Global News Summary: 14–18 October 2024
United States
Economic Growth and Jobs: Strong US consumer spending and labour data on 18 October led traders to reduce their expectations for further Federal Reserve interest rate cuts, strengthening the dollar. The US economy remains robust, with Federal Reserve Governor Christopher Waller highlighting the "sweet spot" for the economy. While some Fed policymakers foresee gradual rate cuts, the dollar reached a two-month high on 16 October due to reduced expectations for aggressive monetary easing.
Corporate Earnings and Stock Performance: The S&P 500 reached an all-time high on 19 October, marking its longest weekly advance in 2024. Tech giants, known as the "Magnificent Seven," are projected to report an 18% rise in third-quarter profits, compared to a modest 1.8% increase for the broader S&P 500 companies. Netflix surged by 11% after strong earnings, and Apple saw a 1.2% rise on the back of strong iPhone sales. However, American Express dropped 3.2% after lowering its revenue forecast.
Commodities and Bonds: Gold rose above $2,700 per ounce, while the 10-year Treasury yield settled at 4.08%. Oil experienced its largest weekly decline in over a year due to falling demand from China and geopolitical tensions in the Middle East.
United Kingdom
Fiscal Policy and Inflation: Chancellor Rachel Reeves identified a £40 billion funding gap ahead of the Budget, with plans to increase capital gains tax on share sales, rather than on second homes. The UK’s inflation rate dropped to a three-year low of 1.7% in September, down from 2.2% in August, prompting a fall in the pound and increasing expectations for further Bank of England rate cuts. UK graduates faced unprecedented competition in the labour market, exacerbated by the growing use of AI in recruitment processes.
Debt Securities: The UK government introduced "guardrails" to reassure bond investors as Reeves prepared a multibillion-pound borrowing programme to fund capital spending.
Eurozone
Monetary Policy and Inflation: The European Central Bank (ECB) cut interest rates to 3.25% on 18 October, as inflationary pressures eased. ECB President Christine Lagarde expressed confidence that inflation is "well on track" to reach the 2% target, with further rate cuts expected in December. However, concerns over sluggish economic growth persist.
Energy Policy: France called for stricter identification of companies shipping Russian gas into EU ports, as the bloc sought to reduce dependency on Russian fossil fuels.
New Zealand
Monetary Policy and Trade: New Zealand’s inflation rate fell from 3.3% to 2.2% in the third quarter, raising expectations for more aggressive monetary easing by the Reserve Bank. The New Zealand dollar fell to its lowest level since August on 16 October. On 18 October, New Zealand escalated a trade dispute with Canada over dairy exports, invoking compulsory negotiations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Japan
Currency and Inflation: Japan’s currency weakened beyond 150 yen per dollar, raising concerns about potential volatility. Consumer prices, excluding fresh food, rose by 2.4% in September, down from 2.8% in August, partly due to government utility subsidies. Exports declined by 1.7% year-on-year, while imports increased by 2.1%, narrowing the trade deficit to ¥294.3 billion ($2 billion).
AI
Industry Developments: The UK government is consulting on a scheme that would allow AI companies to scrape content from publishers and artists unless they opt out, sparking concerns within the creative industry. Saudi Arabia's premier academic institution halted AI collaborations with China over concerns about access to US-made chips. Taiwan Semiconductor Manufacturing Company (TSMC) raised its growth outlook on 18 October, driven by the AI boom and recovery across multiple sectors.
ESG
Energy and Environmental Policy: On 17 October, UK and EU energy companies called for a major overhaul of post-Brexit energy trading arrangements to establish a "green energy hub" in the North Sea. This initiative aims to align energy policies with climate goals and strengthen cooperation between the two regions.
Summary
From 14 to 18 October, global markets saw strong performances driven by positive economic data, particularly in the US. The UK faced fiscal challenges ahead of its Budget, while the Eurozone moved towards rate cuts as inflation eased. New Zealand dealt with trade and monetary policy issues, and Japan experienced currency weakness amid economic uncertainty. The AI sector continued to drive global growth, with Taiwan’s TSMC raising its outlook due to the ongoing AI boom. Meanwhile, energy and environmental policies played a crucial role in UK and EU energy strategies.