September 30 Financial Breakfast: Expectations of a Fed rate cut rise, several senior Hezbollah officials in Lebanon die in Israeli airstrikes

(September 30) 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 PCE data for August continued to cool down, and expectations for a sharp interest rate cut rose again. The US Treasury yield maintained its upward trend. The US dollar index fell nearly 17 points in the short term, and spot gold rose by $4 in the short term. Several senior members of Hezbollah in Lebanon died in Israeli air strikes, and the situation in the Middle East remained tense. The probability of the European Central Bank cutting interest rates by 25 basis points in October rose to 25%, and the euro was under pressure.

Overview of major global market trends

1. Precious metals

Spot gold fell back from its highs last Friday, closing down 0.5% at $2,658.76/ounce, achieving three consecutive positive weekly lines. Spot silver closed down 1.15% at $31.62/ounce.

Joseph Chai, an analyst at RHB Retail Research, said in a report that from the daily chart, gold will continue its upward trend. He said that in a bullish market, resistance levels are usually weak, and there is a greater possibility of an upward breakthrough. Gold may rise above the resistance level of $2,700/ounce.

2. Crude oil

The leader of Hezbollah in Lebanon, Nasrallah, was attacked and killed, and the situation in the Middle East remains tense. However, under the prospect of increased oil supply from Saudi Arabia and Libya, both US and Brent crude oil still recorded a decline last week. Last Friday, WTI crude oil finally closed up 1.71% at $68.45/barrel; Brent crude oil closed up 1.58% at $71.96/barrel.

3. Foreign exchange

The U.S. core PCE price index recorded a monthly rate of 0.1% in August, the lowest since May, and the market expected 0.2%. After the data was released, interest rate futures traders believed that the possibility of a 50 basis point rate cut by the Federal Reserve in November was slightly higher than the possibility of a 25 basis point rate cut. According to CME's "Fed Watch": The probability of the Fed cutting 25 basis points by November is 47.2%, and the probability of cutting 50 basis points is 52.8%. The probability of a cumulative rate cut of 50 basis points by December is 21.6%, the probability of a cumulative rate cut of 75 basis points is 49.8%, and the probability of a cumulative rate cut of 100 basis points is 28.6%.

After the release of the PCE data, the US dollar index broke through the previous low of 100.15, refreshing the lowest level since July 20, 2023, and then rebounded, and finally closed down 0.111% at 100.45.

Last Friday, the US dollar closed down 1.76% against the yen at 142.26. Shigeru Ishiba won the election of the leader of Japan's ruling party and will become Japan's next prime minister. This person is considered to be quite hawkish in monetary policy, and the yen soared across the board. The US dollar against the yen plummeted 270 points to 143.49 in 2 minutes, and the yen cross also fell by a similar amount. Shigeru Ishiba said that fiscal stimulus measures will be implemented if necessary. The trend of loose monetary policy will not change.

Some analysts said that Shigeru Ishiba's victory temporarily eased the market's concerns about the Bank of Japan's tightening policy, but as the Federal Reserve approaches the potential interest rate hike node, the future trend of the yen is still full of uncertainty.

The pound continued to fluctuate at a high level against the US dollar last Friday, closing down 0.32% at 1.3371. Due to the continued resilience of the British economy and the reassessment of the outlook for the US dollar, Goldman Sachs' foreign exchange analysts raised their forecasts for the pound, raising their year-end forecast for the pound against the US dollar from 1.27 to 1.34.

The euro closed down 0.16% against the US dollar at 1.1158 last Friday. With the decline in inflation data in eurozone countries such as France and Spain, the euro-dollar exchange rate has continued to be under pressure recently, and the expectation that the European Central Bank may take further easing measures has reduced the attractiveness of the euro.

Traders raised the probability of the European Central Bank cutting interest rates by 25 basis points in October to 80%. BNP Paribas expects the ECB to cut interest rates by 25 basis points at its meeting on October 17.

4. Commodities

Last Friday, London aluminum, nickel and tin rose by more than 1%, London copper fell by nearly 1% but rose by more than 5% for the week, and London zinc rose by 7.5% in a week.

5. Stock Market

China's Shanghai Composite Index closed up 86.58 points, or 2.88%, at 3087.53 points on September 27 (last Friday); China's Shenzhen Component Index closed up 598.22 points, or 6.71%, at 9514.86 points on September 27 (last Friday); China's CSI 300 Index closed up 158.36 points, or 4.47%, at 3703.68 points on September 27 (last Friday); China's ChiNext Index closed up 171.34 points, or 10%, at 1885.49 points on September 27 (last Friday); China's Science and Technology Innovation 50 Index closed up 46.87 points, or 6.76%, at 740.02 points on September 27 (last Friday).

Germany's DAX30 index closed up 269.05 points, or 1.40%, at 19489.25 points on September 27 (last Friday); Britain's FTSE 100 index closed up 36.37 points, or 0.44%, at 8321.28 points on September 27 (last Friday); France's CAC40 index closed up 49.70 points, or 0.64%, at 7791.79 points on September 27 (last Friday); Europe's STOXX 50 index closed up 35.96 points, or 0.71%, at 5068.55 points on September 27 (last Friday); Spain's IBEX35 index closed up 24.33 points, or 0.20%, at 11977.53 points on September 27 (last Friday); Italy's FTSE MIB index closed up 317.66 points, or 0.92%, at 34,727.00 points on September 27 (last Friday).

The Dow Jones Index closed up 137.89 points, or 0.33%, at 42,313.00 points on September 27 (last Friday); The S&P 500 closed down 7.20 points, or 0.13%, at 5,738.17 points on September 27 (last Friday); The Nasdaq Composite Index closed down 70.70 points, or 0.39%, at 18,119.59 points on September 27 (last Friday). The software service sector rose sharply, and the securities, liquor, photovoltaic concept and other sectors also rose to the top.

6. Bond market

Last Friday, U.S. bond yields fell across the board, with the benchmark 10-year U.S. bond yield closing at 3.754%; the two-year U.S. bond yield, which is more sensitive to monetary policy, closed at 3.567%.

International News

① Shigeru Ishiba won the election for the leader of Japan's ruling party and will become Japan's next prime minister; as Japan's prime minister-in-waiting, Ishiba plans to hold a general election on October 27

② Hezbollah in Lebanon launched a new round of rocket attacks on Israel after announcing the death of its leader

③ Nearly 100,000 people will go on strike in the United States, with widespread impact, and the Biden administration is unlikely to intervene before the U.S. election

④ U.S. President Biden announced that many states have entered a state of emergency due to Hurricane Helene

⑤ Moody's downgraded Israel's credit rating May be further reduced

⑥ Indonesia and Malaysia renew local currency swap agreement

⑦ The 13th meeting of the China-Vietnam Economic and Trade Cooperation Committee was held in Beijing

Domestic News

① Wang Hongzhi, State-owned Assets Supervision and Administration Commission of the State Council: Improve the system and mechanism to promote the development of key industrial chains such as integrated circuits, industrial mother machines, and industrial software

② The quality evaluation method of securities investment banking business has been revised, and a special evaluation indicator of "new stock valuation pricing ability" has been added

③ The central bank: Increase financial support for large-scale equipment renewal and consumer goods trade-in

④ The Xinjiang section of the West-East Gas Pipeline IV was completed and put into operation, with an annual gas transmission capacity of 15 billion cubic meters

⑤ The construction of the Chengdu Green Renewable Resources Smart Industrial Park Project (Phase I) started, marking the full start of the Chengdu-Chongqing first food-grade recycled PET production base

⑥ Chinese researchers have developed a new solar "salt lake lithium extraction" technology

⑦ The National Development and Reform Commission organized a plenary meeting of the inter-ministerial joint meeting to promote large-scale equipment renewal and consumer goods trade-in

Summary of institutional views

① Analysts: Shigeru Ishiba's election as the leader of the Japanese Liberal Democratic Party may drag down the Japanese stock market in the short term

② Capital Economics: The forecast of the first interest rate cut by the Reserve Bank of Australia will be brought forward from May next year to February

③ Huajin Securities: When the rise of A-shares is still in its early stages, it is likely to continue in the short term

④ CITIC Securities: The valuation repair trend of the Hong Kong stock market since early August this year is expected to continue until early November

⑤ Nomura Securities: South Korea's macro-prudential measures have suppressed housing prices and provided support for the October interest rate cut

⑥ Changjiang Securities: Banks, real estate, construction and non-bank sectors may be more likely to benefit from the valuation improvement plan of companies with broken net assets

⑦ Capital Economics: The possibility of another interest rate cut by the European Central Bank when it meets next month is increasing