World Markets Fluctuate Near Record Highs, Private Sector Activities Growth Diverge In U.S. and Europe

Alexander Garcia
23 Sep, 2024
Miami

Stock market indexes traded in a tight range as investors digested the latest update on private sector activities. 

Benchmark indexes rose sharply in the previous week after the Federal Reserve announced a bod rate cut. 

Financial markets cheered the jumbo-sized 50 basis points rate cut after some initial hesitation, as investors hoped that the central bank was more likely to engineer a so-called "soft landing," a gradual economic slowdown without dipping the economy into a recession. 

The rate cut was also seen as the Fed’s acknowledgement that labor market conditions are moderate and inflation is falling at a faster-than-expected pace.

However, the large rate cut may fan inflationary forces in the months ahead, prolonging higher inflation next year.

But for now, investors around the world cheered the Fed’s aggressive move and awaited additional rate cuts later in the year. 

On Monday, the release of the manufacturing and service sector activities survey kicked-off a busy week of economic releases.

The S&P Global Flash U.S. Composite PMI declined to 54.4 in September from 54.6 in August. 

On Monday, the manufacturing and service sector activities survey kicked off a busy week of economic releases.

The S&P Global Flash U.S. Composite PMI declined to 54.4 in September from 54.6 in August. 

The private sector activity growth remained strong, suggesting a robust economic expansion in the third quarter. 

Growth in the service sector remained strong, but it edged lower to 55.4 in September from 55.7 in August, but the contraction in manufacturing deepened to 47 from 47.9 in the previous month. 

Prices for goods and services rose at the fastest pace since March; input costs advanced the most in a year. 

Investors are looking forward to the release of the PCE price index, an alternative measure of inflation, amid expectations of a monthly increase of 0.2%.

Second quarter GDP growth revision, durable goods orders, and new and pending home sales data are also set to be released this week. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,718.05, the Nasdaq Composite rose 0.3% to 18,004.65, and the Russell 2000 index fell 0.4% to 2,219.22. 

The yield on 2-year Treasury notes edged lower to 3.58%, 10-year Treasury notes inched up to 3.75%, and 30-year Treasury bonds inched higher to 4.10%.

WTI crude oil increased $0.11 to $71.11 a barrel, and natural gas prices edged up 6 cents to $2.50 a thermal unit.

Gold rose by $3.48 to $2,625.13 an ounce, and silver decreased by $0.41 to $30.75.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 100.94.

 

U.S. Stock Movers

Ciena Corp. jumped 4.2% to $61.31 after the networking software and system developer for optical connectivity was upgraded to "buy" from "sell," citing improving conditions in the telecom industry. 

Intel Corp. increased 2.4% to $22.43 on a report that Apollo Global Management offered the chipmaker to make an equity-like investment of as much as $5 billion. 

The news was first reported by Bloomberg News on Sunday. 

Intel has fallen more than 60% from a high of $68.26 reached in early April 2021, as the advanced chipmaker struggled to make a transition to smaller and more powerful chips suitable for artificial intelligence applications amid rising competitions. 

 

Eurozone Business Activities Contracted for the Fourth Month, Stocks and Euro Edged Lower 

European markets traded down in cautious trading as investors reacted to the latest political developments in the region and weak business activity data. 

Benchmark indexes in Paris, London, and Frankfurt were down between 0.2% and 0.5% after the business activity index declined for the fourth consecutive month in September. 

The HCOB Flash Eurozone Composite PMI decreased to 48.9 in September from 51.0 in August and fell to the lowest level since January, according to the data released by S&P Global. 

The service sector growth slowed to 50.5 from 52.9, and the manufacturing downturn extended to the 18th month in a row to 44.5 from 45.8 in the previous month, respectively. 

The composite PMI fell at the fastest pace in 15 months after the Olympic games had temporarily boosted activities in France. 

The euro dropped to $1.11 after the report, amid concerns that the European Central Bank may need to accelerate easing of its monetary policy and provide additional support. 

The British pound jumped to a two-and-a-half years high of $1.33 as the UK's Labour Party kicked off its annual conference on Monday. 

In political news, France's prime minister, Michel Barnier, said his government is open to increasing taxes for big businesses and the wealthiest citizens to tackle its large and widening budget deficit.

The Social Democratic Party, led by Olaf Scholz, narrowly defeated far-right party Alternative for Germany in an election in the east German state of Brandenburg. 

 

Europe Indexes and Yields

The DAX index increased by 0.6% to 18,828.59; the CAC-40 index rose by 0.1% to 7,508.08; and the FTSE 100 index advanced by 0.4% to 8,259.71. 

The yield on 10-year German bonds edged lower to 2.15%, French bonds inched higher to 2.93%, the UK gilts edged up to 3.91%, and Italian bonds decreased to 3.52%.

The euro edged lower to $1.11; the British pound inched higher to $1.33; and the U.S. dollar weakened to 84.94 Swiss cents.

Brent crude decreased $1.08 to $73.44 a barrel, and the Dutch TTF natural gas rose by €1.50 to €36.11 per MWh. 

 

Europe Stock Movers

Rightmove Plc increased 1.2% to 682.60 pence after Australia's REA Group increased its offer for the UK-based property portal.

Commerzbank added 0.2% to €15.71, and the German government agency said in a statement that it has no plans to sell its remaining 12% stake in the bank. 

Scout24 SE increased 2.3% to €77.30, and Germany's largest online property platform operator announced its plans to commence its stock buyback program worth €150 million. 

The company plans to launch its stock buyback plan in the next few weeks and end in 2026.

UBS Group AG was nearly unchanged at CHF 25.46 on reports that the Swiss regulator is investigating the collapse of Credit Suisse ahead of its merger with the bank. 

Siemens AG increased 0.4% to €167.26, and the company said it plans to separate its eMobility business. 

 

China Lowered Short Term Rate, Hong Kong Indexes Hovered at 3-Month High 

Stocks in Hong Kong and Shanghai advanced in Monday's trading following an unexpected rate cut by the People's Bank of China. 

The Hang Seng increased 0.6%, and the mainland-focused CSI 300 index gained 0.7% in active trading. 

The People's Bank of China unexpectedly lowered its 14-day reverse repurchase rate by 10 basis points to 1.85% from 1.95%. It also injected liquidity of 74.5 billion yuan into the financial system, according to a statement released by the central bank. 

Last week, the central bank held steady 1-year and 5-year loan prime rates, despite the U.S. Federal Reserve Bank lowering its target rate range by 50 basis points to between 4.75% and 5.0%.

The latest move is likely to spur more lending to businesses and residential property developers, amid weak consumer confidence and domestic demand. 

The central bank's move comes ahead of a 7-day National Day Holiday period starting October 1. 

In other economic news, China's jobless rate among those between the ages of 16 and 24, excluding students, increased to 18.8% in August from 17.1% in July, the National Bureau of Statistics reported Monday. 

The jobless rate increased to the highest since December, when the statistical agency revised its methodology after halting the release of data for four months. 

The revised methodology vastly understates the jobless count among young applicants, according to most private economists. 

Last week, the Hang Seng index advanced 5.1%, the most in five months, following the receding worries of the global economic slowdown.

However, financial market indexes in mainland China continued to struggle near five-year lows as corporate earnings growth outlook remained clouded.

Indexes in India traded at new record highs and gained 0.2%, and in Australia they edged down 0.5% but hovered near recent record highs. 

In Friday's trading, benchmark indexes in New York and Europe closed mixed but extended weekly advance after the U.S. Federal Reserve lowered its target rate range and signaled possible rate declines in the year. 

Japan's financial markets are closed on Monday for a holiday. 

 

China Stock Movers 

The Hang Seng index increased 0.6% to 18,359.38, and the CSI 300 index added 0.7% to 3,223.15. 

Tech stocks led the gainers in Hong Kong following the rise in the sector in Friday's trading in New York. 

Alibaba Group gained 0.5% to HK $87.70, JD.com gained 2% to $114.80, and Tencent Holdings declined 0.5% to HK $387.0. 

Bank of China increased 1.1% to HK $3.54.0, China Minsheng Banking advanced 1.9% to HK $2.86, China Construction Construction Bank added 1.4% to HK $5.66, and Industrial and Commercial Bank of China added 1.6% to HK $4.46. 

Property developers were in focus for the second day in a row after the People's Bank of China unexpectedly lowered short-term rates. 

China Vanke gained 2.2% to HK $4.55, China Resources Land decreased 0.3% to HK $21.20, Longfor Group added 0.1% to HK $8.78, Henderson Land decreased 0.3% to HK $25.40, and Sun Hung Kai Properties added 0.7% to HK $81.95. 

Xiaomi Corp. gained 3.9% to HK $20.65 after its chief executive confirmed the company's plans to launch its popular and expensive flip phone into the global market this month. 

Kweichow Moutai increased 0.3% to ¥1,267.38 in Shanghai trading, and the liquor maker said it plans to repurchase up to 6 billion yuan of its own stock. 

Kweichow Moutai stock is trading at a four-year low amid an economic slowdown and falling wholesale prices.