📅 Market Report.
📉 The IMF trimmed its 2022 growth forecast for China to 4.8% from 4.9%, citing property market weakness as a key risk. A worsening contraction in Chinese property sales, investment and prices could further reduce consumer spending and domestic demand. The IMF chief economist says recent steps taken by China are in the “right direction” but may not be enough given disappointing Q3 growth. Chinese stimulus package risks adding to public debt pressures if not carefully targeted to support demand. Political uncertainty from this year’s US elections adds to challenges facing the Chinese economy. We are in the middle of a trade war, in which the US and Europe are raising tariffs against parts of Chinese industry.
🇺🇸 The International Monetary Fund likewise believes that U.S. growth will continue to be strong. The IMF raised its 2025 growth prediction for the United States and raised its estimate for its 2024 GDP to 2.8% from 2.6% in July in its most recent World Economic Outlook. The IMF revised its economic trajectory higher for both years, making it the first advanced economy to do so. Customers in the United States are responsible for that. In its study, the IMF stated that “strong increases in real wages are largely responsible for the resilience of consumption.”
🇸🇦 Economic growth in Saudi Arabia is projected to accelerate to 4.4% in 2025 from 1.3% in 2024 as higher oil output boosts revenues. Saudi Arabia is expected to abandon its $100/barrel oil price target, allowing it to increase production and market share. Oil prices are seen remaining weak on average in 2025 versus current levels, offsetting the impact of higher volumes. The UAE is predicted to have the fastest growth in the GCC (Gulf Cooperation Council) at 4.9% in 2025, benefiting most from higher quotas under OPEC+ cuts.
💶 Remember when we predicted that in the long term there will be a record fall of the euro against the dollar? This could be the tip of that iceberg. ECB policymakers have started debating if rates need to fall below the neutral rate to stimulate the economy after years of restriction. This comes as the economic outlook deteriorates and inflation remains well below early predictions, raising risks of undershooting for years. As we have repeatedly mentioned, inflation is also a symptom of economic activity, and its absence is a cause for concern. Some argue the ECB has fallen behind and deeper cuts are needed to prevent inflation from falling too low (deflationary risks). Policymakers like Simkus, Centeno and Villeroy de Galhau warn of risks in undershooting the inflation target. None advocated faster cuts than the current 25 basis point pace, and an actual decision on sub-neutral is months away.
🇹🇼 The US threatens Taiwan over trade with China. The US Department of Commerce is investigating Taiwan Semiconductor Manufacturing Co (TSMC) over potential violations of export controls to China. Specifically, the probe relates to whether TSMC shipped components to Huawei after the Chinese company was added to a US trade blacklist in 2020. Any violations could result in civil or criminal penalties for TSMC, one of the world’s largest contract chip manufacturers. The investigation’s outcome could impact US-Taiwan-China business and political dynamics over technology and trade. Oil revenues will remain critical despite diversification efforts, with non-oil GDP growth seen largely matching oil GDP gains.
📈 Market View:
📉 Markets have yet to recover from yesterday’s declines. Mini S&P 500 futures are trading below 5900 points again, currently at 5880 points. The Nasdaq stock market has recovered some ground from yesterday’s levels, currently trading at 20345 points.
💵 The dollar continues to rise like a rocket. The dollar index DXY is currently above 104 points, approaching the next target of 104.50. The euro/dollar has lost 1.08 and is currently trading at 1.0780. US 2 and 4 year bonds continue to trade above the 4% yield, pushing the prospect of further rate cuts closer.
🇪🇺 European equities are also correcting. The DAX 40 is down 19380 points despite last week’s highs. The EuroStoxx 50 is moving away from 5000 points, currently trading at 4915 points.
🛢️ Brent crude oil, which rose above $76 yesterday, falls back to $74.50. Gold remains extremely strong, currently trading at $2766 per ounce. Bitcoin continues to retreat and is currently trading at $66,500.
🌍 Geopolitics:
🇨🇳 At the BRICS Summit, yesterday, Chinese President Xi Jinping gave Russian President Vladimir Putin his whole speech. “The BRICS mechanism is the world’s most important platform for solidarity and cooperation among emerging markets and developing countries.”
🇷🇺 BRICS delegations are told by Russian President Vladimir Putin that “we are all witnessing the development of BRICS and the expansion of its role in global affairs.”
🇮🇷 Russia says it has no intention of abandoning Iran if Israel attacks them. “We are developing cooperation with Iran in a variety of areas. We intend to do this further.”
🇮🇳 Indian Prime Minister Modi tells President Putin he wants to help end Russia’s war with Ukraine.
