This week was marked by significant volatility in global stock markets, with significant economic developments in the United States after a surprisingly strong jobs report and the impact of a major port strike. Global markets remained volatile due to geopolitical tensions in the Middle East and uncertainty surrounding the upcoming US presidential election. Chinese assets surged despite mainland markets closing for Golden Week, as investors leveraged Hong Kong to gain exposure following recent stimulus announcements.
US Labour Market Shows Resilience
The US labour market showed unexpected strength in September, defying fears of an economic slowdown. This robust job growth marks a notable increase from previous months, with August and July job figures revised upward. The hiring surge across various sectors underscores the resilience of the US economy despite ongoing challenges. Meanwhile, the ongoing port strike, which threatened to cause significant disruptions to the supply chain, ended after three days when a deal was agreed upon to raise wages by 62% over six years. Overall, the US economy continues to show resilience, with GDP growing at a 3% annual rate in Q2 2024, as the central bank balances its inflation-fighting efforts with maintaining a strong labour market.
Europe Grapples with Economic Headwinds
European markets struggled this week due to mounting geopolitical tensions. However, euro area unemployment figures showed resilience, as the seasonally adjusted unemployment rate remained steady at 6.4% in August 2024, unchanged from July and down from 6.6% a year earlier. This figure matches the record low for the eurozone, suggesting continued strength despite economic headwinds. Inflation data provided a positive surprise, with eurozone inflation falling to 1.8% in September, dipping below the European Central Bank's 2% target for the first time in over three years. The core inflation rate, which excludes volatile items like energy and food, eased to 2.7% from 2.8% in August, fueling speculation about potential further rate cuts by the ECB.
Asian Markets Navigate Currency Volatility
Despite mainland Chinese markets being closed for the Golden Week holiday, Chinese assets traded in Hong Kong saw significant gains. The Hang Seng Index surged 11% over the week, reflecting optimism about recent stimulus measures. In Japan, the yen weakened against the dollar as diverging monetary policies between Japan and the US continued to pressure the currency.
Commodities Surge on Geopolitical Concerns
In the commodities sector, oil prices rallied over 8%, marking the biggest weekly gain since January 2023, propelled by geopolitical tensions. Adding to the bullish sentiment, OPEC reaffirmed its commitment to maintaining oil production cuts through to the end of the year. Gold prices benefited from the heightened geopolitical tensions over the week, with investors moving to safe-haven assets. However, stronger-than-expected US jobs data caused prices to slip at the end of the week due to a further large Federal Reserve rate cut next month becoming less likely.
Looking Ahead
As we move into the final quarter of 2024, financial markets face a complex landscape of challenges and opportunities. Ongoing geopolitical tensions, particularly in the Middle East, continue to inject uncertainty into global markets, influencing commodity prices and investor sentiment. The upcoming US presidential election, now just over a month away, will likely become an increasingly important factor in market dynamics. Investors will closely watch candidates' polls and policy announcements for potential impacts on key sectors. As always, investors must stay informed about global economic and political developments in this period of heightened uncertainty and potential volatility.