Summary:
Last Week Review
• US ECONOMY GOES SMOOTHLY TOWARDS SOFT-LANDING, WHILE CHINA’S ECONOMY SLOWS DOWN. Earnings sentiment and solid economic data managed to support gains in the Technology stock sector in particular, and across all three of Wall Street’s benchmark indices, such that all three managed to secure their sixth consecutive weekly gain, the longest streak of weekly gains since late 2023. For the past week, the S&P 500 gained 0.9%, the Nasdaq Composite advanced 0.8%, and the Dow Jones Industrial Average jumped 1%. Magnificent Seven technology stocks, which have driven much of Wall Street’s rally this year, helped prop it up. Economic indicators said Retail Sales (Sept) rose strongly, Initial Jobless Claims also declined as expected; Philadelphia Fed Manufacturing Index skyrocketed to a 3-month high, from 1.7 in Sept to 10.3 in Oct.
• ASIA & EUROPE MARKETS: CHINA’S economy grew at the slowest pace since early 2023 in the third quarter. The economy grew 4.6% yoy in July-September, above the 4.5% forecast in a Reuters poll but below the 4.7% pace in the second quarter. Industrial output and retail sales increased and exceeded expectations, but the property sector remained mired in a downturn. Chinese stocks jumped 3.6%, however, as investors focused on the start of Beijing’s two stimulus measures that will initially pump as much as 800 billion Yuan (USD 112.38 billion) into equity markets.
• EUROPE has felt the impact of China’s slowdown, with weakness in GERMANY one of the factors that prompted the EUROPEAN CENTRAL BANK to cut interest rates by 25 basis points to 3.25% on Thursday. The gap between US TREASURY YIELD and GERMAN EUROZONE jumped to its highest point since late June as investors started to factor in more ECB rate cuts. Speaking of Inflation, both EUROZONE and UK reported CPI (Sept) slid lower than expected, both to 1.7% yoy, further below both central banks’ Target of 2%.
• INDONESIA: JCI closed the last week of Joko Widodo’s 7th presidential administration up 2.65%, and garnered Foreign Net Buy of IDR 1.77 trillion (RG market). RUPIAH exchange rate was at 15,462/USD. Last week also reported the 52nd consecutive Trade Balance surplus but with a weaker Export – Import growth note. On the one hand, Foreign Direct Investment in Q3 rose 18.6% (highest in 6 months); compared to 16.6% in Q2. BI RDG on Wednesday announced BI7DRR to stay at 6.0% in order to maintain the stability of Rupiah exchange rate.
This Week’s Outlook
Here’s a look at what’s happening in the markets for the coming week:
• EARNINGS SEASON: Tesla will be the first tech company of the Magnificent Seven to report earnings this week. Global financial leaders will gather in Washington and Oil prices look set to remain volatile. The S&P 500 is trading at nearly 22 times forward earnings – along with high expectations of corporate results and potential volatility surrounding the upcoming US presidential election, could leave stocks vulnerable to a decline. Semiconductor and related equipment stocks account for 11.5% of the S&P 500’s weight. Other names due to report earnings this week include Coca-Cola, IBM, General Motors and Verizon.
• ECONOMIC INDICATORS: This week will be a relatively quiet week in the US economic calendar, but investors will get an update on the health of the housing sector with reports due on existing and new home sales. There are also reports on durable goods orders, consumer sentiment and initial jobless claims. On Wednesday, the Fed will publish the Beige Book, a report on economic conditions in the central bank’s 12 districts. Market participants will also get a chance to hear from several regional Fed officials during the week, including Minneapolis Fed President Neel Kashkari, Kansas City Fed President Jeffrey Schmid, San Francisco Fed President Mary Daly, Philadelphia Fed President Patrick Harker and Richmond Fed President Thomas Barkin.
• IMF MEETING: Global central bank chiefs and finance ministers will gather in Washington starting Monday for the annual meetings of the International Monetary Fund and World Bank to discuss how countries can tackle low growth and high debt. Last week the IMF warned that global public debt is expected to surpass USD 100 trillion by the end of this year, driven by the US and China. High debt levels can trigger adverse market reactions and limit budgetary efforts to react to economic shocks, the IMF said.
• Meanwhile, RUSSIAN President Vladimir Putin will host a summit of BRICS leaders starting Tuesday, as the Kremlin seeks support in its standoff with the West. Russia said leaders from Brazil, India, China, South Africa, Egypt, the UAE and Saudi Arabia, which account for a third of global economic output, will be there.
• COMMODITIES: OIL prices look set to remain depressed after dropping around 7% last week as energy traders parsed a gloomy demand outlook for major importer China and ongoing conflicts in the Middle East. BRENT closed more than 7% lower, while US WTI crude futures fell about 8%, marking the biggest weekly decline since early September. The combination of economic weakness in China along with the move towards transportation electrification looks set to weigh on the demand outlook, analysts said. Meanwhile, uncertainty remains over how the MIDDLE EAST CONFLICT will evolve. US President Joe Biden said on Friday that there is an opportunity to deal with Israel and Iran in a way that could potentially end their conflict in the Middle East for the time being. However, Lebanon’s Hezbollah militant group said on Friday that it would escalate its fight against Israeli forces, dashing hopes that the death of Hamas leader Yahya Sinwar would hasten an end to the escalating war in the region.
• INDONESIA: This week’s important domestic data is the Q3-2024 Banking Survey to be released by Bank Indonesia, as well as the development of Money Circulation in September. This Monday, the public will focus their attention on the Inauguration of Ministers, Deputy Ministers, and Ministerial-Level Officials of the Red and White Cabinet of President Prabowo Subianto’s Government.
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