Market Commentary

Week In Review

4 November | Indonesia GDP

Indonesia's economy grew by 4.95% year-on-year in Q3 2024, slightly below the 5.0% market expectation and down from 5.05% in Q2. This marks the slowest GDP growth since Q3 2023, presenting challenges for President Prabowo Subianto, who aims for 8% growth by 2029. 

Private consumption growth remained stable at 4.91%, nearly unchanged from 4.93% in Q2. However, while exports grew by 9.09% (up from 8.18% in Q2), they lagged behind the 11.47% rise in imports (up from 7.79% in Q2). On the positive side, government spending accelerated to 4.62% from 1.42%, and fixed investment increased by 5.15%, up from 4.43%.

Sector-wise, output growth slowed in transport (8.64% vs. 9.56%), communication (6.86% vs. 7.66%), wholesale and retail trade (4.82% vs. 4.86%), financial services (5.49% vs. 7.90%), and healthcare (7.64% vs. 8.56%). 

The economy is forecast to grow 5.2% in 2024, after expanding by 5.05% in 2023. Year-to-date, Indonesia's GDP has grown by 5.03%.

5 November | Canada Trade

Canada recorded a trade deficit of CAD 1.26 billion in September 2024, slightly narrowing from the CAD 1.5 billion gap in August, but wider than the expected CAD 0.8 billion deficit. This marked the seventh consecutive month of trade deficits. 

Imports fell by 0.4% from the previous month, driven by lower prices for essential goods, keeping import volumes relatively unchanged. Significant declines were seen in purchases of metal and non-metallic mineral products (-12.7% to CAD 5.3 billion), metal ores (-14.3% to CAD 1.3 billion), and electronic equipment (-5.6% to CAD 7 billion).

Exports edged down by 0.1% to CAD 63.9 billion, as energy products (-2.6% to CAD 14.2 billion) and metal and non-metallic mineral products (-5.4% to CAD 7.8 billion) saw declines. However, this was partially offset by increases in forestry products (+5.3% to CAD 4 billion) and aircraft and transportation equipment (+10.3% to CAD 2.8 billion).

5 November | U.S. Trade & Election

The U.S. trade deficit widened to $84.4 billion in September 2024, the highest level since April 2022, slightly above the expected $84.1 billion and up from a revised $70.8 billion shortfall in August. Exports fell by 1.2% to $267.9 billion, after reaching a record high in August. Notable declines were seen in pharmaceutical preparations, civilian aircraft, crude oil, and maintenance services, while increases were recorded for government goods and services and transport.

Imports rose by 3% to a new record of $352.3 billion, driven by higher demand for pharmaceutical preparations, computers, passenger cars, semiconductors, nonmonetary gold, finished metal shapes and transport. In contrast, imports decreased for charges related to intellectual property and travel.

*TRUMP WINS*

5-6 November | ECB President Remarks

The European Central Bank (ECB) has indicated growing consideration of rate cuts as reflected in the minutes of its November meeting. While inflation is expected to moderate primarily due to falling energy prices ECB officials remain cautious about persistent domestic inflationary pressures, particularly strong wage growth and weak labor productivity. Despite a more optimistic inflation outlook the ECB emphasized the need for more data before making any policy adjustments. Policymakers underscored that decisions on rate cuts will depend on the evolving economic situation and further signs of inflationary pressures easing, signaling a cautious, data-driven approach.

6 November | US Interest Rates

Federal Reserve Chairman Jerome Powell said Thursday at a Dallas Regional Chamber event that strong U.S. economic growth gives policymakers the flexibility to take a careful approach in deciding interest rate cuts. He emphasized that the economy is not signaling a need for immediate rate reductions, pointing to robust domestic growth as the strongest among major economies. Powell also highlighted the resilience of the labor market despite weaker job growth in October and noted that inflation is steadily moving toward the Fed’s 2% target. While recent inflation data showed slight upticks in consumer and producer prices, Powell reaffirmed the Fed's commitment to reaching its 2% goal acknowledging that the path may be uneven.

6 November | China Trade

China's trade surplus surged to USD 95.27 billion in October 2024, up from USD 56.13 billion in the same month a year earlier, exceeding expectations of USD 75.1 billion. This marks the largest surplus since June, driven by a strong 12.7% year-on-year increase in exports, the fastest pace since July 2022, as manufacturers front-loaded orders ahead of potential new tariffs from the US and EU. In contrast, imports fell by 2.3%, reversing the 0.3% rise in September, due to weak domestic demand.

The trade surplus with the US widened slightly to USD 33.50 billion in October from USD 33.33 billion in September. Over the first ten months of 2024, China's trade surplus reached USD 785.3 billion, with exports growing 5.1% to USD 2.93 trillion and imports rising 1.7% to USD 2.14 trillion. During this period, the trade surplus with the US stood at USD 291.38 billion.

7 November | Germany Industrial Production

German industrial production fell by 2.5% month-on-month in September 2024, exceeding the expected 1% decline and reversing the 2.9% growth in August. The drop was primarily driven by weak performance across most manufacturing sectors, especially the automotive industry, which saw a sharp 7.8% contraction. Production in energy-intensive industries also fell by 3.3%, largely due to a downturn in the chemical sector. 

On a less volatile three-month-on-three-month basis, industrial output was 2.2% lower from July to September compared to the previous three months. Year-on-year, industrial production dropped 4.6%, deepening from a 3% decline in August.

7 November | BOE Policy

DecisionThe Bank of England reduced its Bank Rate by 25 basis points to 4.75% in its November 2024 meeting, in line with expectations. This marks the second rate cut in four years, following the start of its easing cycle in August. Eight of the nine Monetary Policy Committee (MPC) members voted for the cut, surpassing the expected seven votes, while Catherine Mann voted to hold rates. The decision reflects slowing price growth, with UK inflation dropping to a three-year low of 1.7% in September.

8 November | China Inflation Rate

China's annual inflation rate was 0.3% in October 2024, slightly below the market estimate and a decrease from 0.4% in September. This marks the ninth consecutive month of positive inflation, but also the lowest rate since June, highlighting growing deflation risks despite Beijing's stimulus efforts in late September to support the slowing economy.

*ECB Christine Lagarde spoke 5-6 of November*

Week Ahead

12 November | India Industrial Production

13 November | India Trade

13 November | U.S. Inflation

13 November | Eurozone Industrial Production & GDP

14 November | U.S. PPI

14 November | Japan Industrial Production & GDP

14 November | China Industrial Production 

14 November | Indonesia Trade

14 November | UK GDP

15 November | US Industrial Production 

17 November | Singapore Trade 

17 November | G20 Summit 

Thought(s) of the week

Equities 

There is a possibility that global stock markets could experience mixed performance during the week with U.S. indices including the S&P 500 and Nasdaq possibly facing increased volatility, but ultimately trending sideways as investors balance ongoing concerns over inflation with the potential for higher interest rates from the Federal Reserve. If inflation continues to remain sticky risk appetite could be dampened especially if economic data comes in weaker than expected.

Bonds

U.S. Treasury yields might stabilize after several weeks of upward movement. The 10-year Treasury yield could hover near 4.5%, reflecting investor expectations that the Federal Reserve could maintain a hawkish stance on interest rates, but with signs that economic growth may slow. Global bond markets, including those in Europe and Asia, could follow a similar pattern, with yields stabilizing but still showing caution over inflationary pressures.

Commodities

Oil prices are likely to remain elevated, potentially trading near $90 per barrel for West Texas Intermediate (WTI). This could be driven by supply concerns from major oil producers, as well as ongoing geopolitical tensions in the Middle East. Gold may continue to hold its ground as a safe-haven asset, as investors seek protection against economic uncertainty and potential market volatility.

Currency Markets

The U.S. dollar might continue to appreciate against other major currencies, driven by the Federal Reserve's hawkish monetary policy. The Euro and British Pound could come under pressure, while emerging market currencies—particularly in Asia and Latin America—may face mixed results depending on the strength of the dollar and local economic conditions. Currency markets may be particularly sensitive to any surprises in U.S. economic data or geopolitical developments.

Outlook

The outlook for financial markets in the week of November 11, 2024, appears cautious, as investors weigh the risks of persistent inflation, continued tight monetary policy from the Federal Reserve, and ongoing geopolitical tensions. While economic data may show signs of resilience, particularly in consumer spending, inflation could remain a key challenge, keeping the Fed on a path of tighter rates. Geopolitical uncertainties, especially in the Middle East, could also add volatility to markets, particularly in energy prices. As such, market participants are likely to remain focused on key data points and central bank signals, with the potential for further risk-off sentiment in the near term. If growth remains stable, certain sectors may offer opportunities, but overall, a cautious and selective approach may dominate the market environment.