Please see below, today’s Daily Investment Bulletin Brooks Macdonald providing a brief analysis of the key factors currently affecting global investment markets:
What has happened
Equities struggled to make headway on Wednesday – in the end, the US S&P500 equity index was effectively flat, up just +0.01%, while the pan-European STOXX600 equity index finished up just +0.05% (both in local currency price return terms). There was a little more direction in currency markets meanwhile, with the US dollar up as markets dialled down US interest rate cut hopes a little on the back of stronger US private jobs data – the US dollar currency index (DXY), which is an index of the US dollar against a selection of major developed currencies globally, yesterday rose to its highest level in around 3 weeks. The better US private jobs data also pushed US 10-year government bond yields higher, with bond prices lower.
Middle East
Middle East news continues to dominate newspaper headlines even if the broader market impact is proving to be relatively measured for now. While Israel’s prime minister Benjamin Netanyahu has warned that Iran “will pay” for its latest missile attack on Israel, the US is putting pressure on all sides to avoid further escalation. The oil price (for Brent crude oil) is still hovering around US$75 per barrel – it is off recent lows, but for context it is still towards the lower end of its past 2-year range.
US private jobs data pushes back on fears of labour weakness
US private payrolls data from the ADP Research Institute (ADP) for September showed job gains above forecast on Wednesday. The gain of 143,000 jobs in September was above expectations for a gain of 125,000 jobs. For context, ADP is based on payroll data covering private-sector employees only, whereas the broader US non-farm payrolls data, which is due this week on Friday and is published by the US Bureau of Labour Statistics, captures both private and public sector employees.
What does Brooks Macdonald think
The stronger ADP US private jobs data yesterday has dampened hopes a touch for more super-sized interest rate cuts from the US Federal Reserve (Fed), with 2 more Fed meetings scheduled for the rest of this year. Following the data yesterday, as of this morning, derivative markets (US Fed Funds Futures) are currently pricing in 34.4 basis points (bps) worth of easing when the Fed next announces on interest rates in early November, implying a 37.6% chance for a 50 bps cut. Cumulatively, markets are currently seen to be pricing in 69.2 bps of interest rate cuts across the 2 Fed meetings taken together, before the end of 2024.
Please continue to check our blog content for the latest advice and planning issues from leading investment firms.
Andrew Lloyd
3rd October 2024