ZE Market Weekly: Bloomberg wider Industrial Indexes Tepid, US, Japan Markets Upbeat.
By Chinedu Okoye
Last week broader-based equity indexes (Bloomberg S&P, Bloomberg World Large & Mid Cap Price Return Index, all saw declines midweek, suggesting a concentration of equity performance in the US,
As stated in ZE X Post: “ The economic uncertainty continues with the US and China deal being unsubstantiated, and industrial weakness in the words Number 2 Economy (China) and Consumer weakness in the US. ”
Bloomberg World, S&P, and European Indexes are all down intraday at the time if this post, whulst European Indexes had a mixed weak, with the DWX and CAC40 sliding, whilst the IBEX ALand FTSEMIB rose week-on-week.
From the Paper, a point of nite was the decline in broad European equities as “ Bloomberg European 600 Price Return Index down -0.33% (frame 3); this index tracks 600 large, mid, and small-cap companies from 17 European countries (including the UK, France, Germany, Switzerland, etc.). ”
It represents about 90% of the European equity market capitalization, serving as a broad measure of European stock market performance.
Industrial Production - Equity Markets Divergence in Europe:
France and Germany stock Indexes (CAC 49 and DAX) saw declines and have been somewhat weaker than European counterparts in Italy's FTSEMIB and Spain's IBEX. Coincidentally though these indices are yo month-on-month, the industrial production data for France and Germany have been contracting for the most part f the year.
The emergence of China's auto expansion and competition in the EV space has dealt large blows to the European mechanical giant Genrany, and this has been reflected in the steep decline seen in the third quarter.
(Germany Industrial Output Month-on-month Chart 2025)
US Stocks:
A combination of de-escalation of trade tensions with China, and the US Fed cut have aided stocks and bonds alike with US 10yrs down with stock markets up, led by the NASDAQ, yo +3.7% month-on-month and +0.61% in the week.
(NASDAQ Chart)
However, the US still deals with a weak Consumer and cooling jobs market. The Federak reserve focus seems to be in Inflation as it tries to balance out price stability with labor market objectives. Interest rate policy behind the priced in 75bps for the year if which 50 has been delivered would also have some bearing on precious metals which have been under pressure after a steep rally.
Gold:
Th yellow metal breached it's $4,000 level midweek on a two week losing streak, due to market sentiments as traders took profits, and investors rotated out of gold with treasuries as the beneficiary as DM treasuries largely recorded declines in this period before a sudden rise midweek.
However positions changed as the metal closed at $4,001.9, a key support, resistance and physcological level for Gold investors and traders.
Having met our previous full year target earlier in in the year and as far back as November 2024, and our revised FY2025/Jan2026 target of $4,200 size and three months earlier respectively, the retreat is not unexpected.
But our thesis remains on the revised outlook for January 2026 of $4,200. So we are still bullish in gold, and origits for the commodity segment have been kicked in our take profit action at $4,300.
Bullish or Supportive Factors for Gold:
Fed Rate cuts: the recent reduction in the Fed funds rate to 3.75%-4.00% from 4.00%-4.25% at the last FOMC, signals a possible fed easing into dovish monetary policy stances (i e., mire rate cuts). This makes bonds less attractive compared to gold as the edge of income had been lost.
China industrial production still weak and a comprehensive trade deal with US still elusive: as a result, further economic deterioration could reignite fears, and see the metal bid up again.
Possible Stock Market Correction: The take profits isn't exclusive to gold and can also occur in the stock market should expectations change. And fundamentally, nothing has changed.
The US consumer is still weak and the Chinese consumer still else confident, and the broader economy suffering from declining output and property market woes.
Possible Continuation in Central Bank Purchases: The chart below from World God Council shows that in the past three years, the central bank category of gold purchasers/demand has increased significantly, with no signs of a Slowdown.
This has been the initial strength of the precious metal, and a continuous increase in accumulation would certainly uphold the base line above $3,900 with a gradual tilt back to $4,200 .
Fixed Income: DM Sovereigns
(UK 10yr Gilts Yield)
The market is not done with Gold yet.
Equities are trading at highs that seem unjustified and buoyed by market sentiments, should a crack in underlying economic conditions emerge, these markets can experience capital flight to other asset classes, and gold Gilts and Treasuries are likely beneficiaries.????
(EuroStoxx 50 Chart.)
Crypto:
Recall ZE Crypto Watchlist are as follows; Bitcoin, Bitcoin Cash, Ethereum, PAXG and XAUT.
These coins have performed in a mixed fashion, halting the meteoric rise seen only months ago, wth PAXG and XAUT mirroring Goods slide expectedly, in the w3k, but you +3% month-on-month. Diversification came in handy as barring Bitcoin Cash (BCH) all these coins are down week-on-week, and all are down month-on-month.
CRYPTO W-O-W M-O-M
BTC: $110,016 -1.11%. -7.37%
BCH: $552.73 +8.76%. -6.64%
ETH: $3,881.79 -1.27%. -11.49%
XRP: $2.501 -3.51%. -15.68%
PAXG:$4,007 -2.48%. +3.43%
XAUT:$4,011. -2.53% +3.73%
(Data as of 4:20am 02/11/2025 Nigerian Time)
Author's Note:
Based on the above, ZE remain Bullish on Gold, barring a sudden turnaround in global economic activity/growth, and/or a switch to a hawkish monetary policy stance by the Fed should inflation continue.
Gilts and US Treasuries falling and Gold gaining suggests a return to previous positioning, and an opportunity for investors who'd missed out on the 4% yields when US 10yrs dropped below 4% and UK Gilts below 4.39%.
The industrial production - stock market divergence is most profound in Europe with jet industries e.g., Auto and alternative energy under untene competition from a more efficient China.
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