U.S. and Global Markets Wavered Ahead of Rate Decisions, Crude Oil Prices Drop to 3-Year Lows

Alexander Garcia
10 Sep, 2024
Miami

Stocks struggled to rise for the second day in a row after Wall Street indexes rebounded on Monday from their worst week this year. 

The S&P 500 index and the Nasdaq Composite lacked direction in sluggish trading as investors awaited key inflation data later in the week. 

Both indexes gained more than 1% in Monday's trading as investors searched for bargains in beaten-down tech and semiconductor stocks.  

Oracle surged as much as 6% after the database company reported better-than-expected fiscal first-quarter results. 

Investors are on edge after Friday's payroll report showed that the U.S. economy added less-than-expected 142,000 jobs in August. 

The smaller increase in the payroll additions drove market indexes sharply lower in Friday's trading and extended weekly losses to between 4% and 6% amid worries of an economic slowdown. 

Moreover, investors are hoping that the Federal Reserve will provide an additional boost to the economy and lower its key lending rates by at least 25 basis points at the end of its two-day meeting on September 18. 

Despite the recent cooling of inflation, consumer prices are still rising faster than the Fed's target rate of 2%, and the recent decline in inflation is entirely driven by the weakness in energy and gasoline prices. 

The Federal Reserve is in a difficult spot; if rates are lowered too soon, that could stoke inflationary pressures in the months ahead, and if policymakers wait too long, then the economy may dip into a recession. 

 

Crude Oil Prices Drop to 2021-Lows

Oil exploration stocks were in focus as Tropical Storm Francine is expected to strengthen into a hurricane in the western Gulf of Mexico later today. 

Hurricane Francine is expected to make landfall in Louisiana on Wednesday, and sustained maximum wind with more than 70 mph speed packed with rain is expected to disrupt life and energy production activities in the larger area of the Gulf Coast. 

Despite the worries of potential supply disruption, crude oil prices plunged 3% to below $66 a barrel, a low not seen since November 2021, after OPEC cut its demand forecast for the second time in two months. 

The cartel lowered its 2024 global oil demand growth estimate by 80,000 barrels per day to 2 million barrels per day. 

The organization also trimmed its 2025 demand growth estimate by 40,000 barrels per day to 1.7 million bpd. 

The latest revision is largely driven by the lower demand in China as the country shifts to renewable energy, and electric vehicle sales continue to grow in the second-largest economy in the world. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.01% to 5,470.83, the Nasdaq Composite rose 0.2% to 16,910.03, and the Russell 2000 index fell 0.4% to 2,089.16. 

The yield on 2-year Treasury notes edged lower to 3.66%, 10-year Treasury notes inched down to 3.71%, and 30-year Treasury bonds inched lower to 4.01%.

WTI crude oil decreased $3.22 to $65.50 a barrel, and natural gas prices edged up 3 cents to $2.20 a thermal unit.

Gold rose by $10.16 to $2,516.71 an ounce, and silver increased by $0.06 to $28.33.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 101.64.

 

U.S. Stock Movers

Oracle Corp. jumped 10.4% to $154.90, and database developer and cloud infrastructure company reported better than expected quarter results. 

Revenue in the quarter ending in August increased 7% to $13.3 billion, net income rose to $2.9 billion from $2.4 billion, and diluted earnings per share advanced to $1.03 from 86 cents a year ago. 

Cloud services revenues were up 21% from a year ago to and up 22% in constant currency to $5.6 billion. 

Cloud license and on-premise license revenues were up 7% and up 8% in constant currency to $870 million. 

“As Cloud Services became Oracle’s largest business, both our operating income and earnings per share growth accelerated,” said Oracle CEO, Safra Catz.

Hewlett-Packard Enterprise fell 7.7% to $16.22, and the company plans to sell $1.35 billion of Series C mandatory convertible preferred stock. 

Apple declined 1.6% to $216.89, and investors reviewed the latest new products released by the mobile computing device maker. 

On Monday, Apple released the iPhone 16 and iPhone 16 Plus, and both devices are packed with artificial intelligence features, a larger screen, and enhanced battery life. 

The latest iPhone models are priced between $800 and $1,200. 

Separately, the European Court of Justice ruled that Apple owes Є13 billion in back taxes, in a dispute that has been running since at least 2007. 

The latest court ruling forces the company to pay for taxes on profits generated from the licensing or sale of intellectual properties. 

 

German Inflation Softened In August, UK Jobless Rate Eased to 4.1% 

European markets lacked direction and attempted to rebound for the second session in a row after falling in the previous five sessions. 

Benchmark indexes in Paris, London, and Frankfurt traded in a tight range around the flatline as investors reviewed the latest update on inflation in Germany and the labor market in the U.K. 

German inflation softened to 1.9% in August from 2.3% in July, according to final data released by the Federal Statistical Office, or Destatis, on Tuesday. 

The final estimate matched the preliminary estimate released by the statistical agency, confirming the weakening price trend largely driven by falling energy prices. 

The British pound strengthened against the U.S. dollar and the euro after wage growth and jobless rate updates matched market expectations. 

The unemployment rate dropped to 4.1% in the three-month period to July from 4.2% in the previous three-month period ending in June, the Office for National Statistics reported Tuesday. 

In addition, regular pay, which excludes bonuses, increased at a slower pace of 5.1% from 5.4% in the previous three-month period ending in June. 

Spain's industrial output fell by 0.4% from a year ago in July following a downwardly revised 0.2% increase in the previous month, the National Statistics Institute reported Tuesday. 

A decline in capital goods overshadowed the increase in intermediate goods, energy, and consumer goods. 

Industrial output fell for the first time after inching slightly higher in the previous two consecutive months and struggling since August 2023. 

 

Europe Indexes and Yields

The DAX index decreased by 0.9% to 18,280.83; the CAC-40 index fell by 0.2% to 7,408.95; and the FTSE 100 index declined by 0.8% to 8,205.98. 

The yield on 10-year German bonds edged lower to 2.17%, French bonds inched lower to 2.89%, the UK gilts edged down to 3.87%, and Italian bonds increased to 3.54%.

The euro edged down to $1.10; the British pound inched higher to $1.30; and the U.S. dollar weakened to 84.76 Swiss cents.

Brent crude decreased $3.09 to $68.82 a barrel, and the Dutch TTF natural gas rose by €1.97 to €35.27 per MWh. 

 

Europe Stock Movers

Centamin PLC soared 23.9% to 148.10 pence after AngloAshanti offered to acquire the gold miner for $2.5 billion, or 44.6 billion rands. 

AstraZeneca declined 3.9% to 12,214.0 pence after its lung cancer showed mixed results in a late-stage trial. 

Gamma Communications PLC increased 9.5% to 1,644.52 pence after communication company reported acquisitions supported the increase in revenue and earnings in the first half. 

Capgemini SE advanced 6.5% to €192.25 after Oracle reported better-than-expected revenue and earnings in its latest quarter. 

Amplifon dropped 4.8% to €26.64 after Apple announced its latest AirPods will have integrated hearing aids. 

 

 

Muted Gains In Tokyo Stocks Ahead of Interim Dividends Payments 

Stocks in Tokyo advanced and recouped some of the losses in the previous session, and investors kept a close eye on the currency movement. 

Investors seeking interim dividend payments added exposure to companies announcing dividends, but overall market sentiment remained cautious. 

The Nikkei 225 stock average and the Topix index advanced 0.4%, and the yen edged slightly lower to 143.51 against the U.S. dollar. 

The Nikkei 225 plunged more than 6% in the previous week, tracking losses on Wall Street following the growing worries of an U.S. economic slowdown. 

However, market indexes rebounded this week after investors searched for bargains amid beaten-down tech and semiconductor stocks.

Investors also reviewed the latest update on China's international trade data for August, and exports rose more-than-expected to 8.7% to $308.7 billion and imports rose 0.5% to $217.6 billion. 

China's rising exports to the U.S., European Union, and ASEAN region are putting additional pressure on Japan's export competitiveness. 

Market sentiment has been cautious in Tokyo as the latest household spending, retail sales, and inflation data supported the case for the Bank of Japan to hike interest rates. 

 

Japan Stock Movers 

The Nikkei 225 stock average increased 0.4% to 36,347.80, and the Topix index gained 0.4% to 2,589.94. 

Tokyo Electron jumped 3.9% to ¥22,340.0, Advantest Corp. gained 1.9% to ¥5,924.0, and Screen Holdings added 3.7% to ¥9,920.0. 

Sumitomo Mitsui Financial Group added 1% to ¥9,069.0, Mitsubishi UFJ Financial Group advanced 0.5% to ¥1,450.0, and Mizuho Financial Group increased 0.04% to ¥2,839.50. 

Seven & I Holdings declined 0.1% to ¥2,183.50, Isetan Mitsukoshi gained 0.3% to ¥2,176.0, Aeon Co Ltd. added 1.5% to ¥3,917.0, and Fast Retailing fell 0.7% to ¥43,610.0. 

Toyota Motor added 0.1% to ¥2,503.0, Honda Motor inched lower 1.4% to ¥1,488.0, and Nissan Motor fell 1.2% to ¥403.30. 

Daiichi Sankyo Co. Ltd. plunged 8.5% to ¥5,275.0, and the company's lung cancer drug candidate failed to show significant improvement in some disease conditions. 

 

China Exports Growth Failed to Lift Shanghai Indexes, Hong Kong Stocks Advanced 

Market indexes in Shanghai and Hong Kong diverged as investors reacted to the latest update on international traded data. 

The Hang Seng index gained 0.3%, but the mainland-focused CSI 300 index declined 0.5%, and domestic economic worries overshadowed strong export performance. 

China's exports in August jumped 8.7% to $308.7 billion; imports advanced 0.5% to $217.6 billion, resulting in a trade surplus of $91.0 billion, an increase from $84.6 billion in July. 

China's exports to the U.S., European Union, and Association of Southeast Nations continued to advance, reflecting its strong competitiveness and lack of alternatives. 

Exports to the EU rose 13%, to the ASEAN region advanced 7.8%, and to the U.S. gained by 4.9%. 

Exports to the U.S. advanced for the third month in a row, amid rising demand for electronics, industrial intermediary products, and higher prices driven by inflation. 

Despite rising geopolitical tensions, China's exports have continued to advance in nine of the last ten months, driven in part by a surge in exports of automobiles, consumer electronics, and ship vessels. 

Passenger vehicle exports soared 40% to 610,000, smart phone exports advanced 6.7%, and ship vessel shipments jumped 40% from a year ago. 

The increase in passenger vehicle exports was driven in large part by the surge in exports to Russia and increased shipments of electric vehicles to the ASEAN region. 

In the year to August, China's exports rose 4.6% to $2.31 trillion, imports increased by 2.5% to $1.71 trillion, and trade surplus jumped 11.2% to $608.5 billion. 

Crude oil volume fell 7% in August, highlighting weak domestic demand and partly reflecting China's shift to renewable energy sources. 

 

China Stock Movers 

The Hang Seng index increased 0.3% to 17,244.67 and the CSI 300 index fell 0.5% to 3,176.33. 

Alibaba Group jumped 4.6% to $81.90 after the company's stock was available for trading by mainland investors on the Stock Connect platform. 

Meanwhile, other leading tech stocks lacked direction amid weak demand from investors. 

Tencent Holdings edged down 0.7% to HK $368.60, JD.com added 1.1% to HK $102.40, Meituan increased 0.6% to HK $119.40, and Baidu advanced 1.8% to HK $80.50. 

Wuxi Biologics declined 3.2% to HK $10.98 and Wuxi Apptech fell 7.8% to HK $33.15 after the U.S. House of Representatives placed additional restrictions on the companies citing national security concerns.