Market Review
The U.S. dollar index fluctuated overall this week, with the first three days showing a trend of retreating from daily highs and turning to declines. Supported by U.S. economic performance and expectations that the Federal Reserve may slow down interest rate cuts, the dollar index rose over 3% in October, marking the best monthly performance since September 2022.
Spot gold price retreated after reaching a new high of $2,790 per ounce, as some traders took profits, and the release of strong U.S. economic data increased the likelihood of the Federal Reserve being cautious about interest rate cuts in the coming months. On Thursday, gold prices fell by more than $40 per ounce in a single day. Earlier, gold prices had surged over 30% this year, boosted by central bank buying and safe-haven demand due to conflicts in the Middle East and Ukraine, and had risen for four consecutive months.
In terms of non-U.S. currencies, the ruling party coalition in Japan failed to maintain a majority for the first time in 15 years in the House of Representatives elections, causing the dollar to rise to a three-month high against the yen; the new government budget proposal in the UK suggested a tax increase of £40 billion, leading to a decline of the pound against the dollar, which is expected to drop for the fifth consecutive week.
Regarding international oil prices, due to Israel's retaliatory strikes against Iran bypassing oil and nuclear facilities, which did not lead to energy supply disruptions, crude oil opened significantly lower this week, plunging 6% at one point on Monday. Subsequently, reports indicated that OPEC+ may delay its oil production increase plans, and Iran is preparing to launch attacks against Israel from Iraq in the coming days, causing a rebound in crude oil prices.
In the U.S. stock market, several companies released earnings reports this week. Among them, the guidance provided by Microsoft and Meta Platforms on Thursday disappointed the market, leading to a sharp decline in U.S. stocks. The S&P 500 index recorded its largest single-day drop since early September, erasing all gains from October and halting the longest monthly winning streak since August 2021.
Investment Bank Perspectives Share
Regarding the U.S. election, Fortress Investment founder Griffin expects Trump to win; Temasek warns that Trump's election may not necessarily be beneficial for the global economy and financial markets; Goldman Sachs states that investors are overestimating the risks posed to the market by the uncertainty surrounding the U.S. election results.
In terms of strategy, Citigroup strategists believe that if a 'Republican sweep' occurs, it is time to sell U.S. stocks; Barclays stated that if Trump is elected, Asian currencies may decline, with the South Korean won, Thai baht, and Chinese yuan being the most affected, while the Indian rupee is the most defensive; Goldman Sachs strategists expect a favorable outlook for the Chinese stock market within two to three months after the U.S. election.
In terms of various assets, the co-CIO of fixed income at Loomis Sayles stated that given the risks of the Federal Reserve pausing interest rate cuts and the resilience of the U.S. economy, recent sell-offs in U.S. Treasuries may just be the beginning of rising yields; Citigroup research lowered its Brent crude oil price target to $70 per barrel over the next three months, indicating that geopolitical risk premiums will be lower than previously assumed; Goldman Sachs expects gold prices to rise by about 10% to reach $3,000 per ounce by December 2025.
Weekly Highlights
1. 12,000! Non-farm payrolls shock the market, increasing bets on Fed rate cuts
A series of data from the U.S. this week shows that the economy continues to grow, and inflation is moderating, but the job market has been impacted by hurricanes and strikes, leading to significant surprises, increasing expectations for a 25 basis point rate cut by the Federal Reserve in November.
Data shows that the initial estimate of the U.S. GDP for the third quarter shows a year-on-year growth rate of 2.8%. Consumer spending, which accounts for the largest share of economic activity, grew by 3.7%, marking the largest increase since the beginning of 2023; ADP data shows that the number of new jobs in the U.S. private sector in October reached 233,000, the highest in over a year, exceeding all economists' expectations; as the impact of the hurricane subsides, the number of initial jobless claims in the U.S. last week fell to a five-month low; however, the core PCE inflation, which the Federal Reserve focuses on, rose by 0.3%, marking the largest increase in five months, and personal spending also accelerated, strengthening the Fed's reasons for slowing down interest rate cuts.
The non-farm payroll report released on Friday was a big surprise! The U.S. added only 12,000 non-farm jobs in October, far below the expected 113,000, with the unemployment rate recorded at 4.1%. The average hourly wage saw month-on-month and year-on-year increases of 0.4% and 4%, respectively, while the non-farm employment figures for August and September were revised down by a total of 112,000. This is the weakest employment report for the Biden administration so far, but it also reflects the severe impact of hurricanes and Boeing strikes. Following the data release, interest rate futures indicated an increased likelihood of a 25 basis point rate cut by the Federal Reserve in November, with similar expectations for cuts in December and 2025.
The U.S. Bureau of Labor Statistics announced that employment estimates in some industries are likely to be affected by hurricanes. However, it is impossible to quantify the impact of hurricanes on non-farm employment figures, average hourly wages, and other data. The national unemployment rate, on the other hand, did not show significant effects from the hurricanes.
2. U.S. Election: Over 64 million people voted early, Biden voted to support Harris
The 2024 U.S. presidential election will be held next Tuesday. According to data from the University of Florida's election lab, as of the evening of October 31 local time, over 64 million voters have cast their ballots early across the country. President Biden voted early in Delaware, supporting Democratic candidate Harris.
As the voting day approaches, multiple incidents of arson targeting ballot boxes have occurred in the U.S. Among them, at least two presidential election ballot boxes in the Portland area of Oregon and near Vancouver in Washington state caught fire after 'burning devices' were placed inside, damaging hundreds of ballots.
Different polling results show that the support rates of the two candidates continue to be neck and neck. The Reuters/Ipsos poll shows that Harris's lead over Trump has narrowed to one percentage point; the CNN poll shows that Harris and Trump are tied at 47%; the AtlasIntel poll shows Trump leading Harris with 49.5% to 47%.
3. Israel may withdraw troops from Lebanon within a week, Iran may retaliate against Israel before the election
Israeli Prime Minister Netanyahu reached a consensus with other senior officials, believing that Israel's military actions against Hezbollah in Lebanon have 'basically achieved the established goals.' The draft of the ceasefire agreement between Israel and Lebanon has been released, and if signed, Israeli forces will withdraw from southern Lebanon within a week.
The draft of the ceasefire agreement between Israel and Lebanon includes that Hezbollah and other armed groups in the region must not take action against Israel, and Israel will not carry out any offensive actions in Lebanon, including against military and government targets. According to the draft, the Israeli army will withdraw from southern Lebanon within a week. At that time, the Lebanese armed forces will take over the area under the supervision of the U.S. and other international organizations. This information has not yet been officially confirmed by Israel.
Regarding the situation between Israel and Iran, it is reported that Israeli intelligence indicates that Iran is preparing to attack Israel from Iraqi territory within the next few days, possibly before the U.S. elections. Sources say that Israeli intelligence expects this attack to utilize a large number of drones and ballistic missiles. Iranian President Pezeshkian stated that Iran does not seek war but will defend its national rights and respond appropriately to Israeli aggression, asserting Iran's right to retaliate against Israel's attacks.
4. Japan's ruling party loses majority, Bank of Japan remains steady
The results of Japan's 50th House of Representatives election have been finalized. The ruling coalition led by the Liberal Democratic Party and Komeito won a total of 215 seats, failing to reach the majority of 233 seats in the House of Representatives. This is the first time in 15 years that Japan's ruling coalition has lost its majority, creating significant uncertainty in Japanese politics. Japanese Prime Minister and LDP President Kishida Fumio held a press conference, sincerely accepting the election results and stating that he will continue political reforms.
The Bank of Japan voted unanimously this week to maintain its policy interest rate at 0.25%, in line with market expectations. Governor Ueda expressed concerns about the overseas economic outlook and hinted that the Bank of Japan would proceed cautiously regarding further rate hikes. However, the central bank also stated that given that real interest rates are at very low levels, it will continue to raise the policy interest rate if economic and price trends align with its forecasts.
Bank of Japan Governor Ueda Kazuo stated at a press conference that it is essential to closely monitor the financial and foreign exchange markets and their impact on the Japanese economy and prices, stating that foreign exchange is a significant factor affecting the economy and that the central bank will continue to analyze the impact of the yen's depreciation on Japanese prices and the economy.
5. People's Bank of China: Implementing Open Market Reverse Repo Operations
The People's Bank of China decided to implement open market reverse repo operations starting this week. Sources close to the central bank indicate that it is expected to cover terms of 3 months, 6 months, etc., enhancing the liquidity cross-period adjustment capacity within one year and further improving the precision of liquidity management.
Analysts point out that the central bank's choice to launch new tools at this time is expected to better hedge against the concentration of MLF maturities before the end of the year. 'The central bank's launch of the reverse repo is not only to enrich its operational tools but also to serve as a demonstration for the market to develop reverse repo business, alleviating the pressure of collateral freeze on the overall liquidity regulatory indicators of financial institutions, and continuously improving the liquidity, safety, and internationalization level of the interbank market.'
6. Reports that OPEC+ plans to delay production increase
OPEC+ sources indicated this week that the planned oil production increase scheduled for December may be delayed by a month or longer, citing concerns over weak oil demand and increased supply. This decision is expected to be made as early as next week. OPEC+ plans to hold a meeting on December 1 to decide on its next production policy.
OPEC+ planned to increase production by 180,000 barrels per day in October as part of the beginning to lift the production cut plan of 2.2 million barrels per day, while continuing to implement other production cut measures before the end of 2025. The alliance is currently reducing production by 5.86 million barrels per day, which is approximately 5.7% of global oil demand. However, due to falling oil prices, the plan has been delayed until December and is now facing further delays.
7. No need to wait another year! Six major banks implement a new mechanism for adjusting existing housing loan interest rates
The six major commercial banks, including the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank, announced that starting from November 1, they will successively implement a new pricing mechanism for commercial personal housing loan interest rates, explicitly canceling the restriction that the loan interest rate repricing cycle must be at least one year. Borrowers can request the bank to adjust the repricing cycle to three or six months at any time, or it can remain as one year. However, during the entire repayment period, the loan interest rate repricing cycle can only be adjusted once.
In addition to the six major commercial banks, other commercial banks will also successively release announcements clarifying the new pricing mechanism for personal housing loan interest rates. After the new pricing mechanism for commercial personal housing loan interest rates is implemented, the People's Bank of China will no longer uniformly adjust the interest rates of existing housing loans.
8. Summary of Major U.S. Stock Earnings Reports
Alphabet, Google's parent company, reported a boost in revenue for the third quarter due to its cloud business, exceeding analysts' expectations; chipmaker AMD's revenue outlook for the fourth quarter fell short of analysts' expectations; Microsoft expects the growth rate of its cloud business revenue to slow this quarter; Meta warned that losses in its AI and augmented reality departments will significantly expand this year; Apple reported a 6.1% increase in revenue for the fourth quarter to $94.9 billion, but sales in the Chinese market remain sluggish; Amazon expects strong performance in revenue and profits during the holiday shopping season; Intel's revenue outlook for the fourth quarter is above expectations.
9. 2024 Hurun Rich List Released: ByteDance's Zhang Yiming Becomes China's Richest Person
The Hurun Research Institute released (2024 Hurun Rich List), showing that Zhang Yiming, 41, of ByteDance saw his wealth increase by 105 billion yuan compared to last year, becoming China's richest person for the first time with a net worth of 350 billion yuan. He is the 18th richest person in China in the past 26 years and the first self-made 'post-80s' Chinese rich person.
Due to a slowdown in performance growth for Nongfu Spring in the second quarter of this year, its 70-year-old founder, Zhong Shanshan, saw his wealth decline by 110 billion yuan to 340 billion yuan, ranking second. Tencent's Ma Huateng, 53, saw his wealth increase by 35 billion yuan compared to last year, ranking third with 315 billion yuan, driven by improvements in gaming, advertising, and cloud business.
10. The interest rates for large-denomination CDs from the four major state-owned banks have all fallen below 2%, entering the '1%' range
Recently, the interest rates for large-denomination certificates of deposit from the four major state-owned banks have fallen below 2%, entering the '1%' range. The current annualized interest rates for large-denomination CD products with terms of 1 month, 3 months, 6 months, 1 year, 2 years, and 3 years at the Industrial and Commercial Bank of China are 1.15%, 1.15%, 1.35%, 1.45%, 1.45%, and 1.9%, respectively. Currently, the interest rates for large-denomination CDs from the four major state-owned banks are generally consistent, and five-year products have been discontinued.
11. Indian stock surges 66,900 times in a single day, setting a record
This week, a small-cap stock named Elcid Investments in India saw its price suddenly surge 66,900 times, rising from 3.53 rupees to 236,250 rupees due to interventions from the Indian Securities and Exchange Board to reassess low-priced stocks, setting a global record and becoming the highest-priced stock in India. The next day, the company's stock rose another 5%, reaching 248,060 rupees, with a total market value approaching 50 billion rupees (approximately 4.2 billion yuan). The company's business primarily revolves around investing in stocks, bonds, mutual funds, and other financial assets.
12. Luckin Coffee plans to enter the U.S. market!
It is reported that Luckin Coffee plans to enter the U.S. market as early as next year and has been establishing its own supply chain while making technical adjustments for the U.S. market, preparing to compete with Starbucks and other rivals by selling beverages priced around $2-3. It is said that Luckin has been advertising during NBA games to build brand awareness, targeting cities such as New York that have a large number of Chinese students and tourists.
Article reposted from: Jin10 Data