fed heads also ‘dependent’ on data? What about Paul Volcker, who caused one of the deepest recessions — in fact, the stagflation — in our history?
It would be absurd to say that Volcker couldn’t read statistics and not to see the dark abyss to which his stubbornness was leading businesses and consumers. Why wasn’t he reversing his detrimental policies then? Because he was not ‘data dependent’ and believed in the ‘cause,’ perhaps?
Isn’t that right? Those individuals upstairs now possess such unprecedented powers that it has led them to view the rest of us as lab rats. Some of those ‘scientists’ are megalomaniacs like Volcker, who insist on proving their outlandish ‘economic theories’ no matter what.
Of course, some are well-intentioned and genuinely seek ‘universal good and prosperity,’ or are, more likely, ordinary bureaucrats interested in their careers first and foremost. In that case, they try to navigate between opposing political forces pressuring them and label themselves ‘data dependent.’
In fact, if they truly are, then they can only act in unison with a prevailing macro-trend by magnifying it — injecting more or less liquidity into the markets. In other words, being ‘data dependent’ means they are always late, by definition. So the question is, why do they exist at all if they can only exacerbate market volatility instead of preventing it?
If, by contrast, they see themselves as Volcker-like missionaries, it means they claim a divine power to know what the future holds and are able to direct us to or from it. This is preposterously foolish, and most bureaucrats who have taken Financial History 101 understand that.
No wonder, then, that we are now stuck with Powell — one of those learned bureaucrats who feeds us ‘data dependent’ fallacies in order to keep his job longer despite all good reasons.
On Thursday, equities ended mixed after the Dow and SP briefly reached new ATHs, with semiconductor shares leading the gains. Retail sales increased, and jobless claims were lower than expected, suggesting strong consumer spending. Traders are now focusing on the upcoming earnings reports from Big Tech. Gold reached a new ATH as the ECB cut its rate. BTC (at 68K) continued to slowly edge up on election optimism, while ETH remained stuck at 2.6K.
Details
- The NAHB/Wells Fargo Housing Market Index rose to 43 in October, exceeding expectations. Current sales conditions and sales expectations rose, supported by expectations of Fed rate cuts. Traffic of prospective buyers increased slightly. The share of builders cutting prices remained unchanged. 1Y trend: “Side” (Nahab)
- The Philadelphia Fed Manufacturing Index rose to 10.3 in October, exceeding expectations. Current general activity, new orders, and shipments grew. Employment remained stable. Price indexes decreased slightly but still show price increases. Future growth expectations improved, signaling optimism. 1Y trend: “Up” (Phil)
- Retail sales rose 0.4% in September, exceeding expectations. Sales at miscellaneous stores, clothing, health, food, and beverages increased. Sales at electronics, gasoline, and furniture stores declined. Excluding food, auto, building materials, and gasoline, sales rose 0.7%, the most in three months. 1Y trend: “Side” (Census)
Crypto
- Spot BTC ETFs have seen over $20B in net inflows, despite BTC’s seven-month downtrend. BTC has struggled to surpass $68.3K since June and has declined since March. It took ten months for BTC ETFs to reach $20B, compared to five years for gold ETFs. BlackRock accounted for $22 billion in inflows, while Grayscale faced over $20 billion in outflows. (source)
World Markets
- The ECB lowered interest rates by 25 bp, as expected. This follows similar moves in September and June. The deposit facility rate is now 3.25%. Inflation is falling and is expected to decline toward the 2% target in 2025. Wage growth remains high but is easing. The ECB remains committed to restrictive rates to ensure inflation reaches its medium-term goal, using a data-driven approach. 1Y trend: “Side” (EU)
- Eurozone inflation fell to 1.7% in September, below the ECB target of 2%. Services inflation slowed, energy prices fell, and core inflation eased to 2.7%. Inflation eased in Germany, France, Italy, and Spain. 1Y trend: “Down” (EC)
- China’s economy grew 4.6% in Q3, below expectations. This is the slowest growth since Q1 2023, due to property weakness, weak domestic demand, deflation risks, and trade frictions. 1Y trend: “Side” (CN)
- China’s new home prices fell 5.7% year-on-year in September, the 15th consecutive decline. This is the steepest pace since May 2015, despite Beijing’s efforts to address property weakness. Prices dropped in most cities, with Beijing, Guangzhou, Shenzhen, Tianjin, and Chongqing seeing steeper declines. Shanghai’s prices rose. Monthly, new home prices dropped 0.7% for the fifth straight month. 1Y trend: “Down” (CN)
Currencies
- The dollar index rose to 11-week highs, supported by strong US economic data and a potential Trump victory. Retail sales rose more than expected, and jobless claims fell. The dollar gained from a weakening euro after the ECB cut rates. Investors await housing starts, building permits, and Fed commentary. 1Y trend: “Side”
Commodities
- Gold reached $2,690 on Thursday, a new ATH, as it maintained strong momentum despite increases in the dollar and Treasury yields. The European Central Bank cut rates by 25bps, signaling a solid disinflation process. Investors moved to safe-haven assets amid concerns over China’s property crisis, affecting major Chinese capital markets. 1Y trend: “Up”
On Friday, equities rose, fueled by strong tech performance. This week, the S&P 500 is up 0.2% and the Dow is up 1%. Gold reached a new ATH, while silver is at its highest in 12 years. BTC touched $69K and is set to make a new ATH, at last, while ETH, still at $2.6K, is lagging far behind.
Details
- Building permits down (2.9%) in September, not fitting expectations. Regional decreases: Northeast (-13.1% to 126 thousand), the Midwest (-2.9% to 200 thousand), and the South (-6.1% to 765 thousand); Increases: the West (10.9% to 337 thousand). 1Y trend: “Down” (Census)
Crypto
- AI meme coins are becoming a new trend in cryptocurrency, sparking conversations about institutional investment. The integration of AI into these coins is viewed as a potential advantage, though skepticism remains about the viability of many mid-tier projects.
World Markets
- In August, Euro Area construction output fell 2.5% YoY. From 1996 to 2024, it averaged -0.2%, peaking at 44% in April 2021 and hitting a low of -31.1% in April 2020. 1Y trend: “Down” (EU)
Currencies
- The euro is up ($1.086) and set for its 3-rd weekly decline as markets expect more cuts from the ECB. The bank has lowered rates three times this year, citing improved inflation control and weaker economic conditions. Lagarde’s comments led to expectations of a 25 basis point cut at each meeting until mid-2025, with a December cut fully anticipated. In contrast, strong economic data has lowered expectations for aggressive Fed cuts. 1Y trend: “Up (Depreciating)”
Commodities
- Silver prices rose to $33 per ounce, the highest in nearly 12 years, following gold’s increase amid safe-haven demand due to US election uncertainty and Middle East tensions. Market forecasts favor Trump slightly against Harris. Positive data from China and the ECB’s rate cut also influenced trading. 1Y trend: “Side”
- Gold surged past $2,710 per ounce, hitting a record high due to strong demand for safe-haven assets and recent interest rate cuts by central banks. Tensions in the Middle East and concerns over China’s economy further boosted prices, though US economic data tempered gains. 1Y trend: “Side”
- WTI crude oil down 2% ($69.2) — the biggest since early September (-8%). This was due to lower demand, slowing China and signs of easing in the Middle East. 1Y trend: “Side”
On Week 43, the earnings season brings Tesla, Coca-Cola, 3M, General Motors, and Verizon releasing quarterly reports. Also, PMI data, durable goods orders, and home sales reports will be featured. Investors will also watch Germany’s Ifo index and confidence figures for various countries, along with PMI data for Australia, Japan, India, France, Germany, and the UK. Canada will focus on the Bank of Canada’s interest rate decision and retail sales. Additionally, South Korea will release its Q3 GDP growth rate.
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