Crude oil over 70$ per barrel, China attempts economic stimulus
Markets in the ME push Oil above $70 after tensions, U.S. manufacturing contracts, HK stocks surge on China’s stimulus efforts.
Middle East Tensions and Oil Markets
The final quarter of 2024 began with heightened geopolitical tensions in the Middle East. Israel and Iran engaged in direct conflict, which briefly rattled energy markets, pushing crude oil prices above $70 per barrel, though this remains about 20% lower year-on-year. Oil markets are also closely monitoring an upcoming OPEC+ meeting. The group is expected to maintain its policy of gradually raising output by 180,000 barrels per day starting in December. Saudi Arabia warned that oil prices could fall to $50 per barrel if OPEC+ members fail to adhere to production targets.
Early Wednesday, U.S. crude prices climbed by $1.51 to $71.34 per barrel, while Brent crude increased by $1.45 to $75.01. This rise follows Iran’s missile attack on Israel, which raised concerns about supply disruptions. Despite the geopolitical tension, energy prices have not yet spiraled out of control.
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U.S. Economic Data and Trends
In the United States, industrial data showed a significant decline in manufacturing, with JPMorgan’s global factory index revealing the deepest contraction of 2024, nearing levels last seen during the aftermath of the COVID-19 pandemic. Despite this downturn, there were positive signs, including a rise in new orders and a nine-month low in factory input prices. U.S. job openings also increased unexpectedly in August, reinforcing the narrative of a “soft landing” for the economy.
U.S. Labor and Stock Markets
A labor strike among East Coast port workers could disrupt supply chains and potentially skew monthly economic data and inflation readings. This strike may also impact European automakers, which are already struggling due to declining industrial activity.
The U.S. stock market has remained relatively steady despite these pressures. The S&P 500 fell by less than 1% from record highs on Tuesday, and the VIX volatility gauge briefly spiked above 20, indicating slight market unease. U.S. Treasuries saw a brief “flight to safety” after the Middle East tensions, with 10-year yields dropping below 3.70%, but yields have since stabilized at around 3.75%.
European Economic Conditions
In Europe, inflation has dropped below target, and industrial activity continues to contract, particularly in the troubled auto sector. Economists are adjusting their European Central Bank (ECB) forecasts, with most analysts predicting no further rate cuts in the near term. The euro has weakened against the dollar due to speculation about continued ECB easing.
On the stock market, European benchmarks like the DAX and FTSE 100 saw modest gains, up 0.1% and 0.4% respectively. Germany’s DAX stood at 19,232.74, while the CAC 40 in Paris rose by 0.5% to 7,611.12.
Asian Markets
In Asia, markets were mixed. Japan’s Nikkei 225 fell by 2.2% to 37,808.76, reflecting concerns about rising energy costs and economic uncertainties under the new leadership of Shigeru Ishiba. Meanwhile, Hong Kong’s Hang Seng Index surged 6.2% to 22,443.73, driven by investor optimism over China’s recent economic stimulus efforts, particularly in the property sector. Major Chinese developers like Longfor Holdings Group and China Vanke saw their stocks jump by 25% and 10%, respectively.
Global Currencies, Commodities, and Cryptocurrencies
In the currency markets, the U.S. dollar remained stable, trading at 144.03 yen and 1.1066 euros. Cryptocurrencies saw slight movements, with Bitcoin rising 0.4% to $61,048.82, while Ether remained stable at $2,453.46.
Gold prices were flat at $2,648.76 per ounce, while West Texas Intermediate crude rose by 3.1% to $71.97 a barrel, driven by concerns over Middle East tensions.
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