Financial Markets’ Weekly Recap

Last week, the US dollar demonstrated remarkable resilience, propelled upwards by robust growth indicators in the United States and an escalating demand for safe-haven assets triggered by mounting geopolitical tensions in the Middle East. The Israeli army’s limited incursions into the Gaza Strip stirred renewed concerns, leading to a surge in risk aversion among investors.

The dollar index, a key measure of the US currency’s performance against major counterparts, surged to 106.60 points, marking a substantial increase from the previous week’s closing at 105.39 points. Within the week, the index peaked at 10.76 points, a notable ascent from its lowest point of 105.39 points.

Interestingly, gold managed to secure gains despite the dollar’s ascent, capitalizing on the escalating tensions in the Middle East. The precious metal achieved a weekly growth of approximately 1.3%, maintaining stability at $2,006 per ounce. This marked the highest level in five months, compared to the prior week’s closing at $1,980 per ounce.

Meanwhile, the benchmark US 10-year Treasury bond yields experienced a significant breakthrough, surpassing a formidable resistance at 5.00%. This development signaled levels unseen in over 15 years, driven by the Federal Reserve’s persistence in maintaining historically high interest rates and growing concerns regarding the financial landscape in the United States.

In contrast to the currency and precious metal markets, US stocks concluded the week on a bearish note. The downturn was influenced by waning risk appetite, exacerbated by escalating fears stemming from geopolitical tensions in the Middle East and the robust growth experienced by the United States. As the global market continues to navigate these challenges, investors closely monitor developments in both the geopolitical arena and economic indicators, preparing for potential shifts in the financial landscape.

Earnings

In the bustling realm of corporate finance, the latest earnings reports from tech giants Alphabet, Microsoft, Meta, and retail behemoth Amazon have sent shockwaves through the market, exceeding even the loftiest expectations.

Alphabet, the illustrious parent company of Google, dazzled investors by posting profits of $1.55 per share in Q3 2023, trumping forecasts of $1.45 per share as predicted by the renowned market research institution, LSEG (formerly known as Refinitiv). This financial feat was mirrored in their revenues, which soared to an impressive $76.69 billion, outstripping LSEG’s projection of $75.79 billion.

Microsoft, another titan in the tech universe, reported robust profits of $2.99 per share, surpassing the estimated $2.65 per share from LSEG. Their Q3 revenues were equally impressive, standing at $56.52 billion, against LSEG’s prediction of $54.50 billion.

Meta, the visionary parent company of Facebook, outshone all expectations by recording profits of $4.39 per share, defying the anticipated $3.63 per share according to LSEG. Their revenues experienced an upward surge, reaching $34.15 billion, beating the projected $33.56 billion.

Not to be outdone, Amazon, the retail giant, emerged victorious with profits of 94 cents per share, outperforming market expectations of 58 cents per share. Their revenues painted a similar success story, climbing to an astounding $143.1 billion, compared to LSEG’s projection of $141.4 billion in Q3 2023.

This triumphant performance across the board on the New York Stock Exchange indices in the third quarter of 2023 paints a resoundingly positive picture for these industry titans. Investors and industry experts alike eagerly anticipate what these powerhouses have in store for the future, as they continue to shape the landscape of global commerce.

Oil

Oil prices rose about three percent on Friday to the highest level in a week, amid investors’ concerns about the expansion of the conflict in the Middle East, which could disrupt global crude oil supplies.

By 1740 GMT, Brent crude futures rose $2.25, or 2.6 percent, to $90.18 per barrel. US West Texas Intermediate crude futures also increased $2.14, or 2.6 percent, to $85.35 per barrel.

The price difference between Brent and West Texas Intermediate crude is heading to reach its highest level since July.

Brent fell about two percent for the week, while West Texas Intermediate fell about three percent.

Although the developments did not directly affect supplies, fears increased that the conflict in the Gaza Strip could spread and disrupt supplies from major crude oil producer Iran, which supports Hamas. A broader war could also affect shipments from Saudi Arabia, the world’s largest oil exporter, and other major producers in the Gulf.

Goldman Sachs analysts kept their expectations for the Brent price in the first quarter of 2024 at $95 per barrel, but they added that the decline in Iranian exports may push core prices up by about five percent.