Global News Summary: 1-4 October 2024

United States

Economic Growth: The US economy showed resilience, with 254,000 jobs added in September, the highest in six months, boosting optimism for a soft landing. The strong labour market data shifted market sentiment, reducing expectations for aggressive Fed rate cuts.

Jobs: Unemployment declined, reinforcing the strength of the labour market. The strong jobs report signalled continued economic growth, though some warn it could complicate the Fed’s efforts to control inflation due to wage pressures.

Debt Securities: US Treasury yields rose, with the two-year yield at 3.93% and the 10-year yield at 3.97%, reflecting reduced expectations for a large rate cut in November.

AI: OpenAI secured $6.6 billion in new funding, giving the company a valuation of $157 billion. The company is also urging investors to avoid backing rival start-ups like Anthropic and xAI as competition in AI intensifies. Google is developing AI software with human-like reasoning capabilities, competing directly with OpenAI.

ESG: Oil prices surged by 1% to $74.44 per barrel, partly driven by geopolitical tensions in the Middle East. President Biden urged Israel to avoid targeting Iran’s oil infrastructure amid growing concerns over energy supply disruptions.

United Kingdom

Economic Growth: House sales rose by 25% in the four weeks to 21 September, driven by lower mortgage rates and increased homebuyer demand. This marked the fastest increase since the post-lockdown period, signalling a recovery in the housing market.

Jobs: The labour market in the UK showed signs of cooling, with median pay awards in the private sector dropping to 4.1% in the three months to August, down from 4.4% in the previous period. This indicates easing wage pressures.

Debt Securities: The Bank of England remains cautious about interest rate cuts, as rising house prices and wage growth could reignite inflationary pressures.

Eurozone

Economic Growth: The ECB is expected to cut interest rates on 17 October, following a drop in inflation below 2% for the first time in three years. The French government announced €60 billion in spending cuts and tax hikes to address its growing budget deficit, reducing it from 6.1% to 5% of GDP next year.

Debt Securities: German and French bond yields rose in response to the expectation of interest rate cuts and inflation stabilisation. The ECB is set to lower borrowing costs, responding to weakening economic indicators and the Fed’s shift towards easing.

Inflation: Eurozone inflation fell to 1.8%, reinforcing expectations for an interest rate cut, while France's inflation remains a challenge amid public spending cuts.

Japan

Economic Growth: Prime Minister Shigeru Ishiba pledged to maintain accommodative policies to fight deflation and support growth. The Bank of Japan indicated caution in raising rates, as uncertainties around the global economy persist.

Debt Securities: The yen weakened as Japan's government remained hesitant about further rate hikes. Japanese stocks rallied, with exporters, particularly in the tech and auto sectors, benefiting from the weaker yen.

Inflation and Recession: Japan’s economic policies remain focused on defeating deflation, while inflation remains low.

China

Economic Growth: China’s CSI 300 Index rose 8.5%, driven by optimism over Beijing’s stimulus measures to support the economy. Factory activity continued to contract in September, and policymakers are preparing further stimulus measures to counteract economic challenges.

Inflation and Recession: China’s economy faces headwinds across multiple sectors, with sluggish factory output and weak consumer demand requiring additional policy interventions to prevent a further slowdown.

Switzerland

Debt Securities: The Swiss National Bank stated it stands ready to intervene in currency markets if necessary and is prepared to lower interest rates again. Wage growth stabilised at 1.9% year-on-year, aligning with the SNB’s inflation target.

FX, Bonds and Commodities Markets Overview

Stocks: The S&P 500 rose 0.9%, Nasdaq 100 gained 1.2%, and small-cap companies led the rally, reflecting confidence in domestic growth.

Currencies: The US dollar posted its best week in two years, while the Japanese yen fell by 1.2% to 148.73 per dollar.

Bonds: Treasury yields surged, with the 10-year US Treasury yield up 12 basis points to 3.97%.

Commodities: Oil rose 1% to $74.44 per barrel due to geopolitical tensions, while gold dropped 0.2% to $2,650.87 per ounce.

Overall, the period from 1 to 4 October highlighted the continued resilience of the US economy, cautious optimism in European markets, and growing concerns over geopolitical risks and inflationary pressures globally.