Global markets rose through the week spurred on by the stimulus package announcement by the Chinese central bank with further support for the country’s troubled property sector. U.S. markets also trended higher, owing to the latest labor and manufacturing data, which elevated investor optimism. Inflation has eased more than expected in two of the euro zone’s biggest economies and the German jobs market has continued to cool this month, adding to an already substantial case for the European Central Bank to cut borrowing costs further. Despite the Fed approving a half percentage point reduction in its baseline short-term borrowing rate, treasury yields on the 10-year note moved higher, particularly at the long end of the curve. In Asia, along with China’s stimulus announcement, Japan’s ruling LDP announced Shigeru Ishiba as the successor for outgoing Prime Minister Fumio Kishida.

Global Updates
  • The MSCI All Country World Index jumped this week driven by a number of international developments. It was also in part due to the lagged effects of the Fed’s rate cut decision. The variety of stimulus measures introduced by the government of China and People’s Bank of China also contributed. 
  • Eurozone private sector business activity declined for the fourth consecutive month in September as indicated by the HCOB Composite PMI, which was lower than expected. Manufacturing output declined in Germany and France. The services sector growth slowed, especially in France.
  • China announced multiple stimulus measures including 50 bps rate cuts in Reserve Requirement Ratio, 20 bps rate cut in short term rates, reduced mortgage rates, bank refinancing and issue of $284 billion of sovereign debt to revive the Chinese economy. 
  • Chinese industrial profits contracted 17.8% year-to-year in August and earnings growth slowed down to 0.5% in the January to July months as per the data released by National Bureau of Statistics.
  • Oil prices trended lower due to dwindling optimism regarding a resurgence of Chinese energy demand increasing likelihood of supply shocks from OPEC+. US oil inventories fell by 4.5 million barrels in the last week exceeding the 1.4 million barrels expected deficit.
  • Shigeru Ishiba won the ruling Liberal Democratic Party (LDP) leadership election by securing 215 votes and is set to become the next prime minister of Japan. The former defense minister won against Sanae Takaichi, who secured 194 votes.
  • The Swiss franc appreciated after the Swiss National Bank loosened interest rates by 25 bps to 1%, even as domestic inflation decelerated. 
  • Bank of Mexico has lowered its policy rates by 25 bps to 10.5% in a deflationary environment.
  • Hurricane Helene roared through Florida and Georgia states as one of the most powerful storms to hit the United States, killing one person, swamping neighborhoods and leaving more than 2 million homes and businesses without power.
U.S. Equity
  • The S&P 500 and Dow Jones index touched record highs, while the Nasdaq index also rallied this week driven by the continuing effects of Fed’s monetary easing and positive data on labor and manufacturing. 
  • US private sector business activity continued to expand in September as indicated by the S&P Global Composite PMI of 54.4, marginally declining from 54.6 in August.
  • US jobless claims dropped unexpectedly to 218,000, which was 4,000 claims less than expected in the last week.
  • Sales of new single-family homes in the U.S. dropped 4.7% in August to 716,000 units, which was 16,000 units more than expected.
  • The 30-year mortgage rate eased by 1 bps to 6.08% the lowest since September 2022, trickling down from the Fed’s 50 bps rate cut.
  • The U.S. Justice Department hit Visa with an antitrust violation case, for its illegal strategies to monopolize the card-payments business.
  • Micron stock rose after a higher than the expected revenue projection of $8.5 to $8.3 billion for the fourth quarter. The projection is attributed to the demand for its memory chips used in AI technology.
  • U.S. Steel announced that an arbitration board had ruled in favor of Nippon Steel’s $14.9 billion buyout of the company, but that the United Steelworkers union disagreed with the decision.
  • Merrill Lynch, Pierce, Fenner & Smith and Harvest Volatility Management have agreed to pay a combined $9.3 million to settle U.S. Securities and Exchange Commission charges related to investment limits and fees.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose marginally this week.
  • The U.S. 10-year Treasury yield  rose to 3.79% and the yield on the 2-year note edged up to 3.627% over the week.  Analysts find the upward trend in yields at the beginning of a monetary easing cycle to be counter-intuitive.
  • The U.S. Dollar Index rose marginally to 100.74 this week.
Sources

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