China's Growth Efforts Drive Momentum in Commodity Market
Sayali ShirkeCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Editorial, Market Moves, Market Watch
The U.S. dollar ended the week down at 100.4, with expectations growing for further interest rate cuts from the Federal Reserve.
Positive U.S. economic data and long-awaited stimulus measures from China have bolstered global risk appetite., the effects of which were witnessed in the commodity in the last month.
The U.S. dollar ended the week down at 100.4, with expectations growing for further interest rate cuts from the Federal Reserve. Despite this, the dollar experienced volatile swings throughout the week. The Consumer Confidence Index saw its sharpest decline in three years, highlighting increased consumer pessimism. However, stronger-than-expected GDP growth and lower jobless claims alleviated fears of an economic slowdown, reducing the urgency for aggressive rate cuts and briefly pushing the dollar back to 101.
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, rose by 0.1 per cent month-overmonth and 2.2 per cent year-over-year in August. Modest increases in personal income and spending pointed to a cooling economy, potentially setting the stage for future rate cuts. This caused the dollar to pull back while U.S. stocks continued their upward momentum for a third consecutive week.
COMEX gold soared to a record high of USD 2,708.70 per ounce as the steep drop in U.S. consumer confidence fueled expectations for more aggressive Fed rate cuts. Heightened geopolitical tensions further boosted gold's appeal as a safe-haven asset. Silver also saw gains, reaching USD 32.60 per ounce before paring its rise to a 1.3 per cent weekly gain, mirroring the pullback in gold and other industrial metals.
In domestic markets, MCX Gold December futures charted a Bearish Engulfing candlestick pattern, signalling a potential bearish trend. While the short-term outlook remains bullish, a pullback could occur, with prices possibly testing the ₹75,000 per 10-gram support level, followed by ₹74,850. A breakout above ₹75,530 could renew bullish momentum, pushing the price towards ₹77,000.
Modest increases in personal income and spending pointed to a cooling in the U.S. economy, potentially setting the stage for future rate cuts. This caused the dollar to pull back while U.S. stocks continued their upward momentum for a third consecutive week.
LME base metals hit multi-month highs, lifted by measures from China’s central bank governor, Pan Gongsheng, aimed at boosting economic growth and stabilising the ailing property market. LME copper surged past USD 10,000 per tonne for the first time since June, while zinc topped USD 3,100 and aluminium climbed above USD 2,650. This rally followed the People’s Bank of China’s (PBoC) decision to cut the Reserve Requirement Ratio by 50 basis points, coupled with promises of stronger fiscal measures to revive the economy.
On the energy front, WTI crude oil took a sharp hit, falling to USD 66.95 per barrel. Prospects of increased supply from Saudi Arabia and Libya overshadowed the improved demand outlook from China and concerns about Hurricane Helene. Libya is poised to resume production after rival political factions agreed on a new central bank governor, while Saudi Arabia is expected to increase output in collaboration with OPEC+ in December. While rising supply could weigh on oil prices, escalating tensions in the Middle East, particularly after Israel killed a Hezbollah leader, may provide some upward pressure.
Looking ahead, all attention is on the upcoming U.S. jobs report, as inflation nears the Fed's 2 per cent target. A weak labour report could strengthen the case for further rate cuts following the recent half-percentage-point reduction. However, expectations of a soft landing could be dashed if employment data disappoints for a third consecutive month.