Weekly Recap 18-22 Oct

From Europe to the United States, market drivers ranged from unemployment, inflation-related concerns, earnings and alarming losses to inventories of energy, particularly natural gas.

On Friday, Fed’s Chair Jerome Powell officially announced that the U. S. economy is ready for reducing the asset purchases, however, he did not think that it is a good time to hike the interest rate. Powell said at a virtual meet before a conference, “I do think it’s time to taper; I don’t think it’s time to raise rates. We think we can be patient and allow the labor market to heal. Our policy is well-positioned to manage a range of plausible outcomes.”

There were 290,000 initial claims for unemployment benefits in the US during the week ending October 16, the data published by the US Department of Labor (DOL) showed on Thursday. This reading followed the previous print of 296,000 (revised from 293,000) and came in better than the market expectation of 300,000.

On Thursday, China’s Commerce Ministry said in a statement on Thursday that Washington and Beijing should work together to create conditions for implementing the pe one trade deal. On Thursday, there was no certain catalyst behind the retreating risk appetite although inflation-related concerns constituted one part of the whole economic scene.

Economists polled by The Wall Street Journal had forecast a reading of minus 5.0. The fresh reading comes amid rising inflation and economic recovery slowdown.

Goldman Sachs indicated in its expectations that the Bank of England would raise interest rates during November meeting.

Data released by the Statistics Bureau of China on Monday morning revealed that China’s economic growth rose during Q3, but at a pace weaker than market expectations, and it was the worst reading of the index since the third quarter in 2020.

U. S. Dollar

The European trading session witnessed a quiet week’s onset with a remarkable surge of the US Treasury yields leading to some support to the U. S. dollar, which began to advance against all rival currencies on Monday, and the U. S. dollar managed to return to a one year high amid rising inflation concerns and rising bond yields boosted its appeal against its competitors.

The dollar also rose on Monday over China’s weak economic data and surging oil prices in addition to investors’ concerns on inflation that would lead to interest rates developments.

The safe-haven U. S. dollar fell on Tuesday to its lowest level in three weeks against other major currencies amid an improvement in risk appetite, as Asian stocks tracked the rise in US technology shares, and also amid signs that China’s property market problems could be contained.

The dollar index, which measures the performance of the American currency against six other major currencies, fell to a low of 93.641 for the first time since Sept. 28, dropping from its recent range. It was down in the last trading 0.26 percent to 93,690.

The USD managed to stop its Wednesday’s downtrend to advance anew on Thursday. Risk turned off on Thursday leading the USD to reap the most out of it. The dollar weaker yesterday, but it managed to appreciate against most major rivals, except safe-haven CHF and JPY.

Houston’s pension fund for its firefighters said Thursday it bought $25 million worth of bitcoin and ether for its defined-benefit plan’s portfolio, the latest move by an institutional investor into digital assets.

Global and Asian shares

Most Asian stocks closed in the red area over key Chinese economic data. Japanese stocks closed slightly lower Monday, October 18, but automakers gained after Toyota hinted that it might meet its full year production target despite chips shortage.

The Nikkei Index fell 0.15% to close at 29025.46 after posting its first weekly gain in four weeks last week. MSCI’s broadest index of Asia-pacific shares outside Japan falls 0.07%. The Shanghai Composite Index ws trading down 0.6%, following the disappointing third-quarter Gross Domestic Product, which expanded 4.9% YoY basis, below the market expectations of 5.2%.

The broader Topix index lost 0.23% to close at 2019.23, but the Transportation Equipment Industry TOPIX Index rose 1.86% to reach its highest level since 2015. On Tuesday, Japan’s Nikkei index closed higher boosted by technology heavyweights that tracked the Nasdaq’s gains.

   

Japanese stocks rose on Wednesday, buoyed by a strong close on Wall Street, but gave up most of the gains as investors grew cautious about weak US futures and higher yields on Treasury bonds.

Bundesbank president Jens Weidmann has thrown an additional wild card on the negotiation table for Germany’s economy after Merkel’s last term in office.

After 10 years opposing the ECB’s loose fiscal policy,the German economist announced his departure on Wednesday for personal reasons. Last month’s election pushed has pushed Dr Weidmann out because he began to sees himself out of step as he ran out of any further road to go with any new government under the leadership of the Social Democrats.

The Nikkei index rose 0.14 percent to close at 29,255.55 points, after rising by about 0.9 percent earlier in the session. The broader TOPIX index rose 0.05 percent to close at 2027.67 points. On Friday, gains were limited by uncertainty about a U. S. interest rate hike ahead of Japan’s general election and corporate earnings season. The Nikkei rose 0.34 percent to close at 28,804.85 points after gaining 0.98 percent earlier in the session, thanks to news that Evergrande had made interest payments on bonds. The Nikkei was down 0.9 percent for the week.

Wall Street

US shares have undergone mixed performance, and tended to rise with the beginning of Monday’s trading session, attempting to overcome the impact of U. S. and Chinese data that cast negative shadows across the global markets after a decline in the growth of the second largest economy in the world.

The S&P 500 and Nasdaq rose to 4,480 points and 14,992 points, after achieving gains by 0.3% and 0.7%, respectively.
On Tuesday, major equity indexes in the U. S. opened on the positive side with a calm market ahead of key quarterly earnings figures. The S&P 500 was up 0.3% on the day at 4,500, the Dow Jones Industrial Average was rising 0.2% at 35,310 and the Nasdaq Composite was gaining 0.4% at 15,079.

Later on Tuesday, the U. S. session was further brighter with gains on the back of posts on corporate earnings that remained of the most powerful impact on the price movement of assets traded in financial markets, which led to a robust improvement in risk appetite across global financial markets.

New earnings reports were expected after closing the trading session on Wednesday. Netflix, and Procter and Gamble exceeded market expectations and registered $3.19 vs $2.56 and $1.61 vs. $1.59 by per share, respectively.

Johnson & Johnson announced that sales of its coronavirus vaccine recorded about 500 million doses in the third quarter of 2021 as part of its quarterly earnings report released Tuesday. The giant pharmaceutical company added that its profits rose in the same period to $2.60 per share, compared to expectations that indicated $2.35 per share.

Treasury yields

On Wednesday, the 10-year US Treasury yield touched a five-month high of 1.673 percent during Asian trading hours.

Cryptocurrencies

The United States Department of the Treasury issued a review on sanctions and suggested the government do more to develop its infrastructure and policies in regards to digital assets.

During Thursday’s trading, Bitcoin, which analysts see as the new digital gold, climbed to a high of $66,000. On Thursday, Bitcoin broke out beyond its previous all-time high to reach $67k, following the successful launch earlier this week of the first-ever Bitcoin ETF.

The Wall Street Journal reported that this move comes as bitcoin powered back to a record above $66,000 earlier this week.

Gold

On Wednesday, gold reaped considerable gains benefiting from the weaker USD in addition to several factors including the accelerated inflation-related concerns over British inflation data, which reminded the markets of the huge surges in consumer and producer prices around the world leading to fresh increases of the precious metal that investors resort to in the markets as a safe haven against the impact of inflation.

On Thursday, Spot gold rose 0.1 percent to $ 1782.70 an ounce, and US gold futures rose 0.1 percent to $ 1786.40, and bullion prices were traded between $ 1748 an ounce and $ 1800 an ounce

Other Commodities

West Texas Intermediate crude rose more than 1% to over $83 a barrel on Monday for the first time since October 2014 as demand continued to rise and amid a global energy crisis.

OPEC+ alliance failed to pump enough oil again last month. The block is said to cut its production 15% deeper than planned in September, compared to 16% in August and 9% in July.

This once again assures that OPEC members have again failed to pump enough oil to meet the production target, despite the quota cut – exacerbating the supply deficit in the market. On Wednesday, Oil prices fell on Wednesday after the Chinese government stepped up efforts to stem record coal prices and operate coal mines at full capacity to ease the energy shortage crisis.

Brent crude futures fell 64 cents, or 0.8 percent, to $84.44 a barrel by 0645 GMT, giving up the rise of 75 cents in the previous session, but still near their highest levels in several years. On Thursday, Brent crude futures lost 54 cents, or 0.6%, to $85.28 a barrel, after early gains that took the benchmark to its highest level since October 2018. It rose 0.9% the previous day.

For December, US West Texas Intermediate crude futures fell 33 cents, or 0.4%, to $83.09 a barrel. US crude contracts for November, which expired on Wednesday, settled, up 91 cents, or 1.1%, after touching the highest level since October 2014 earlier in the session.

Amid a worldwide energy shortages, U. S. natural gas inventories climbed to 92 billion cubic feet. The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas climbed by 92 billion cubic feet for the week ended Oct. 15.

Following the data, November delivery of natural gas extended decline, trading down 11.5 cents, or 2.2%, at $5.062 per million British thermal units. Prices were at $5.107 shortly after the data was announced.

On Friday, WTI futures have bounced up to $82.50. the U. S. crude oil regained previous losses to return to levels near multi year highs at $83.95.

Crude prices remain within previous ranges, consolidating after a nine week surge, however, oil prices retreated earlier today as the German Chancellor, Angela Merkel, and Federal Reserve’s Chairman, Jerome Powell, warned about demand disruptions if coronavirus infections are likely to reemerge.