General Market Analysis – 30/09/24

Markets Rally into the Weekend – Dow Hits New Record, Up 0.3%

US markets ended another strong week on Friday, with the Dow achieving a fresh record close, rising 0.33% on the day. In contrast, the S&P and Nasdaq posted declines, losing 0.13% and 0.39%, respectively, though both indices enjoyed positive performance over the week. US PCE Price Index data came in slightly below expectations, prompting a fall in both treasury yields and the dollar. The 2-year yield dropped by 6 basis points to 3.563%, while the 10-year shed 3.8 basis points to close at 3.751%. The dollar index fell 0.17% to 100.43. Meanwhile, oil prices rose on Friday amid increasing geopolitical risks in the Middle East, with Brent crude climbing 0.53% to $71.89 and WTI jumping 0.75% to $68.18. Gold, on the other hand, retreated from recent record highs, falling 0.42% on the day but still closing out a historic week at $2,657.97.

US Employment Numbers in Focus This Week

This week promises to be pivotal for financial markets, with a major focus on the latest updates regarding the US jobs market. The Non-Farm Payrolls report on Friday will likely be the key event, but there are three other crucial updates earlier in the week that could significantly influence the Federal Reserve’s interest rate cut plans and their broader impact on the markets. JOLTS Job Openings, ADP Non-Farm Employment, and the weekly Unemployment Claims all hold potential to move markets. It is now widely acknowledged that the Fed’s focus has shifted towards employment data, away from inflation figures. Continued weakening in the labour market could bolster the case for a 50 basis point rate cut in November, while stronger-than-expected figures might lead to heightened volatility, with a retreat in rate cut expectations and a potential rebound for the dollar.

Busy Start to the Trading Week

It looks set to be an active start to the trading week today, with a range of risk events on the calendar and escalating geopolitical tensions likely to generate market-moving headlines. In the Asian session, attention will initially focus on China, where the release of key Manufacturing PMI data is expected to print at 49.4. During the European session, traders will turn their attention to Germany’s CPI data, released incrementally across the session by individual states, which should keep euro traders alert. Though the New York session is light on economic data, with only the Chicago PMI figures scheduled, it could still see significant moves as major central bank figures, including ECB President Christine Lagarde and Federal Reserve Chair Jerome Powell, are due to speak.

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