Global markets recovered from their fears of a global recession in the second week of September. Technology stocks like Nvidia and Tesla led the resurgence in markets. The cooling of inflation in US consumer prices and factory gate prices increased confidence of monetary easing by the Federal Reserve (Fed). The European markets also trended up this week due to easing of policy rates by the European Central Bank (ECB). Oil prices continued to be choppy in response to the latest data influencing prices.

Global Updates
  • The MSCI All Country World Index surged, buoyed by rising technology stocks and optimism regarding easing monetary policy by the Fed and ECB.
  • The US annual inflation rate slowed to 2.5% in August from 2.9% in July, below expectations of 2.6%. This is the lowest inflation since February 2021. 
  • Energy prices declined by -4% and food inflation slowed to 2.1%. Core inflation remained steady at 3.2%, lowest in three years. Markets anticipate the Fed will limit rate cuts to 25 bps considering persistence in inflation. 
  • The ECB cut its key lending rates by 25 bps to 3.5%. Inflation and labor costs have moderated in the European Union but economists anticipate the 3.5% interest rate to continue to dampen economic growth. 
  • Oil prices were choppy this week. Prices were initially pressured lower by the economic slowdown in the U.S. and China. Later hurricane Francine disrupted crude production in the Gulf of Mexico, pushing up prices.
  • Iron ore prices have dropped to two-year lows of $90.25 per ton, with slowing demand from China. Mining companies expect copper demand from energy transition to support revenues. 
  • German business association BDI has urged the German government to invest $1.55 trillion to correct the bottlenecks of energy costs, labor shortage and cost, bureaucracy and high taxes.
  • The European Union is set to impose an antitrust fine on pharmaceutical giant Teva, specializing in generic drugs, for the use of unfair practices to hamstring its rivals. The Court of Justice also upheld the EU’s antitrust crackdown on Ireland’s tax concessions to Apple and Google’s anti-competitive practices. 
  • Abu Dhabi National Oil Company is expected to acquire the German plastics and chemicals company Covestro for $15.90 billion.
U.S. Equity
  • The S&P 500, Nasdaq and Dow Jones index rallied this week driven by the strong performance of technology and semiconductor stocks. The markets were also optimistic of monetary easing by the Fed following the release of economic data confirming cooling inflation and need for economic growth.
  • Producer Price Index (PPI) data indicated cooling inflation in August in the U.S. The monthly inflation in PPI and core PPI was marginally higher than expected at 0.2% and 0.3% respectively. The jobless claims in the first week of September rose by 30,000 claims indicating a persistently soft labor market.
  • BlackRock purchased a minority stake in Bapco Energies’ pipeline project linking Bahrain and Saudi Arabia. 
  • The U.S. Federal Energy Regulatory Commission has approved BlackRock’s $12.5 billion acquisition of utilities investor Global Infrastructure Partners.
  • Wells Fargo stock dropped due to the Office of Comptroller of the Currency restricting the bank from operating in medium or high-risk activities. The regulator found the bank susceptible to money laundering and illegal transactions.
  • Goldman Sachs stocks fell due to CEO David Solomon anticipating a 10% decline in third quarter trading revenues and drop in revenues next month due to the company offloading its GM card business.
  • Boeing workers are striking after rejecting the company’s four-year contract offering 25% higher wages and a $3,000 signing bonus. This will impact the production of Boeing Max 737 jets, already struggling with structural issues, production delays and debt pressures.
  • Moderna shares fell after the company announced restricted spending on research and drug development and forecasted lower than expected sales in 2025.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose marginally this week.
  • The U.S. 10-year Treasury yield fell to 3.646% over the week and the yield on the 2-year note edged down to 3.591%, the lowest in 24 months.  The higher-than-expected core CPI increased the probability of a 25 bps rate reduction by the Fed.
Sources

HCM-030624-063.GWS