Summary:

Last Week Review

• THE COMBINATION OF US INFLATION AND LABOR DATA REINFORCES THE CONTINUATION OF THE FED’S RATE CUTS. The FED’s Sept meeting minutes showed a majority of members favored a jumbo cut, although there were signs that some members preferred to keep the rate-cutting cycle at a more modest magnitude, anticipating concerns about the strength of the US economy. US CPI rose slightly higher than expected in September as food costs rose, but on an annualized basis this inflation increase was the smallest in more than 3.5 years. The Labor Department said US CPI rose 0.2% mom after rising 0.2% in August, slightly above expectations of economists polled by Reuters for a 0.1% increase. On an annualized basis, US CPI rose 2.4% yoy compared to the estimate of 2.3%, though easing from the previous month’s 2.5%. At the producer level, US PPI was unchanged on a monthly basis in September, compared to a 0.1% increase expected by economists polled by Reuters. On an annualized basis, the producer price index increased by 1.8%, lower than the upwardly revised figure of 1.9% in August, meaning Inflation is definitely slowing down.

• Other data showed weekly INITIAL JOBLESS CLAIMS jumped 33,000 last week to 258,000, quite materially above the 230,000 estimate, although the rise was partly due to distortions from Hurricane Helene. The above jobless claims data initially helped to reinforce expectations that the Federal Reserve will cut interest rates next month, by 25bps with an increasingly steady chance of above 80%; while the remaining percentage set up the probability for no rate change. On a weekly basis, the S&P 500 gained 1.1% while the Dow Jones Industrial Average advanced 1.2% and the NASDAQ appreciated 1.1%; all three recorded their 5th consecutive week of gains and the DJIA recorded its best gain in 8 months.

• QUARTER 3 FINANCIAL REPORT season officially opened with the release of the performance of a series of major banks last Friday, such as: JPMorgan Chase, Wells Fargo, and Bank of New York Mellon which on average announced earnings above expectations.

• CHINA: kept the eyes of market participants focused on the continuation of a more detailed plan for the largest stimulus after the COVID pandemic, including interest rate cuts, more liquidity to boost bank lending, and a commitment of USD 340 billion to support the stock market. The effort has pushed China & Hong Kong stock markets up by around 30%. But so far there are still many unanswered questions, including how much total stimulus is being talked about and how they will carry out this mandate. The outline of the stimulus still seems to be around assistance to the property sector, such as: lowering China’s mortgage interest & DP for home purchases. While the steps that have not been executed are : liquidity preservation for the capital market and Chinese government bond transactions in the secondary market. Investors are forced to wait for the next presentation at the Chinese legislative meeting, the date of which is also unclear.

• COMMODITIES: OIL prices moved up above 1% over the past week, anticipating a number of driving factors such as the MIDDLE EAST CONFLICT which is still full of threats of ISRAEL attacks on IRAN’s energy infrastructure, despite the glimmer of hope for ceasefire negotiations that have begun to emerge; not to mention taking into account CHINA (the world’s largest crude oil importer) which is still full of bearish narratives. Sluggish demand from there as well as North America led the US Energy Information Agency (EIA) on Tuesday to lower its demand forecast for 2025. On the supply side, LIBYA’s national oil company said that it has resumed production back to even pre-crisis central bank levels, at 1.25 million barrels.

This Week’s Outlook

Berikut adalah gambaran tentang apa yang terjadi di pasar untuk minggu mendatang:

• QUARTER 3 FINANCIAL REPORT season will bring more big bank reports this week, including Bank of America and Citigroup on Tuesday, while Netflix will report after the close on Thursday. Investors will be looking closely at the results from Netflix – specifically whether the streaming service is gaining or losing subscribers and how fast – to gain insight into the health of consumer spending. The quarterly report is expected to provide justification to support the stock market valuation, which is well above its historical average.

• U.S. ECONOMIC INDICATORS: Markets will get another update on the health of the US consumer on Thursday, from the Retail Sales data. Investors will also get a chance to hear from several Fed officials in the coming days, including Governor Christopher Waller, Minneapolis Fed President Neel Kashkari and San Francisco Fed President Mary Daly.

• THE EUROPEAN CENTRAL BANK (ECB) is expected to cut interest rates by another quarter point on Thursday, after indications that slowing economic growth and easing price pressures have increased the need for faster cuts to support the bloc’s economy.

• CHINA’S 3Q GDP will be released on Friday, highlighting a busy week for economic data from the world’s second largest economy. Policymakers have expressed confidence in achieving their annual growth target of around 5%, despite a weak second quarter and expectations of little improvement in the third quarter. Investors may shrug off pessimism given Beijing’s recent announcement of aggressive stimulus measures, which propelled the stock market to new highs. While some of the initial enthusiasm has faded, further details on fiscal support could spark another market rally. In addition to GDP, China will release data on trade, house prices, and retail sales, giving policymakers insight into the challenges at the end of the year.

• OIL PRICES rose for the second consecutive week as investors weighed factors such as possible supply disruptions in the Middle East and the impact of Hurricane Milton on fuel demand in Florida. Both benchmarks ended the week with gains of more than 1% as markets awaited Israel’s response to a massive missile attack from Iran. Florida is the third-largest gasoline consumer in the US, but there are no refineries in the state, which makes it dependent on imports through sea.

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