On Friday, US stock indices fell to 2-week lows. At the close of the stock market on Friday, the Dow Jones Index (US30) was down by 0.83% (-2.08% for the week), while the S&P 500 Index (US500) decreased by 1.26% (-2.72% for the week). The NASDAQ Technology Index (US100) closed Friday negative by 1.53% (-3.49% for the week).
The CBOE Volatility Index, Wall Street's most commonly tracked gauge of investor nervousness, closed Friday at its highest level in nearly seven months. The yield on 10-year Treasury bonds fell Friday, a day after it topped the 5% mark for the first time since July 2007 amid mixed comments from Federal Reserve Chairman Jerome Powell. As a result, investors have piled into other traditional safe-haven assets such as the dollar and gold, as well as short-term Treasuries or money market funds that offer more attractive yields.
FRB Atlanta President Bostic said that the long-term trend of the US economy is positive, and he does not believe the Fed will cut interest rates until mid-2024. Comments from another FOMC official, Philadelphia Fed President Harker, indicate that he favors a pause in rate hikes.
Geopolitical tensions are also lingering in the news cycle. In addition to a possible "black swan," attacks on US facilities have increased. The US Pentagon said drone attacks on US facilities have increased in Iraq and Syria, and a US destroyer on Thursday shot down cruise missiles fired by Yemeni Houthi militants. That could lead to a wintertime crude supply crunch in the Northern Hemisphere.
Equity markets in Europe were mostly down on Friday. Germany's DAX (DE40) decreased by 1.64% (-2.77% for the week), France's CAC 40 (FR 40) was down by 1.52% (-3.04% for the week) on Friday, Spain's IBEX 35 (ES35) was down by 1.21% (-2.26% for the week), and the UK's FTSE 100 (UK100) closed negative by 1.30% (-2.60% for the week).
This week, on Thursday, the ECB will hold its monetary policy meeting. This will be the penultimate ECB meeting of the year. Economists expect the overall ECB to keep the rate at 4.5%, but it remains a hawkish course, keeping the door open for another rate hike in December.
Oil prices fell on Friday after the Islamist group Hamas released two US hostages from the Gaza Strip, raising hopes of a de-escalation of the Israeli-Palestinian crisis without engulfing the rest of the Middle East region and disrupting oil supplies. But the risk of further escalation remains.
Asian markets were mostly down last week. Japan's Nikkei 225 (JP225) was down 2.26% for the week, China's FTSE China A50 (CHA50) fell by 3.04% for the five trading days, Hong Kong's Hang Seng (HK50) was down by 3.55% for the week, and Australia's ASX 200 (AU200) was negative by 2.13% for the week.
At the end of last week, Bank Indonesia (BI) surprised by raising rates to 6.0% to support the Indonesian currency. The central bank believes that the global economy will face increasing headwinds amid growing uncertainty and cited the need for a "stronger policy response." The IDR has fallen by 1.77% over the past month, and BI had no choice but to lend further support to the currency.
Inflation reports from Australia, Singapore, and Japan will be the focus of the Asian data calendar this week. Singapore's inflation report will be released as early as today. It is expected that inflation may rise to 4.1% from 4% previously y/y. Meanwhile, core inflation is still on a downtrend and could fall to 3.2% y/y from 3.4%. On Wednesday, Australian Consumer Price Index data will be released, where inflation is expected to rise slightly to 5.4% from 5.2% y/y. The latest minutes indicate that the RBA does not expect inflation to fall significantly until the middle of next year, so "lack of satisfactory progress" may be considered a sufficient condition for a further rate hike. Japan will release Tokyo inflation data on Friday. It is expected that core inflation may fall to 2.6% y/y in October (vs. 2.8% in September, market consensus is 2.7%). However, a comparison with the previous month shows that the recent rise in global commodity prices and weakening yen may add to upward pressure.
S&P 500 (F)(US500) 4,224.16 −53.84 (−1.26%)
Dow Jones (US30) 33,127.28 −286.89 (−0.86%)
DAX (DE40) 14,798.47 −246.76 (−1.64%)
FTSE 100 (UK100) 7,402.14 −97.39 (−1.30%)
USD Index 106.16 −0.09 (−0.08%)
- – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3).
by , 2023.10.23
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