Global Macro Weekly




By Chinedu Okoye 



The Federal Reserve, Bank of England and Bank of Japan all made monetary policy decisions on interest rates in the week ended September 20, 2024.  The Federal Reserve cut interest rates by 50 basis points, the Bank of Japan, and the Bank of England held held rates steady the BoE at 5%.

This has had the expected effect on the markets, with commodity prices on our watchlist up, treasuries down and the US Dollar index back at the 100 level.



Commodities:

Gold climbed 1.71% week-on-week to $2,622.27 as the Federal Reserve delivered 50 basis point cut in Feds Funds Rates.


(% Change in Gold and Crude Prices)

The rally also spread to Crude oil as both BRENT and WTI are within our key technical levels. BRENT is up +3.65% week-on-week settling at $73.69/per barrel as WTI sits at $70.33.

As the chart shows, the rally for Crude Oil futures only extends as far as the past trading week. The subsequent periods - monthly and annual price change - posted price declines. Whereas in the case of gold, the gains increase as you go from weekly to annual price changes. 



Treasuries:

Yields on the ten year US Bonds are up (+2.88%) to 3.741%, and the two year up (+0.28%) at 3.597%. Both the two and ten year notes hields are down on the month as the markets priced on the prospects of a rate cut.

Global Bonds are also expectedly in the risend this includes emerging and frontier markets with higher yields. The market clearly are increasing their allocations for safety and yields. This creates an opportunity also for blue High Yield bonds as the interest differentials increases with the cuts.




Economic Implications:

Gold is in high demand from both investors and Central Banks as the highly bid metal provides a layer of safety to the portfolios and makes for a good currency hedge. The move in Crude Oil we attribute to a weaker US Dollar.

Where the momentum in Oil prices isn't sustained, we expect a reallocation to more safety assets, creating an opportunity in fixed income securities, as it will probably signal - or be as a result of - a decline in economic activity.

Weak China Data:

From the chart below;

People aren't buying properties, as property volumes purchases are low compared to to 2023 and 2019. Vehicle travels as depicted by traffic congestion (frame 4) Is also low, is the flight data shows a decine.

So the Chinese consumer isn't buying homes, or travelling as much. Hence the expectations of further stimulus.


Remarks:

If gold continues to rise s we expect, it would be as a result of a continuous slowdown in economic activity in both China and the US, which will have a ripple effect on other asset classes. A weaker Dollar would support Oil prices, but only in the sense of providing a cushion if it were below current levels.

We still expect gold to hit ND possibly breach the $3000/oz. heights by the first half of 2025, and Crude to stay around or above $70/pb and $75/pb for WTI and BRENT respectively 



DISCLAIMER: THIS IS ARTICLE IS MEANT TO OFFER PERSPECTIVES AND INSIGHTS INTO THE MARKETS ND NOT FOR INVESTMENT ADVICE.

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