Brazilian Stocks End at Near 1-Year Low
Brazil’s Ibovespa trimmed early losses to close 1.3% down at 106,296 on Friday, its lowest since November 20th 2020, after the economy minister dismissed rumors he would resign even having lost four key members of his team over disagreements about the government's spending plans. Still, pessimism about the country's macroeconomic scenario persisted as investors remain worried about the fiscal unfoldings of both the new income transfer program (Auxilio Brasil) and the new Diesel Aid proposed by the government which will lead to changes in the spending cap rule, weighing on the country's credibility. The key index ended the week more than 7% lower, the biggest decline since the week ending February 22.
Dow Jones Closes at Record High
The Dow Jones closed 0.2% higher, reaching a new high on strong earnings reports after Amex shares rose more than 6% with the company reporting better-than-expected earnings and revenues. Meanwhile, S&P was slightly down to end at 4,545 and the Nasdaq fell 0.9% dragged down by Intel and Snap. Snap sank around 26% after the social-media company said it expects growth to slow following new guidelines of Apple’s IOS privacy that will impact company advertisements. Intel also plunged around 12% after the company reported weaker-than-expected sales as computer shipments were impacted by components shortage. Still, S&P (+1.6%), Nasdaq (+1.3%), and Dow Jones (+1.1%) closed the week with gains.
Canada Stocks End at New High
The S&P/TSX Composite advanced for the 13th straight day to close at a fresh record level of 21,216 on Friday, its longest winning streak in almost four decades, as solid gains in commodity-linked companies and financials offset weakness in technology and healthcare stocks. At the same time, investors continued to monitor quarterly corporate results, while also digesting comments on stimulus tapering from Federal Reserve Chair Jerome Powell. For the week, the benchmark index rose 1.4%, extending gains for a third straight week.
Crude Oil Almost Touches $84
WTI crude reversed early losses to trade at almost $84 a barrel on Friday, new 7-year high and headed for a 0.5% rise for the week, as concerns over the supply in the US outweighed the easing of energy crises. US crude inventories remain at historically low levels and OPEC+ has been struggling to add crude back to the market. At the same time, coal and gas prices eased, curbing oil-switching in generators.
Crude Oil Hits 7-year High
Crude Oil increased to a 7-year high of 83.98 USD/Bbl
US Posts 2nd Largest Budget Gap on Record in FY 2021
In the 2021 fiscal year, the US budget deficit reached $2.772 trillion, the second-highest on record, compared with the $3.132 trillion reported in 2020. Receipts jumped 18.3% to $4.046 trillion, amid higher individual and business income taxes from a recovering economy; while outlays rose 4.1% to $6.818 trillion due to continued spending to counteract the devastating effects of the global pandemic. The deficits in both years were only surpassed by a shortfall of $1.4 trillion in 2009 during the Obama administration, amid higher spending to lift the country out of a severe recession following the 2008 financial crisis. In September only, the budget deficit hit USD 62 billion, the fiscal year's final month, compared with a USD 125 billion shortfall a year ago and market expectations of a USD 60 billion gap. That was the smallest budget gap since January of 2020, as receipts grew 23.1% to $460 billion while outlays increased only 4.7% to $521 billion.
South African Stocks End at Near 2-Month High
The FTSE/JSE All Share index extended gains to close 1.5% up at 67,051 on Friday, its highest since August 31th, led by commodity-linked companies on higher gold and platinum prices and retailers. At the same time, investors digested another strong batch of US earnings, while concerns over Chinese property market eased somewhat. Meanwhile, the International Monetary Fund (IMF) said it expects South Africa’s economy to grow by 5% in 2021, reflecting a better-than-expected growth in the year’s first half, but warned that this growth could slow significantly in 2022 due to ongoing local issues. For the week, the JSE was almost flat.
Copper Hits 9-week Low
Copper decreased to a 9-week low of 4.02 USD/Lbs
French Stocks End at 1-1/2-Month High
The CAC 40 closed 0.7% up at 6,734, the highest in over 6 weeks, in line with its European peers, with investors cheering positive third quarter corporate results and Evergrande’s remittance of its debt. L’Oreal rose 5.1% after confirming a strong Q3 performance, particularly in Asia, while Vivendi advanced 1.2% backed on surpassing growth expectations, driven by Canal Plus sales. At the same time, Sanofi rose 1.4% following phase 3 success of its new drug, Dupixent. Furthermore, Renault unexpectedly rebounded from early losses this session following the announcement that the car manufacturer would cut output by 500,000 cars this year to maintain the firm’s profit outlook due to higher car prices and cost cuts.
Gold Caps Gains as Dollar Pares Losses
Gold trimmed early gains to trade around $1,790 an ounce level, as the US dollar cut losses after Jerome Powell announced that the Federal Reserve is ready to begin tapering. Even though the FED’s chairman said that it is premature to raise rates, the speech came with the acknowledgment that inflation is well above the target, and in case of inflation expectations persistently rise they are ready to use the necessary tools. Still, the metal is set to rise 1.0% on the week, the second consecutive with gains.
Milan Stocks End Week Higher
The FTSE MIB rose 0.2% to close at 26,572 on Friday, in line with its European peers, and near a 10-week high as investors welcomed Evergrande’s last-minute bond interest payment and better-than-expected earnings reports. Among single stocks, A2A (+2.4%) and CNH Industrial (+2.1%) were in the spotlight boosted by the overall good performance of automotive and industrial sectors in Europe. The key stock index rose 0.3% in the week, the third consecutive with gains.
London Stocks End Slightly Higher
The FTSE 100 closed 0.2% up at 7,205 on Friday, recovering from a slight decline on Thursday, as concerns over China's property sector cooled following the surprise interest payment by Evergrande and as investors digest a batch of corporate results and economic data. InterContinental reported a sharp jump in third-quarter room revenue after a busy summer, with the company recovering closer to pre-pandemic levels. Meanwhile, poor data showed British consumers at their most downbeat since February, due to rising energy prices and Covid-19 cases, while the country's retail trade unexpectedly declined for a fifth month. The FTSE 100 ended 0.4% lower on the week.
US Treasury Yields Decline from 5-Month High
The yield on the key US 10-year Treasury note tumbled to 1.64% on Friday, from a 5-month high of near 1.7% after Fed Chair Powell warned during a virtual conference that supply constraints and elevated inflation are likely to last longer than previously expected and well into next year. Powell indicated the Federal Reserve is ready to begin tapering but it is premature to raise rates. On the data front, recent PMI figures showed the service sector growth accelerated to the strongest since July while manufacturing output increased the least in 15 months.
South African Rand at 1-Week Low
The South African rand was trading around 14.8 against the US dollar, its lowest since October 14th, amid general dollar strength and further evidence that the US Federal Reserve will begin tapering soon. In the meantime, recent data showed South Africa's economic recovery from the pandemic has been uneven across sectors, partly due to deadly riots, arson and looting that erupted in July and derailed economic activity in the two biggest provinces. Meanwhile, South African consumer inflation quickened slightly to 5% in September from 4.9% in August, but is still comfortably inside the South African Reserve Bank’s 3% to 6% target rate. The implied policy rate path of the central bank’s quarterly projection model, which the MPC uses as a guide, indicates a 25-basis point increase in the final quarter of 2021 and in every quarter of 2022 and 2023.
European Shares End Week on Bright Note
European stock markets ended the week on a bright note, with the German DAX finishing 0.5% higher and the pan-European Stoxx 600 adding 0.6%, as investors across the globe welcomed a surprise interest payment by China’s debt-ridden property developer Evergrande, while eyeing another round of corporate earnings results. L’Oreal jumped 5.1% as Q3 sales growth largely beat market estimates, while Renault added 0.6% as the carmaker maintained its full-year operating margin guidance despite higher estimated losses in the second semester and after posting a 13.4% drop in Q3 revenues to €9 billion. On the data front, UK consumer morale deteriorated to its weakest level since February, while the country's retail trade unexpectedly declined for a fifth month. Meanwhile, the Eurozone flash composite PMI declined to a 6-month low of 54.3, reflecting the impact of soaring prices in Europe’s private sector.
US Dollar Trims Early Losses after Powell Speech
The US dollar index trimmed early losses and hovered around 93.7 on Friday, as traders digested remarks from Federal Reserve Chair Jerome Powell indicating the central bank is ready to begin tapering. Powell warned that the central bank’s cautious approach wasn’t designed for the current framework, adding that upside risks on the supply chain, inflation, and wages are likely to last longer than previously anticipated and well into 2022. Still, the greenback is close to its lowest in nearly four weeks and is on track to finish the week 0.3% lower.
Fed on Track for Taper
The Fed is on track to begin tapering although it would be premature to raise rates, Fed Chair Powell said during a Panel Discussion at the Virtual Bank for International Settlements-South African Reserve Bank Centenary Conference. Powell also mentioned that supply bottlenecks are still weighing and have gotten worse in some cases recently. At the same time, high inflation and pressure on wages will likely last into next year but will abate. Still, the Chair added, "if we see serious risk on inflation expectations persistently rising we will use our tools".
US Stocks Pull Back on Powell Comments
Wall Street reversed gains to trade lower on Friday, after both the Dow Jones and the S&P reached record levels as Fed Powell acknowledged inflation is well above the target and reiterated it is time to begin taper but it is premature to raise rates. Still, investors remained upbeat on earnings reports as 84% of the companies that have so far reported results for Q3 surprising on the upside, according to Refinitiv. Earnings from Honeywell beat forecasts but the company cut its 2021 guidance while American Express topped estimates on both earnings and revenues. At the same time, Snap sank around 20% after the social-media company said it expects growth to slow following new guidelines of Apple's IOS privacy that will impact company advertisements. Intel also plunged around 12% after the company reported weaker-than-expected sales as computer shipments were impacted by components shortage.
S&P/TSX Hit Fresh Record on Friday
The S&P/TSX Composite rose more than 0.2% to hit a fresh record of 21,265 on Friday. Materials gained 2% backed by higher gold and silver prices and in line with its international peers. The energy sector rose 1.3% on the back of higher oil prices, even though Canadian energy producers have recently voiced concerns over Prime Minister Trudeau’s recent demands of cutting carbon emissions by 2025. At the same time, healthcare fell 1.2% and technology stocks dropped 1.4%, due to multiple software firms’ losses following Intel’s weaker-than-expected Q3 sales. The index is on track to finish its third straight week of gains.
Baltic Exchange Dry Index Posts Biggest Fall in 9 Months
The Baltic Exchange Dry Index fell 5.2% to 4,410 on Friday, its lowest since September 21th and the steepest decline since late January, amid weakness in the capesize vessel segment. The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, plunged 10.3% to 6,205, the biggest decline since January 27th; and the supramax index fell 40 points to 3,584, snapping a winning streak of 13 sessions. Meanwhile, the panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, went up 0.5% to 4,327, its highest in over 11 years. The Baltic Dry Index recorded a weekly loss of 9.1%, the biggest since the week ending May 24th.
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