Financial Breakfast on October 18: US data shows economic recovery, strengthening expectations of a 25 basis point rate cut, and the Israeli army claims to have killed Hamas leader

Friday (October 18) Financial Breakfast, including important fundamental news, precious metals/crude oil/foreign exchange/commodities/stock market/bond market, international news, domestic news, institutional views, today's important financial data and financial events. The US retail sales and initial unemployment claims data are solid, reinforcing the expectation of a 25 basis point interest rate cut, and the US dollar index rose slightly after receiving support. The US EIA crude oil inventory unexpectedly decreased last week, and oil prices stopped falling for four consecutive days. The Israeli army said it had killed Hamas leader Sinwar, and the ceasefire seemed to have dawned again.

Overview of major global market trends

1. Precious metals

Due to the tense geopolitical situation in the Middle East, the uncertainty of the US election, and the prospect of interest rate cuts by the Federal Reserve and most central banks around the world, spot gold rose slightly on Thursday, setting a new record high of $2,696.63, and finally closed up 0.68% at $2,691.83/ounce. Spot silver finally closed up 0.05% at $31.67/ounce.

Kelvin Wong, senior market analyst for Asia Pacific at OANDA, said: "Amid uncertainty in the US election, investors are seeking safe-haven gold as a hedge. Trump's presidency could increase trade tensions and widen the budget deficit, so it should support gold."

From the daily chart, gold is trying to break through the resistance level of $2,700 an ounce, said Joseph Chai, an analyst at RHB Retail Research, in a research report. Chai said that the latest bullish candle shows that gold prices are trying to break through this resistance level.

2. Crude oil

The domestic crude oil production in the United States hit a record high in the week to October 11, the strategic petroleum reserve inventory was the highest since the week of December 2, 2022, and the decline in refined oil inventories was the largest since the week of March 1, 2024. EIA crude oil inventories in the United States fell by 2.191 million barrels in the week to October 11, and the previous value increased by 5.81 million barrels.

International oil prices narrowed their losses on Thursday. WTI crude oil eventually closed down 0.69% at $70.13 per barrel; Brent crude oil closed down 0.05% at $74.41 per barrel.

3. Foreign exchange

The increase in U.S. retail sales in September was slightly higher than expected, supporting the view that the economy maintained strong growth in the third quarter. The monthly rate of U.S. retail sales in September was 0.4%, while the unrevised increase in August was 0.1%. As of the week of October 12, the number of initial jobless claims in the United States fell by 19,000 to 241,000, lower than the median forecast of 259,000 in the survey of economists.

Signs of economic recovery may not prevent the Federal Reserve from cutting interest rates again next month, but will strengthen expectations of only a 25 basis point cut. The U.S. dollar index finally closed up 0.24% at 103.77 on Thursday.

The European Central Bank (ECB) cut interest rates for the third time on Thursday, cutting the deposit rate by 25 basis points to 3.25% in response to slowing economic growth, a softening labor market and easing consumer price pressures. After the announcement of the resolution, the euro quickly fell back against the dollar after rising more than 10 points in the short term, and finally closed down 0.29% at 1.0830.

Data on Thursday showed that Australia's September employment data was stronger than market expectations. The Australian dollar rose more than 20 points against the US dollar in the short term, and finally closed up 0.45% at 0.6695.

On Thursday, the US dollar closed up 0.39% against the Japanese yen at 150.20, breaking through the key psychological level of 150, making the risk of intervention by the Japanese authorities the focus of market attention again. New Prime Minister Shigeru Ishiba hinted earlier this month that Japan was not ready to raise interest rates, but he later said he was seeking to unify his pace with the Bank of Japan. The economic report released by the United States showed that the economy was resilient, prompting the market to lower its expectations for the Fed's interest rate cuts, which also put pressure on the yen.

On Thursday, the US dollar closed up 0.32% against the Canadian dollar at 1.3794. 19 of the 29 economists surveyed expect the Bank of Canada to cut interest rates by 50 basis points to 3.75% on October 23, and another 10 economists predict a 25 basis point cut. 10 of the 29 economists expect the Bank of Canada to cut interest rates to 3.50% by the end of 2024, 9 expect 3.75%, 9 expect 3.25%, and 1 expects 4.00%.

4. Commodities

LME copper continued to fall on Thursday, closing down 0.96% at $9,499/ton; LME aluminum closed down 1.22% at $2,556/ton; LME zinc closed down 0.44% at $3,048.50/ton.

5. Stock Market

On Thursday, the Shanghai Composite Index closed at 3169.38 points, down 1.05%; the CSI 300 Index closed at 3788.22 points, down 1.13%; the Shenzhen Component Index closed at 9894.02 points, down 0.71%; the ChiNext Index closed at 2033.45 points, down 0.32%; the copper cable high-speed connection concept was active, and Huawei computing power concept, semiconductors, aviation and other sectors ranked first in growth.

On Thursday, most of the major European stock indices closed higher, with the German DAX30 index closing up 0.77%; the British FTSE 100 index closed up 0.79%; and the Euro Stoxx 50 index closed up 0.67%.

6. Bond Market

On Thursday, the benchmark 10-year U.S. Treasury yield closed at 4.0850%; the two-year U.S. Treasury yield, which is more sensitive to monetary policy, closed at 3.9890%.

International News

① The Israeli army said it had killed Hamas leader Sinwar and will continue to search for other Hamas military commanders

② Japan's exports fell 1.7% year-on-year in September, the first decline in 10 months

③ Thailand's Ministry of Finance: The central bank should consider global trends when deciding interest rates next time

④ French President Macron called on Israel to end its military operations in Lebanon

⑤ US Secretary of Defense: The death of Hamas leader Sinwar "provides an extraordinary opportunity for a lasting ceasefire"

⑥ Israeli Prime Minister Netanyahu: Sinwar's death is the beginning of the end of the Gaza War

Domestic News

① Preliminary prediction of Japan's general election: The Liberal Democratic Party may lose more than Several seats

② The China Automobile Association released data, in September, automobile exports were 539,000 units, a month-on-month increase of 5.4% and a year-on-year increase of 21.4%

③ Several major banks lowered deposit interest rates again from Friday, and a major bank lowered the listed interest rate of fixed deposits by 25 basis points

④ Shanghai's real estate market issued a new policy, and the housing provident fund personal housing loan policy will be adjusted from October 18

⑤ The sampling survey on China's population and family development has entered the organization and implementation stage, and will comprehensively analyze the reasons for not wanting to have children or not daring to have children

Institutional viewpoint summary

① Bank of America: Gold also has the risk of giving up recent gains, and the price is expected to be supported around US$2,000 per ounce in the end

② Daniel Hynes, senior commodity strategist at ANZ, said that heightened tensions in the Middle East and increased geopolitical risks also drove safe-haven buying

③ ING: The prospect of Trump's victory may help boost the dollar

④ Barclays: The volatility risk of the US election has been reflected in the options market

⑤ JPMorgan Chase: Financial markets are beginning to price in the possibility of Trump winning the 2024 US election

⑥ Citigroup: Profit-taking on the strategy of shorting US Treasuries/longing UK gilts proposed two weeks ago. Indeed, US gilts have more room to fall relative to UK gilts