Daily Digest: Wednesday 25th September
USA
Tuesday’s US consumer confidence data for September remained a key focus for traders during Wednesday’s session, as performances were hampered by deteriorating consumer sentiment. The Conference Board consumer confidence index fell 6.9 points to 98.7, from August’s revised 105.6. This indicates that US consumers are becoming less economically active as we approach November’s presidential elections. The leading cause of a spending slowdown is thought to be a slowing jobs market, a position which can be tested upon the release of September’s hourly earning, non-farm payroll, and total unemployment data on Friday, October 4th. At face value, lower consumer confidence actually compliments the Fed’s monetary policy strategy, opening the proverbial door for policymakers to continue the rate cutting cycle earlier than the committee’s December meet as the US economy slows, effectively curbing inflation.
US crude inventory data shows that US officials are facing a battle between heightened demand and surging crude prices, with barrels topping the $72 level last week. US inventories fell by 4.5 million barrels last week, significantly exceeding analyst expectations of a1.3 million barrel drawdown, marking a second consecutive week of drawdowns. Price action remains heavily driven by supply side pressures, particularly geopolitical tensions across the Middle East. A notable development this week includes efforts to ease tension in Libya, which could see the nation resume crude exports upon the appointment of new central bank officials, though no immediate change is expected. On the demand side, Tuesday’s announcement of China’s economic rescue package supported price action, while seasonal trends are likely to influence demand as the US and major European economies head into winter. It wouldn’t be extreme to suggest that officials may look to increase and restock inventories in the coming weeks, taking advantage of cooling markets to mitigate demand spikes. As of 20:38 GMT, crude was trading just below the $70 per barrel mark at $69.69.
Equity performances were mixed through Wednesday. The S&P 500 ($SPX) traded within relatively tight ranges, closing 10.67 points (0.19%) lower at 5,722.26. The Dow ($INDU) saw slightly sharper declines, falling 293.47 points (0.70%) to 41,914.74, after being rejected at new all-time highs. The Nasdaq 100 ($NDX) was the only of the three major indexes to move higher, closing 27.76 points (0.14%) higher at 19,972.61.
Nvidia ($NVDA) was the standout performer amongst the US ‘magnificent seven’, as shares rose +2.18% breaking new monthly highs at $123.51. Investors appear to have doubled down after CEO Jensen Huang announced that he had finished selling a portion of his personal shares, restoring confidence in the firm. Additionally, new industry reports have supported stronger outlooks indicating that AI demand is set to scale significantly.
Europe
European markets lacked any major macroeconomic catalysts through Wednesday’s session, the UK’s FTSE 100 (FTSE) edged higher during early trading but ended the session lower, falling 14.06 points (0.17%) to 8,268.70. European markets should experience a slight uptick in on Thursday as the SNB conclude their September meet, and ECB President Christine Lagarde delivers the opening address at the 2024 European Systemic Risk Board Conference.
Rest of the World
Year-on-year Core Japanese CPI data for August was released on Wednesday morning, indicating that, in the absence of food and energy prices, the underlying inflation rate in Japan is 1.8%. This print fell in line with analyst expectations, marking an effective stabilisation of the nation’s core inflation rate which has remained unchanged from July’s figures. As previously mentioned, the core inflation rate removes all food and energy constituents from the CPI basket due to their prices being the most volatile in the short run, therefore they can artificially inflate or deflate the output of the CPI calculation due to their weight in CPI composition. Core CPI therefore allows economists and traders to identify and isolate the core and fundamental inflation trends within an economy. Japanese shares traded lower into the session close, the Nikkei 225 (¥N225) erased around one third of Tuesday’s gains falling 70.33 points (0.19%) to 37,870.26. Once again, the 38,000 level was continuously tested throughout trading but remains a key level of price resistance.
Chinese equity markets continued higher on Wednesday, as traders price in Tuesday’s economic intervention and stimulus program. The most impactful measure involved a 50 basis point cut to the bank reserve requirement ratio, governing the minimum liquidity level banks must hold to cover demand deposits. Due to Chinese banks operating under the fractional reserve system, a reduction in reserve requirements allows an institution to increase their lending activity. Ultimately, downwards adjustments to the reserve requirement of a bank are a form of liquidity injection, which in the case of China is expected to free up 142 billion dollars for new loans to be issued. Additionally, authorities have moved to lower upfront housing deposits in a bid to stimulate new buyer activity within the property sector, complementing their move to ease borrowing conditions. The Shanghai Composite index (¥SSE) rose a further 33.18 points (1.16%) to 2,896.31, marking a third consecutive session of gains as traders edge closer to the 3,000 level.
What to Watch Tomorrow
US Final Quarterly GDP
US Unemployment Claims
Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
https://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com
Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice