Markets Last Week - 25/10/2024

The STOXX Europe 600 and major European indexes fell as markets expected slower Fed rate cuts. Economic activity in the eurozone continued to contract, as shown by the October PMI, while European Central Bank (ECB) officials debated easing, with some proposing a cautious rate-cut pace amid inflation concerns. 

In the UK, preliminary data from S&P Global showed the composite PMI dropped to an 11-month low of 51.7 in October, down from 52.6 in September, indicating a slowdown in new order growth. Additionally, a survey by market research firm GfK revealed that consumer confidence in October fell to its lowest point this year, hinting at consumer concerns over potential tax hikes. 

Japan's stock markets fell over the week, with the Nikkei 225 down 2.74% and TOPIX dropping 2.63%, as uncertainty around the October 27 general election weighed on investors. Caution over the election weakened the yen to JPY 151 against the USD, driven further by a rallying dollar as investors anticipated a less aggressive rate-cutting stance from the Federal Reserve. 

 
The Tokyo-area core CPI rose 1.8% year-over-year in October, slightly exceeding expectations but down from September's 2.0%, following restored utility subsidies. Bank of Japan Governor Kazuo Ueda emphasied a balanced approach, proceeding cautiously amid inflationary uncertainty while discouraging expectations for prolonged low rates to avoid speculative risks. 

Chinese equities saw gains as the central bank rolled out additional stimulus to support economic growth. The Shanghai Composite Index rose 1.17%, and the CSI 300 increased 0.79%, though Hong Kong’s Hang Seng Index slipped 1.03%. 

The People’s Bank of China (PBOC) injected RMB 700 billion into the banking system through its medium-term lending facility (MTLF) at an unchanged 2% rate, resulting in a net withdrawal of RMB 89 billion for October. Chinese banks also cut their one- and five-year loan prime rates by 25 basis points to 3.1% and 3.6%, respectively, aligning with a broader stimulus plan unveiled in late September. The PBOC hinted at further easing measures, potentially lowering the reserve requirement ratio if liquidity conditions warrant it. 

Youth unemployment in China showed some improvement, with the rate for 16- to 24-year-olds (excluding students) dropping from 18.8% in August to 17.6% in September. 

Chile: The central bank cut rates to 5.25% as inflation fell to 4.0%. 

Turkey: Turkey continues economic rebalancing efforts, with strong FX reserves and a narrower current account deficit. However, the slow disinflation remains a concern amid upcoming wage negotiations.