Financial Markets’ Weekly Recap, September 26-30

The dollar fell last week, as commodity bulls took some breathing; However, this decline was short-lived, as the dollar jumped again to its highest level in 20 years.

The dollar’s rise to a high of 112 from a one-week low came, moving back towards levels not seen since May 2002, after personal spending and core PCE inflation came in above expectations.

Inflation in the US, as measured by the Personal Consumption Expenditures (PCE) Price Index, declined to 6.2% on a yearly basis in August from 6.4% in July, the US Bureau of Economic Analysis announced on Friday. This reading came in below the market expectation of 6.6%. On a monthly basis, the PCE Price Index rose 0.3% as expected.

The Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, edged higher to 4.9% on a yearly basis from 4.7% in July, compared to analysts’ estimate of 4.7%, and was up 0.6% in August.

Greece and Bulgaria on Saturday (October 1st) began the commercial operation of a long-awaited gas pipeline that will help reduce southeastern Europe’s dependence on Russian gas and enhance energy security.

The 182 km pipeline will support Bulgaria, which has been struggling to secure affordable gas supplies since the end of April, when Russia’s Gazprom halted deliveries over Sofia’s refusal to pay in rubles.

Russia reduced gas supplies to Europe after the West imposed sanctions on Moscow over its invasion of Ukraine, which made the European Union countries rush to secure alternative supplies amid high prices.

Annual inflation in Germany, as measured by the Consumer Price Index (CPI), climbed to 10% in September from 7.9% in August, Germany’s Destatis reported on Thursday. This reading came in higher than the market expectation of 9.4. the Harmonised Index of Consumer Prices (HICP), the European Central Bank’s (ECB) preferred gauge of inflation, jumped to 10.9% from 8.8%, compared to analysts’ estimate of 10%.

The US economy contracted at an annualized rate of 0.6% in the second quarter, the US Bureau of Economic Analysis’ (BEA) third and final estimate showed on Thursday. This reading came in line with the market expectation and the previous estimate.

The data published by Destatis showed on Friday that the Unemployment Rate in Germany stayed unchanged at 5.5% in September as expected. the Unemployment Change was up 14K in the same period, down from 28K in August and below the market consensus of 20K.

Real Gross Domestic Product (GDP) in Canada grew by 0.1% on a monthly basis in July, Statistics Canada reported on Thursday. This reading followed June’s expansion of 0.1% and came in better than the market expectation for a contraction of 0.1%.

US

US stocks ended the last trading in September in the red, incurring weekly, monthly and quarterly losses.

At the end of the session, the Dow Jones index fell by 1.71%, or about 500 points, to 28,725 points, the first time that the index closed below the levels of 29 thousand points since November 2020.

The S&P500 also fell by 1.5%, at 3585 points, while the Nasdaq index fell by 1.5%, to record 10,575 points.

On a weekly basis, the Dow Jones index fell by 2.9%, and recorded the worst monthly performance since March 2020, down by more than 7%, while it fell by more than 5% quarterly.

The index recorded quarterly losses for the third consecutive quarter, for the first time since 2015.

As for the S&P 500 index, it declined by 2.9% weekly, fell by more than 7% during the current month, and recorded quarterly losses for the third consecutive quarter for the first time since 2009.

While the Nasdaq index incurred weekly losses by 2.7%, while it declined by 9.1% during September in the largest monthly loss since April, and it also declined by 2.7% based on the third quarter.

Today, Russian President Vladimir Putin signed the annexation of four Ukrainian regions, which led to further escalation.

The United States announced new economic sanctions targeting hundreds of people and institutions in Ukraine.

Nike stock is recording its worst daily performance since 2001

Nike stock fell by 12.8% at the session’s close, the largest daily decline since 2001.

Coinciding with the decline in the stock, the company disclosed its quarterly results for the first fiscal quarter, and despite recording an increase in revenues, it warned of an increase in inventories.

Oil

Oil prices fell on Friday in volatile trading. Still, they achieved their first weekly gain in five weeks, supported by the possibility of the OPEC + group agreeing to reduce crude production when it meets on the fifth of this October.

During the Friday session, Brent crude futures for November, which expired on Friday, fell by 53 cents, or 0.6 percent, to $87.96 a barrel. The most active December futures contract fell $2.07 to $85.11 a barrel.

US West Texas Intermediate crude futures fell $1.74, or 2.1 percent, to $79.49 a barrel upon settlement.

Brent and West Texas Intermediate each rose more than a dollar earlier in the session but fell back on news that OPEC oil production rose in September to its highest level since 2020, exceeding the increase pledged by producing countries for this month, according to a Reuters survey.

The Brent and West Texas Intermediate crudes rose 2% and 1% weekly to record their first weekly rise since August, after hitting their lowest levels in nine months this week.

Oil prices rose, supported by the dollar’s decline earlier in the week from its highest levels in 20 years. The decline in the dollar makes oil denominated in the US currency cheaper for holders of other currencies, which improves demand.

The market had received support from the possibility of reducing the Organization of Petroleum Exporting Countries (OPEC) and its allies to production quotas at their meeting on the fifth of October.

Analysts expect production cuts as demand concerns related to a possible global economic recession and higher interest rates weigh on crude oil prices.

Brent and West Texas Intermediate prices ended the third quarter with significant declines of 23 percent and 25 percent, respectively.

Europe

European shares closed higher on Friday but suffered heavy quarterly losses, during a quarter that saw a sharp increase in interest rates and a significant decline in risk appetite. Data indicating a further increase in inflation on the continent caused investors to be nervous.

The pan-European Stoxx 600 index closed 1.3 percent higher but lost some of its gains after data showed that inflation in the eurozone quickly exceeded expectations, hitting 10 percent in September, hitting a new record.

The inflation data has fueled speculation that the European Central Bank will make another massive interest rate hike.

All sectors on the Stoxx 600 ended higher on Friday, with bargain-hunting for shares that fell in the retail, oil, gas, and banking sectors.

The Stoxx 600 index fell from July to September by 4.8 percent, marking the third consecutive quarter of losses in what may be the longest streak of such losses since 2011.

The FTSE 100 index in London fell briefly before closing 0.2 percent higher.

Shares of German sportswear companies Puma fell 5.7 percent and Adidas 4.1 percent after their American rival Nike warned of pressure on profit margins.

Gold

Gold prices rose at the close of trading today, Friday, September 30, recording weekly gains, as it ignored concerns about inflation in Europe and the United States, in conjunction with the losses of the American stock market.

The metal recorded its sixth monthly decline in a row

And upon settlement of trading on Friday, gold futures rose by 0.2% to $1,672 an ounce, recording a weekly gain of about 1%.

On the basis of the monthly performance of the metal, it fell by 3.1%, recording losses for the sixth consecutive month, while it declined by 7.5% on a quarterly basis.

Gold ignores inflation data

The yellow metal ignored inflation data in the euro area, which showed today that it rose to 10% in September, the highest level ever

And inflation data in Germany showed yesterday that it rose to 10% on an annual basis in September, the highest level since 1951.

These data motivate the central banks to continue the monetary tightening policy in order to curb inflation.

Australia has added a ban on Russian gold imports to its sanctions against the regime of Russian President Vladimir Putin, in response to Russia’s military operation in Ukraine.

The United States has imposed more sanctions against Russia in response to Moscow’s annexation of four Ukrainian regions, the government announced.

The sanctions target other representatives of the Russian government, their family members and military members, and others. The sanctions also included defense equipment procurement networks, including international suppliers.