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Daily Macro markets update 18/10/2024

๐Ÿ“… Market Report.

๐Ÿ“‰ As anticipated by markets, the European Central Bank cut its benchmark interest rate by 25 basis points to 3.25% on Thursday. It has lowered rates at successive meetings for the first time since December 2011 with its third 25 basis point decrease this year. The disinflation process is “well on track,” according to the ECB’s Governing Council. The ECB President Christine Lagarde’s statement that the bank is “not pre-committing to a particular rate path” caused traders to take notice, and Europe’s Stoxx 600 index ended the day up 0.83%.

๐Ÿค” Considering the latest German and French inflation data, the sharp falls in inflation could be due to a fall in general economic activity as revealed by manufacturing PMIs or Ifo surveys, rather than an effective ECB policy. It is likely that Lagarde is thinking this when she said, “is probably more downside risk than upside risk” to the central bank’s inflation forecast. However, J.P. Morgan CIO said Lagarde will likely stop short of committing to a December rate cut given the ECB’s meeting-by-meeting approach.

๐Ÿ‡บ๐Ÿ‡ธ The US economy continues to show strong data, retail sales increased 0.4% in September, better than the forecasted rise of 0.3% and up from a revised 0.1% gain in August. Initial jobless claims fell 19,000 to 241,000, below estimates of 260,000, despite hurricanes affecting Florida and North Carolina. Consumer spending has remained resilient while the labor market holds up after signs of weakness over summer.

๐Ÿ’ป TSMC, the world’s largest chipmaker, reported a 54% jump in Q3 profits to $10.1 billion, driven by demand for its AI-capable chips. Revenue rose 36% to $23.5 billion, beating estimates, on strong smartphone and AI demand for its 3nm and 5nm technologies. TSMC shares jumped 9% on the earnings beat, as the company sees demand continuing to outpace chip production through 2025/26. The strong Q3 gives more confidence in views that TSMC can keep expanding gross margins on ongoing AI strength and demand. In ATFX We published a preearning report on TSMC 2 days ago: https://buff.ly/48aS3Qe

๐Ÿ‡จ๐Ÿ‡ณ China’s Q3 2024 GDP growth was 4.6% year-on-year, the slowest pace since early 2023, slightly exceeding forecasts but down from Q2’s 4.7%. The struggling property market remains a significant drag on the economy, despite government stimulus efforts. New home prices fell at their fastest rate since May 2015. September’s industrial output and retail sales figures exceeded expectations, offering a glimmer of hope. While authorities have ramped up stimulus, markets await details on the package’s size and a clearer roadmap for long-term recovery. Nevertheless, officials expressed confidence in achieving the government’s full-year growth target of around 5%. Concerns about deflation are increasing, with some economists predicting a deepening of these pressures. Markets initially reacted with mixed signals to the data but rallied after the central bank announced funding schemes to support the equity market.

๐Ÿ‡ฌ๐Ÿ‡ง In the United Kingdom, retail sales climbed 0.30 percent in September after rising 1 percent in August. The number exceeds the consensus of a 0.3% decline. Retail sales increased 3.9% year over year, above forecasts of 3.2%.

๐Ÿ‡ฏ๐Ÿ‡ต Japan’s annualised inflation has fallen from 2.8% in August to 2.4% in September. However, it is above expectations of 2.3% and would indicate that inflationary pressure continues in Japan, putting pressure on the BoJ to continue its rate hike which puts its economic growth at risk.

๐Ÿ“ˆ Market View:

๐Ÿ“‰ Mini S&P 500 futures are back below 5900 points, but remain in a strong uptrend. The Nasdaq has also retreated in recent hours and is now trading at 20,285 points.

๐Ÿ’ต The dollar welcomed the euro rate cuts, strengthening and attracting more capital. The dollar index DXY rose above 103.50 points and is currently trading at 103.65. This is in line with the targets we set last week. The EUR/USD has lost 1.0850. The US 2 year bond is consolidating more and more in the near 4% zone, with more pressure for higher interest rates for longer.

๐Ÿ‡ช๐Ÿ‡บ In Europe, the DAX 40 continues to advance to new highs, helped by the rate cut, and is currently trading at 19,630 points, almost an all-time high, with 19,700 as the next frontier. The Eurostoxx 50 was also encouraged by the rate cut, but failed to reach 5000 points.

๐Ÿ›ข๏ธ Crude oil continues to move sideways in the area of 74 to 75 dollars per barrel Brent. Gold has broken new records and continues to rise freely, regardless of the fluctuation of the dollar, reaching 2725 dollars per ounce. We put its next target at 2850 dollars. Bitcoin, meanwhile, continues to press the $68,000 barrier, and everything seems to indicate that it will break through it to the upside.

๐ŸŒ Geopolitics:

๐Ÿ‡บ๐Ÿ‡ฆ Zelensky gives the West an ultimatum: Join NATO or acquire nuclear weapons. Desperation at the failure of the bellicose campaign seems to be reaching new levels.

โ˜ข๏ธ Ukraine is working on a dirty nuclear bomb and has all the means at its disposal to do so, warned Dmitry Medvedev, deputy chairman of the Russian Security Council.

๐Ÿ‡ฎ๐Ÿ‡ท Iranian General ๐—”๐—บ๐—ถ๐—ฟ-๐—”๐—น๐—ถ ๐—›๐—ฎ๐—ท๐—ถ๐˜‡๐—ฎ๐—ฑ๐—ฒ๐—ต assures that โ€˜Soon we will reveal a weapon more sophisticated than drones, missiles and nuclear technology that will change everythingโ€™.

๐Ÿ‡ช๐Ÿ‡บ The EU launches the Global Gateway initiative to compete against China’s Road Belt Initiative.

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