China continued to stimulate the economy. SNB cut the rate by 0.25% and plans further cuts

On Thursday, the Dow Jones Index (US30) gained 0.62%, and the S&P 500 Index (US500) rose by 0.40% and reached a new all-time high. The NASDAQ Technology Index (US100) closed positive 0.60%. Rising shares of chip companies drove the overall market higher. Micron Technology, the largest US maker of computer memory chips, closed higher by more than 14% after reporting unexpectedly strong sales and earnings forecasts, helped by demand for artificial intelligence equipment. The stock held its ground amid strong economic reports.

The US weekly initial jobless claims unexpectedly fell by 4,000 to a 4-month low of 218,000, indicating a stronger labor market than expectations of a rise to 223,000. 2Q US GDP was unchanged at 3.0% (QoQ annualized), stronger than expectations of a downward revision to 2.9%. US new capital goods orders for August rose by 0.1% m/m, matching expectations. Home Sales for August rose by +0.6% mom, weaker than expectations of 1.0% m/m. Markets rate the probability of a 25 bps rate cut at the November 6-7 FOMC meeting as 100%, while the probability of a 50 bps rate cut at this meeting is 51%.

The Mexican peso (USD/MXN) weakened to 19.65 per dollar, retreating from a four-week high of 19.12 hit on September 17, as investors digested the Bank of Mexico’s rate cut decision. The central bank lowered the benchmark rate by 25 bps to 10.50%, citing improving inflationary trends. Core inflation fell to 4.66% in mid-September 2024, and core inflation fell to 3.95%, the lowest since February 2021.

Equity markets in Europe traded flat on Wednesday. Germany’s DAX (DE40) rose by 1.69%, France’s CAC 40 (FR40) closed 2.33% higher, Spain’s IBEX 35 (ES35) gained 1.36%, and the UK’s FTSE 100 (UK100) closed yesterday up 0.20%. European equity markets opened higher on Friday, extending the previous session’s rally as China continued implementing measures to support economic growth, boosting global sentiment. 

The GfK German Consumer Confidence Index for October unexpectedly rose by 0.7 to 21.2, stronger than expectations of a decline to 22.5. Swaps discount the odds of a 25 bps ECB rate cut at the October 17 meeting by 61% and a 25 bps rate cut at the December 12 meeting by 100%.

The Swiss National Bank (SNB) cut its key rate by 25 bps to 1% in September 2024, the third consecutive cut and bringing borrowing costs to their lowest level since early 2023, in line with market expectations. Policymakers added that they remain willing to be active in the FX market as needed, and further interest rate cuts may be necessary in the coming quarters to ensure price stability in the medium term.

Silver (XAG/USD) hit $32.5 per ounce, the highest in 12 years, following the performance of other assets amid expectations of an upcoming rate cut by the Federal Reserve. Silver received support from new announcements of aggressive fiscal and monetary stimulus measures to support the world’s second-largest economy. Rising prices coincided with increased industrial metals prices, boosting the outlook for silver-intensive manufacturing processes, including electrification technologies and solar panels.

WTI crude oil prices fell toward $67 a barrel on Friday, declining for the third consecutive session as prospects of oversupply put pressure on the market. Reports emerged on Thursday that Saudi Arabia, the world’s biggest exporter, is ready to abandon its unofficial $100 a barrel price target and increase production in December, even if it leads to a sustained price decline. This would follow an expected increase in supply from OPEC+, with the production hike starting in December after a two-month delay.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) is up 2.79%, China’s FTSE China A50 (CHA50) increased by 4.41%, Hong Kong’s Hang Seng (HK50) jumped by 4.16%, and Australia’s ASX 200 (AU200) was positive 0.95%. Chinese indices rose for the third consecutive day. China continued implementing policy announcements made earlier this week to support economic growth. The People’s Bank of China (PBoC) cut the 7-day reverse repo rate by 20 bps to 1.5%, the second cut in three months. The central bank also cut banks’ reserve requirement ratio by 50 bps, the second cut this year, which is expected to free up 1 trillion yuan of capital. Markets now expect Beijing to signal more support for fiscal policy, which investors say is necessary for a more sustainable economic recovery.