Economy Spotlight : Key Events and What’s Next 10/21-28/2024

Introduction:

In our current report "Economy Spotlight" we will discuss many issues related to the major economies, especially those related to precious metals, and other issues that were affected by many indicators, variables and economic data.

Last week was a great week for precious metals, as gold rose to an unprecedented historical peak, and with-it silver prices also rose to price levels that the markets have not seen since 2012, driven by central banks' trends towards deeper interest rate cuts on the one hand, and news about China's revitalization of its economy soon on the other hand.

The Japanese economy experienced a moment of relief as inflation declined for the first time in five months. This development may provide reassurance to Japanese officials regarding the potential need to raise interest rates, a shift the economy has not encountered since 1999, when the Bank of Japan implemented a negative interest rate policy to stimulate economic growth and encourage investment.

Also, the US economy witnessed economic data that reduced the possibility of the Federal Reserve heading towards deep cuts in the upcoming meetings, especially since this data coincided with good performance in the US labor market, in addition to good financial results for technology companies after the distinguished performance of the US banking sector driven by investment services fee revenues, which jumped globally by about 21% during the first nine months of this year according to Dealogic data.

Economy Spotlight : The Most Important Events Last week

The following are the most prominent events that happened in the major economies:

First. The US economy:

The US economy witnessed mixed economic data, and speeches by several members of the US Federal Reserve, who indicated the need to monitor inflation and economic data to make the next decision regarding the size of the interest rate cut, while the Federal Reserve Bank of Cleveland said that the challenges facing the Federal Reserve to return inflation to 2% are still ongoing.

As for corporate results, after disappointing data from ASML, which had started the week with somewhat disappointing results driven by expectations of a decline in demand for chips, financial markets returned to life due to the results of Taiwanese chipmaker TSMC, which gave the financial market optimistic signals about the future of artificial intelligence, especially for the American company NVIDIA, the largest semiconductor manufacturer and the second largest company in terms of market value in the world, after a setback at the beginning of the week following a media statement by the US President that he intends to limit US semiconductor exports abroad.

Meanwhile, economic indicators have confirmed the health of the US economy; US retail sales rose by 0.4% in September, slightly more than expected, while weekly unemployment claims fell unexpectedly and were unclear due to the impact of Hurricane Helen, which affected jobs in Florida and other parts of the US Southeast. These indicators still support a quarter-point cut at the next meeting on 7 November.

Second. The European Economy:

The European Central Bank continues to take steps contrary to its approach to interest rates, as it reduced interest rates for the third time due to the rapid decline in the inflation rate, which fell in its latest reading to 1.7% from 1.8% that appeared in the first reading in September, so that this reduction represents the first consecutive reduction in interest rates in 13 years for the bank, which is accustomed to making one reduction almost every quarter, which reflects European keenness to protect the economy from slipping into recession and to stimulate economic growth in general.

Third. The Chinese Economy:

China is still living in the shadow of news about the stimulus packages announced by the Chinese government with the aim of stimulating the economy and pushing it to achieve economic growth around 5%, as Chinese media reported in the middle of last week that China may collect 850 billion US dollars from its treasury bonds over three years to stimulate the economy, while at the end of the week it announced stimulus steps related to the stock market and investment facilities for brokers and insurance companies, and more interest incentives.

Despite the somewhat good news on China’s economic stimulus, economic data remains mixed.

Consumer inflation unexpectedly eased in September while producer price deflation deepened. 

Its third-quarter GDP fell from 4.7% to 4.6%, marking the second straight quarter of decline in China’s main gauge of economic growth, while industrial production and retail sales data were better than expected.

Fourth. Japan’s economy:

Japan’s exports fell for the first time in ten months in September, raising concerns among policymakers about their ability to exit ultra-easy monetary policy as weak demand in China and slowing growth in the United States weigh.

But Japan’s economy received good news on inflation, which fell from 2.8% to 2.4%. Although the decline was slightly higher than the 2.3% forecast, it was the first decline in two months.

Fifth. UK Economy:

Unemployment rates in the UK economy fell alongside inflation, with unemployment down to 4% from 4.1%, while inflation fell to 1.7% from 2.2%, below expectations of a fall to 1.9%, while retail sales indicators almost doubled from 2.2% to 4%, supporting upcoming interest rate cuts by the Bank of England this month.

Sixth. Precious metals and commodities:

Gold and silver were among the most prominent things that witnessed a noticeable rise during the past week, as gold rose from levels of $2649 to $2721, while silver prices rose by about 10% from levels of $30.9 to $33.9.

Gold rose due to the general trend of major central banks that showed a noticeable openness to reducing their interest rates, and the increase in uncertainty regarding geopolitical tensions in the Middle East region, and considering the approaching US elections, which are still witnessing a high state of uncertainty about the next US president.

As for the oil markets, they declined due to OPEC's monthly report, which expected a decline in global oil demand of 106 thousand barrels per day this year, and by 100 thousand barrels per day in 2025.

The report attributed this slowdown to the uncertainty of China's position on its economic growth, especially since it is the largest oil importer in the world.

The organization expects its demand to decrease by 70 thousand barrels per day, with Chinese demand expected to increase by 580 thousand barrels per day this year.

For The barrel of West Texas Intermediate crude fell by 8% to close at $69, down from $75 at the beginning of the week, and the price of a barrel of Brent crude fell by about 6.5% to close at about $73, down from $78.

Economy Spotlight . What are the markets waiting for next week:

Global markets will be waiting for the following economic data:

Monday 10-21-2024:

China:

The main lending rate, with expectations of a decrease of 20 basis points to reach 3.15%.

Globally:

 The annual meetings of the International Monetary Fund will begin, which will extend until 10-26-2024 to discuss many important global economic issues.

Tuesday 10-22-2024:

Euro:

Speech by the Governor of the European Central Bank, Christine Lagarde.

Wednesday 10-23-2024:

USA:

• Existing home sales, with expectations of an increase of 200 thousand units.
• US crude oil inventory.

Britain: 

Speech by the Governor of the Bank of England.

Canada:

Interest rate decision with expectations of a fourth decrease by a quarter of a percentage point to reach 3.75% after inflation on the Canadian side decreased to 1.6%, down from the previous 2%.

Thursday 10-24-2024:

USA:

• Building permits.
• Unemployment complaints rates.
• Repercussions of ongoing unemployment.
• Manufacturing PMI, with expectations of a slight increase.
• Services PMI, with expectations of a slight decrease.
• New home sales, with expectations of a slight increase.

Friday 10-25-2024:

USA:

• Michigan Inflation Expectations Index, for October and for five years, with expectations of stable rates.
• Michigan Consumer Expectations Index.

Saturday 10-26-2024

Globally: IMF meetings conclude.

Sunday: 10-27-2024:

China: Industrial profit until the beginning of the year (September).