11/09/2024 Evening Reports
Sterling gained slightly against the dollar on Wednesday, recovering from earlier losses, but declined against the euro after unexpected stagnation in the UK’s July economic data. The Office for National Statistics reported no growth in British economic output for the month, mirroring June’s performance.
Economists had predicted 0.2% growth for July, but the flat result came amid a drop in manufacturing output.
Analysts at Peel Hunt advised not to place too much concern on the missed forecast, citing healthy forward-looking business activity surveys and the known volatility of monthly data, particularly in heavy industries. Similarly, JPMorgan noted that July’s data does not reflect the overall trend, though they acknowledged diminishing upside risks to third-quarter GDP growth.
Deutsche Bank’s Sanjay Raja echoed this sentiment, saying the bank now sees potential downside risks to their baseline third-quarter growth estimate of 0.4% quarter-on-quarter.
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Oil’s collapse to the lowest level in more than two years is the market’s indication that there’s no need for extra OPEC+ supplies, Citigroup Inc. said.
Global benchmark Brent crude on Tuesday fell below $70 a barrel for the first time since December 2021, though prices recovered back above that level Wednesday.
The Organization of Petroleum Exporting Countries and its allies recently postponed planned supply additions for the fourth quarter by two months. Citi says the group will likely need to cut production next year if it wants to balance the market in the face of bumper supply additions from outside the grouping.
“I would say the market is trying to send a strong signal to OPEC that there’s no room for any more barrels,” the bank’s head of commodities research, Max Layton, said in a Bloomberg TV interview. “Our balances suggest that OPEC needs to cut a whole extra million barrels for the entirety of 2025 to balance this market.”
Traders have become “consensus bearish” on the outlook for next year at the moment, he added.
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US stock futures dipped slightly as investors await a crucial inflation report, with growing concerns that the Federal Reserve may have waited too long to ease monetary policy.
While major economies show signs of slowing, including oil prices trading below $70, attention is focused on the upcoming US Consumer Price Index (CPI) report, expected to show a further slowing of inflation.
Investors are also looking ahead to the Fed’s next policy meeting, weighing whether a large 50-basis point cut is necessary or if a smaller quarter-point cut will suffice.
In markets, S&P 500 futures slipped 0.2%, and bond yields remained steady. Meanwhile, oil rebounded slightly after a sharp decline, while renewable energy stocks rose amid support for green energy policies.
U.S. core inflation unexpectedly rose in August, with prices for housing and travel driving the increase. The core consumer price index (CPI) climbed 0.3% from July, the largest jump in four months, and 3.2% year-over-year. This undercuts the chances of an outsized Federal Reserve rate cut next week, though a smaller cut is still expected. Treasury yields rose and S&P 500 futures dipped following the report. Shelter costs, which make up a large part of services, were the main contributor to the inflation rise, while goods prices continued to show some relief.
