23/09/2024 Daily Reports
On Monday, oil prices increased due to worries that escalating conflict in the Middle East could reduce regional supply, along with expectations that last week’s significant U.S. interest rate cut will boost demand.
Both contracts increased in the last session, driven by the U.S. interest rate cut and a reduction in U.S. supply following Hurricane Francine. Oil prices rose for the second consecutive week last week.
“Geopolitical tensions between Israel and Hezbollah in the Middle East have risen, which may help sustain oil prices due to the potential for a wider conflict,” stated Yeap Jun Rong, a market strategist at IG. “Nonetheless, the increase in prices has been fairly cautious, suggesting some doubts about the actual effect on oil supplies, considering that the conflict has persisted for some time without causing major disruptions.”
Hezbollah, the Iranian-backed group in Lebanon, and Israel engaged in heavy fighting into Sunday, with Hezbollah launching rockets deep into northern Israel following one of the most intense bombardments in nearly a year of conflict. The situation has significantly escalated over the past week after numerous pagers and walkie-talkies used by Hezbollah members exploded, an incident widely attributed to Israel, although the country has neither confirmed nor denied its involvement.
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Global Stocks Gain as Fed Rate Cut Optimism
The dollar and euro extended gains against the yen after Bank of Japan Governor Kazuo Ueda’s dovish comments on Friday. This follows broader market momentum after the Federal Reserve’s recent half-point rate cut, which has spurred investor optimism. Futures markets are pricing in a 50% chance of another outsized rate cut in November.
U.S. markets have seen a strong September so far, with the S&P 500 up 1% in a month that is historically weak for stocks. Year-to-date, the S&P 500 has gained 19%, reaching all-time highs. On Friday, over 20 billion shares were traded on U.S. exchanges, the busiest session since January 2021. Analysts at Bank of
America noted that, historically, the S&P rises an average of 21% in the 12 months following the start of Fed rate cuts when there is no recession.
Looking ahead, markets are awaiting key inflation data, particularly the Fed’s preferred core PCE measure, due on Friday. Analysts expect a 0.2% month-on-month increase, with the annual rate at 2.7%. Additionally, the headline inflation rate is expected to slow to 2.3%.
This week also features several key central bank meetings. The Swiss National Bank is expected to cut rates by 25 basis points to 1.0%, with a 41% chance of a larger 50 bps cut. Sweden’s Riksbank is also forecasted to reduce rates by 25 basis points, with a possibility of a larger cut.
Additionally, nine Federal Reserve policymakers are scheduled to speak this week, including Chair Jerome Powell, providing further insights into the Fed’s stance on future monetary policy.
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Asian Stocks Rise on Stimulus Hopes as China Prepares for Economic Briefing; Gold Hits Record High
Asian stocks climbed on expectations of new Chinese stimulus measures, with the MSCI Asia Pacific Index advancing as shares in China, Hong Kong, and South Korea rose.
China’s announcement of an economic briefing by top regulators, alongside a rate cut, sparked optimism for further growth-boosting policies.
Meanwhile, the yen weakened as the Bank of Japan signaled no rush for additional rate hikes, and US equity futures gained.
Gold hit a record high, bolstered by geopolitical tensions in the Middle East.
Global markets now await key US economic data and insights from several central banks this week.
