Stock Markets

Last week marked the 11th time this year that the S&P 500 has closed more than 2% lower than where it started the week, compared with a yearly average of around six times since 2010. The sell-off was largely driven by news that daily coronavirus cases have hit new record highs, and by less certainty that we will see another round of fiscal stimulus this year. Notably, the technology sector, which has been a leader for much of this bear-market rally, was down 6.5%, making it one of the leaders in the decline this week. Some good news was the strong third-quarter GDP growth, a labor market that is continuing to recover, and consumer spending that is continuing to exceed expectations.

US Economy

With days left before the U.S. election, a trifecta of worries around the political outcome, the path of the virus, and the lack of progress on another fiscal package weighed on stocks. The S&P 500 fell almost 6%, its worst weekly decline since March 20, and volatility jumped 40% from prior weeks’ levels. Analysts say this spike in volatility does not signal a 180-degree change in the long-term outlook for stocks, but rather reflects some nervousness around uncertainties that are likely to result in a slower, bumpier path ahead. However, they don’t think this uneasiness will derail the recovery.

Metals and Mining

Gold battled headwinds this week, falling below US$1,880 per ounce for the first time in four weeks. The US dollar rallied briefly but was reversing course by Friday. Uncertainty around the approaching US election paired with a rise in global COVID-19 cases weighed on investor sentiment, aiding in a late-week ascent for the yellow metal. The broader precious and base metals sectors also faced declines in the last week of the month, with palladium and nickel experiencing the largest decreases at 9 percent and 2.6 percent, respectively. Gold started the week holding just above US$1,900, edging as high as US$1,909 on Tuesday. But by Wednesday, a stronger US dollar index had added pressure, sending the price plummeting to US$1,872. And that wasn’t the end to the currency metal’s woes — the greenback’s move then forced gold even lower, to US$1,863. Despite the recent dip, most analysts expect gold to regain steam. Gerardo Del Real of Digest Publishing sees the drop-in value as a realignment and opening. Gold was priced at US$1,879 on Friday. The silver price shed as much as 7.3 percent this week, dropping as low as US$23.02 per ounce for the first time since September 21. Volatility across equity markets added pressure to the dual metal, which was weighed down by both its currency and industrial correlations. The white metal stands to benefit from infrastructure, stimulus and energy projects post-election, although it is likely to face headwinds until after the November 3 vote. Silver was trading for US$23.40 an ounce on Friday. Platinum also fell lower this week, losing 3.9 percent after edging to US$879 per ounce. Sluggish Q3 automotive sales and lingering supply chain challenges have depressed platinum prices, as well as prices for its metal sister palladium. Although Q3 auto sales rose 38 percent from the previous quarter, they are still down 10 percent year-over-year. Palladium was the precious metal facing the largest declines this period, dropping 9 percent. It sunk from US$2,264 on Tuesday to US$2,057 by early Friday. Platinum was valued at US$840 and palladium was selling for US$2,091 on Friday.

After reaching a year-to-date high of US$6,953 on October 21, copper has pulled back by 3.7 percent. Although the dip has lowered prices, the copper outlook remains optimistic. A recovery in China, which makes up the bulk of copper demand, looming supply shortages stemming from lockdowns in Peru and Chile and a weak US dollar are all potential catalysts for copper prices down the road. Copper was moving for US$6,692 per tonne on Friday morning. Zinc also experienced volatility for the last trading week of October. Like copper, zinc reached a year-to-date high of US$2,565 per tonne late in the month, then fell back. Prices remain above US$2,500, but according to analysts at the International Lead and Zinc Study Group (ILZSG), volatility could be ahead for both zinc and lead. 2020 is anticipated to bring a 5.3 percent fall in zinc demand, and a 6.5 percent decline for lead. Some of that is expected to be offset by output drops from top-producing nations Bolivia, Peru and Mexico. Zinc mine production is forecast to be down 4.4 percent, with a 4.7 percent decrease for lead. However, these two metals have also experienced severe supply disruptions as well. Zinc was priced at US$2,503 on Friday, while lead was trading for US$1,801 per tonne. Nickel spent the early part of the week edging higher to sit at US$15,819 per tonne on Wednesday. A day later, a dramatic drop sent prices to US$15,393, a 2.6 percent decline. The reversal is linked to a market correction after the metal marked its year-to-date high of US$16,064 on October 21. Nickel’s October rally has been attributed to a recovery in the stainless-steel market, and that could help keep prices above US$15,000 into next year. On Friday morning, nickel was valued at US$15,393.

Energy and Oil

Oil prices plunged this week after spending months trapped in a narrow range around $40 per barrel. Renewed national lockdowns in France and Germany rattled financial markets, while the U.S. case count for covid-19 remained at record levels and may continue to rise. “As lockdowns begin to bite on demand concerns across Europe, the near-term outlook for crude starts to deteriorate,” said Stephen Innes, chief global market strategist at Axi. In early trading on Friday, WTI fell to $35 per barrel and Brent was at $37. It seems that OPEC members are reluctant to extend cuts. Three of the biggest OPEC producers behind Saudi Arabia may not be on board with extending the current cuts into next year. Iraq, the United Arab Emirates (UAE), and Kuwait are reportedly not particularly inclined to support a rollover of the cuts of 7.7 million barrels per day (bpd), because such cuts are too deep for their economies and budget incomes to sustain.

Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $2.86 per million British thermal units (MMBtu) last week to $3.06/MMBtu tis week.  At the New York Mercantile Exchange (Nymex), the November 2020 contract expired at $2.996/MMBtu, down 3¢/MMBtu from last week. The December 2020 contract price decreased to $3.291/MMBtu, down 6¢/MMBtu from last week to this week. The price of the 12-month strip averaging December 2020 through November 2021 futures contracts declined 3¢/MMBtu to $3.108/MMBtu.

World Markets

Shares in Europe tumbled the most since their March swoon, as investors worried that lockdowns aiming to control the coronavirus’ spread could push the eurozone economy into a double-dip recession. Political uncertainty in the U.S. also weighed on sentiment. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 5.56% lower, while Germany’s DAX Index dropped 8.61%, France’s CAC 40 lost 6.42%, and Italy’s FTSE MIB slid 6.96%. The UK’s FTSE 100 Index declined 4.83%.

Core eurozone bond yields fell on the week. The yield on Germany’s 10-year sovereign bonds declined, as the country and France reintroduced national lockdown restrictions to combat rising coronavirus cases. Dovish messaging from the European Central Bank (ECB) after its policy meeting on Thursday also helped to support prices and compress yields on core eurozone bonds. Peripheral bond yields fluctuated. Yields in Spain and Italy drifted higher early in the week, as investors shied away from risk; however, yields on these bonds moved lower after the ECB reiterated its commitment to easier monetary policy. UK gilt yields followed their developed market counterparts lower.

Chinese stocks fell in sympathy with the downturn on Wall Street, with the benchmark Shanghai Composite Index declining 1.6% and the large-cap CSI Index shedding 0.5%. The yield on the 10-year sovereign bond ended flat at 3.20%, and the dollar-renminbi currency exchange rate stayed broadly stable. In currency news, the People’s Bank of China (PBOC) asked domestic banks to suspend the use of a so-called countercyclical factor (CCF) in fixing the renminbi’s daily midpoint against the U.S. dollar, Reuters reported. The CCF—which is an adjustment made by contributing banks to influence the value of the yuan—was introduced in 2017 as a tool to dampen excessive currency volatility. The PBOC’s move to neutralize the CCF was interpreted as allowing the renminbi, which is tightly managed by the central bank, to become more market-driven.

The Week Ahead

Important economic data being released this upcoming week include the Unemployment Rate, the Fed’s upper bound key interest rate, and various PMI series.

Key Topics to Watch                          

• Markit manufacturing PMI (final)
• ISM manufacturing index
• Construction spending
• Election Day                                       
• Factory orders Sept.
• Motor vehicle sales (SAAR)
• ADP employment report
• Trade deficit
• Markit services PMI (final)
• ISM services index
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claims (federal & state, NSA)
• Productivity
• Unit labor costs
• Federal Reserve meeting announcement                                         
• Fed Chair Jerome Powell news conference                                      
• Nonfarm payrolls
• Unemployment rate
• Average hourly earnings
• Wholesale inventories
• Consumer credit

Market Summary

Stock Markets

Following three consecutive weekly advances, stocks declined modestly last week. The news flow was dominated by headlines around the negotiations for another round of fiscal relief from Washington before the election, which is fast approaching. The 10-year Treasury yield rose to the highest level in four months amid expectations that a potential Biden win would lead to a larger relief package to support the economy. Aside from the speculation about potential election outcomes and policies, economic data for the week was encouraging to the long-term outlook, showing an improvement in jobless claims and continued strength in the housing market.

US Economy

Markets behaved in a somewhat orderly fashion last week, oscillating in a fairly narrow band that left U.S. equities slightly in the red for the week.  We’d stop short of labeling last week the ‘calm before the storm” because analysts think there are credible reasons for stocks to have a toehold. That said, analysts think investors would be well served to brace for a bumpier ride as we work our way to, and through, the election.

Current conditions are prompting a perception among some investors that the election represents a binary outcome for the market. November 3 may be viewed as a seminal moment in our country’s political landscape, but when it comes to investing, it’s the much broader periods of time – not singular moments – that matter most. In addition to political headlines and reasonably encouraging economic readings, last week brought a few market anniversaries, including the 33rd anniversary of the “Black Monday” crash.

Metals and Mining

After the second and final US presidential debate on Thursday, gold moved above the key US$1,900 per ounce threshold. After slipping below that level earlier in the week, investors regained hope that a US stimulus package could be close at hand. Gold’s steady growth trend was disrupted this week as the US dollar strengthened, adding volatility to the yellow metal’s value. The other precious metals were also on course to end the week in the green. Entering the five-day period at US$1,910 before slipping to US$1,895 on Wednesday, a subsequent rally pushed gold as high as US$1,927 by the headwinds mentioned. Because gold is considered a hedge against inflation and currency debasement, the next round of stimulus is expected to add to its value. On Friday an ounce of gold was trading for US$1,893.66. Silver had been locked at the US$24 per ounce range since the end of September but moved above US$25 briefly this session. While the trend to US$25 was unsustainable, silver remained above US$24.50 for the remainder of the week. The nature of the dual metal as a leveraged play on gold has worked in its favor, prompting analysts to note that during bull markets silver traditionally outperforms gold. That was evident during Q3, when silver outpaced its yellow sister significantly. During the period, silver added 34 percent to its value, gaining more than 60 percent year-to-date at its quarterly peak. On the other hand, gold added only 6.9 percent to its value in total for Q3, and 16 percent when it touched an all-time high of US$2,063. Though gold and silver have spent the last four weeks edging higher, platinum has been steadily slipping lower. However, that trend was reversed this period, with the automotive metal surging past US$900 per ounce late in the week. Adding 5 percent to value for the week, the metal is positioning to benefit from the rally in precious metals. On Friday, platinum was valued at US$907. The palladium price was also propelled higher this week when it breached US$2,300 per ounce. The price action took palladium back to pre-COVID-19 levels seen in March. But after hitting the six-month high, prices were pressured and fell back to US$2,246. Palladium was selling for US$2,260 on Friday.

The broad base metals space was also in the green on Friday, with all metals registering gains. Copper was the leader, surging to a year-to-date high of US$6,953 per tonne on Wednesday. Demand out of Asia has contributed to the red metal’s ascent to a two-year high. Renewed industrial demand and the US stimulus package are forecast to continue working in copper’s favor. Zinc was also on the move this week, adding 2.7 percent to its value. Despite being shy of its year-to-date high, the metal is still in positive territory. Zinc was trading for US$2,540 per tonne to end the week. Nickel marked a year-to-date high this session when it surpassed US$16,064 per tonne, a 14 percent increase from its January values. The metal has been gaining since late September, as demand from the electric vehicle space is projected to increase. By Friday, nickel had shed some of the gains to trade for US$15,707. Lead also enjoyed a price uptick for the third full week of October. Though it remains well off its year-to-date high, the metal is slowly edging higher and is holding above US$1,700 per tonne. Lead ended the week at US$1,792.

Energy and Oil

On Thursday, the U.S. reported more than 70,000 COVID cases for the first time in three months, and the trajectory suggests the U.S. may break new record highs in the coming days. The numbers help explain weak (and weakening) gasoline demand in the U.S., a theme also unfolding in Europe. The pandemic continues to largely cap any potential price rally. Crude remains stuck at $40, where it has traded for the better part of four months. Demand is weak in Europe, the U.S. and Latin America, and remains depressed as the coronavirus continues to spread. But in Asia, gasoline demand is robust, and even jet fuel demand is rebounding strongly. As Javier Blas notes, there is a very big difference between east and west right now, with Asia looking to pre-pandemic demand levels. IN the final presidential debate, Biden and Trump clashed over oil and climate. While the substance and their positions were not new, the topics of oil, fracking and climate change played a large role in the last presidential debate. Trump has largely ignored the climate science and promises to maintain a friendly stance towards oil and gas. Biden played up the job opportunity of renewables and said the U.S. must transition away from fossil fuels. Democrats propose “blue carbon” bill. A proposal from House Democrats would expand offshore wind while barring new offshore oil drilling.

Natural gas spot price movements were mixed this week. The Henry Hub spot price rose from $2.03 per million British thermal units (MMBtu) last week to $2.86/MMBtu to this week. At the New York Mercantile Exchange (Nymex), the price of the November 2020 contract increased 39¢, from $2.636/MMBtu last week to $3.023/MMBtu this week. This increase marks the first time the near-month natural gas futures price has reached $3.00/MMBtu since January 2019. The price of the 12-month strip averaging November 2020 through October 2021 futures contracts climbed 13¢/MMBtu to $3.133/MMBtu.

World Markets

Shares in Europe fell on signs that the economic recovery was stalling amid tighter restrictions to curb surging coronavirus infections. The pan-European STOXX Europe 600 Index ended the week 1.36% lower, and major country indexes also declined: Germany’s DAX Index slipped 2.04%, France’s CAC 40 gave up 0.53%, and Italy’s FTSE MIB dropped 0.54% The UK’s FTSE 100 Index lost 1.00%, in part reflecting strength in the pound after the resumption of talks with the European Union (EU) on post-Brexit trade ties. UK stocks tend to fall when the pound rises because the index includes many multinationals with overseas revenues.

The German 10-year bund yield inched up on hopes that the U.S. government would pursue additional measures to stimulate its economy. Yields on sovereign bonds from peripheral European economies largely followed suit. Italian government debt yields also climbed after the sale of EUR 8 billion 30-year bonds, which received EUR 90 billion in offers. An inaugural issue of EU 10- and 20-year social bonds attracted bids of more than EUR 233 billion, far exceeding the EUR 17 billion on offer. The issue is part of the EU’s EUR 100 billion SURE (Support to mitigate Unemployment Risks in an Emergency) bond program designed to support jobs.

Chinese stocks retreated for the week, with the large-cap CSI 300 Index and benchmark Shanghai Composite Index shedding 1.5% and 1.8%, respectively. The yield on China’s 10-year sovereign bond decreased, slowing a steady advance dating back to July. On the monetary policy front, the People’s Bank of China Governor Yi Gang said that China’s key debt ratios could moderate in the coming months as economic growth picks up. Yi also stated that the central bank would pursue a balanced approach to supporting China’s economy, saying that monetary policy “needs to guard the gates of money supply and properly smooth out fluctuations” in the country’s macro leverage ratio. The renminbi currency continued its strengthening against the U.S. dollar aided by strong inflows into China’s domestic bond market, whose relatively high yields have attracted foreign investors.

The Week Ahead

The third-quarter earnings season is in full swing, with almost 40% of the S&P 500 companies reporting earnings throughout the week. Important economic data being released include consumer confidence on Tuesday, third-quarter GDP growth on Wednesday, and personal income and spending on Friday.

Key Topics to Watch                          

• Chicago Fed national activity index
• New home sales (SAAR)
• Durable goods orders
• Core capital goods orders
• Case-Shiller national home price index (year-over-year change)
• Consumer confidence index
• Home ownership rate (NSA)
• Advance trade in goods deficit
• Gross domestic product (SAAR)
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims state program, SA)
• Continuing jobless claims (total, NSA)
• Pending home sales index
• Personal income
• Consumer spending
• Core inflation
• Employment cost index
• Consumer sentiment index

Market Summary

Stock Markets

Equity markets finished slightly higher last week as investors continue to hope for a fiscal stimulus package. On the vaccine front, some trials have been paused due to health concerns, and Pfizer has filed an emergency-use plan for the end of November. Retail sales continue to be a bright spot for the economy, showing unexpected gains in September, even while jobless claims came in higher than expected and job growth showed signs of slowing.

US Economy

Stocks oscillated between positive and negative territory last week, reflecting a tug-of-war between rising concerns and encouraging economic data. Weakness last week stemmed from a continued stalemate in stimulus talks, along with the recent rise in COVID-19 cases and the accompanying worries over implications for the continued reopening of the economy. Markets did find a lift from a positive U.S. retail sales report that showed consumer spending rose strongly in September despite the lack of renewed aid from Washington, signaling some resiliency to the recovery. Analysts believe that the broader fundamental outlook remains intact, but as last week demonstrated, policy support and the path of the virus, along with the discovery of an effective vaccine, will be key drivers in the months ahead.

Metals and Mining

Facing headwinds this week, the gold price was on track for its first week of losses since mid-September. Concern that a US stimulus package won’t get approved ahead of the November election has stalled investor appetite for the yellow metal. Volatility was felt across the sector, with the other precious metals also in the red on Friday morning. October has been challenging for the sector after Q3 saw each metal move significantly higher. The Q4 pressure was also felt in the base metals space, with the broader sector experiencing volatility. Starting the period holding above US$1,900 per ounce, gold dipped dramatically on Tuesday, falling to US$1,890.60. The slip prompted speculation about liquidation in the gold space in response the again delayed stimulus package. After holding above US$25 per ounce for four days, silver was on a downward trend this week, falling below US$24 on Thursday. The white metal’s duality did not work in its favor this session, and it was dragged lower by its currency correlation as well as its industrial side. Silver’s nature as a leveraged play on gold has been reflected in record-setting growth in silver exchange-traded products (ETPs). The first three quarters of 2019 saw ETPs add 103 million ounces, while the same period in 2020 saw 297 million ounces of inflows. This week was also challenging for platinum, which had been trending higher since early October. The automotive metal was pushed down to US$833 per ounce on Thursday, its lowest since September 21. Early Friday, prices were edging higher and holding above US$850. Platinum was trading for US$870 on Friday. Three weeks of gains also came to an end for palladium, which shed 6.5 percent by Friday morning. The catalyst metal soared to a six-month high of US$2,372 per ounce on October 9 but fell to US$2,205 on Tuesday. Palladium was selling for US$2,215 on Friday.

Copper slipped late in the week, hitting US$6,683.50 per tonne. Since October 2, the red metal has added a little over 4 percent to its value but remains off its September 21 year-to-date high of US$6,837. Copper was selling for US$6,683.50 on Friday. Zinc also saw a year-to-date high in September, hitting US$2,554 per tonne, but has since shed some of that value, holding in the US$2,400 range. By Friday, zinc was on the decline following a strong early week showing. It was moving for US$2,397 to end the week. Nickel spent the second full week of October in the green. A mid-week slip saw it dip to US$15,105 per tonne; however, a quick rebound on Thursday pushed the metal back above US$15,350. The positive performance is nickel’s second best this year — on September 1, the base metal reached a year-to-date high of US$15,660. On Friday, nickel was valued at US$15,353. Lead fell below US$1,800 per tonne this week, unable to the retain gains it had made since reaching a 10-week low in early October. Lead was holding at US$1,754 to end the week.

Energy and Oil

Oil prices retreated once again on concerns about a second wave in Europe and a third wave in the U.S. France reported more than 30,000 positive cases on Thursday. Many countries in Europe are reporting cases far higher than the peaks they saw during the first wave. Also, on Thursday, the U.S. reported more than 60,000 cases for the first time in more than two months. OPEC+ won’t let oil prices crash again, according to OPEC’s Secretary-General Mohammad Barkindo. “I want to assure you that the OPEC, non-OPEC partnership will continue to do what it knows best, by ensuring that we don’t relapse into this almost historic plunge that we saw,” Barkindo said. OPEC’s top official says the group will guard against another price slide, but tensions within the cartel are mounting. OPEC production cuts compliance is still around 100 percent, but the coming months will see that figure fall. In its latest Oil Market Report, the IEA said that the oil market has stabilized, with stocks drawing 0.9 mb/d in the third quarter, but that the outlook is fragile. The rising cases of covid-19 in many parts of the world “surely raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth,” the agency said. The European Union is considering methane limits on natural gas that is consumed or imported into the bloc. As a result, it could negatively impact demand for gas from around the world, including the United States.

Natural gas spot prices rose at most locations this week. The Henry Hub spot price remained flat at $2.03 per million British thermal units (MMBtu). At the New York Mercantile Exchange (Nymex), the price of the November 2020 contract increased 3¢, from $2.606/MMBtu last week to $2.636/MMBtu this week. The price of the 12-month strip averaging November 2020 through October 2021 futures contracts climbed 8¢/MMBtu to $3.000/MMBtu.

World Markets

Stocks in Europe fell on burgeoning coronavirus infections, Brexit-related uncertainty, and the dissipating prospects of U.S. fiscal stimulus before the November 3 presidential and congressional elections. A rally in German debt pushed yields on these haven securities to the lowest level since the market swoon in March. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.78% lower. Major indexes lost ground: Germany’s Xetra DAX Index slid 1.09%, Italy’s FTSE MIB dropped 1.05%, and France’s CAC 40 gave up 0.22%. The UK’s FTSE 100 Index declined 1.61%.

In the face of regional protests, European central governments imposed stricter targeted measures to contain the accelerating spread of the coronavirus and prevent a second round of economically damaging national lockdowns. France, for example, imposed a nighttime curfew in Paris and eight other cities, while Germany began to impose restrictions on socializing in areas worst hit by the virus, such as Berlin. The UK implemented a three-tiered system of localized lockdowns across England and offered business subsidies to the worst-affected areas.

Chinese stocks rallied after investors returned from the national Golden Week holiday. The benchmark Shanghai Composite Index rose 2.0% and the blue-chip CSI 300 Index advanced 2.4% in its third weekly gain. In fixed income markets, the yield on China’s 10-year sovereign bond rose four basis points to 3.25%, as strong September trade data reinforced hopes for a sustained recovery. Last month marked another strong month for foreign purchases of Chinese bonds, with foreign investors buying USD 20.2 billion in September. At a monthly press conference, People’s Bank of China (PBOC) officials appeared to show little appetite for cutting interest rates. The central bank injected RMB 500 billion into the financial system via its one-year medium-term lending facility, although the added liquidity was seen by market participants as not particularly generous, given upcoming tax payments.

The Week Ahead

Important economic news coming out this week include housing data and the preliminary October Purchasing Managers’ Index.

Key Topics to Watch

• NAHB home builders’ index
• Housing starts (SAAR)
• Building permits (SAAR)
• Beige Book                                         
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (regular state program)
• Continuing jobless claims (total, NSA)
• Existing home sales (SAAR)
• Index of leading economic indicators
• Markit manufacturing PMI (flash)
• Markit services PMI (flash)

Market Summary

Stock Markets

Stocks climbed last week, with the S&P 500 recording the best weekly gain since early July, while long-term government yields rose to a four-month high. The driver behind the equity-market strength was the anticipation that another stimulus package will eventually be passed despite the shaky negotiations so far. The White House increased its fiscal stimulus offer to $1.8 trillion from $1.6 trillion, which partly bridges the gap but is still short of the $2.2 trillion package the House has already approved. Analysts believe a deal for further relief is likely, even if it ends up arriving after the election, as both sides agree on the need for more spending to offset the pandemic’s hit to incomes and certain industries.

US Economy

Two forces were in the driver’s seat last week: policy and politics. While it may be hard to tell the two apart, analysts think there are elements of each that pose particular implications for the market ahead. Analysts expect politics (election) to keep a hand on the wheel in coming weeks, while policy developments (specifically, fiscal and monetary stimulus) will be a more persistent driving force behind the economic recovery ahead.

Markets fluctuated widely last week as expectations for another round of financial aid for households and businesses bounced between doubtful and hopeful. Stock markets sold off as Washington negotiations over another round of fiscal relief broke down. Then the markets regained strength amid the prospects that smaller and more targeted aid packages could potentially find some agreement among policymakers, or that a more comprehensive bill may still be reachable.

Metals and Mining

Safe haven support sent the gold price higher this week as more cases of COVID-19 were reported in the White House, causing disruption in the market. A weaker US dollar also worked in the yellow metal’s favor, with investors looking to hedge against currency debasement and inflation. The other precious metals also benefited from the rally and were sitting in the green on Friday morning. The broader base metals sector performed positively too and edged higher throughout the week. After a brief dip to US$1,876.50 per ounce, gold was on track for a second consecutive week of gains. Renewed optimism that a US stimulus deal could be reached in the coming weeks pushed it higher.

Gold exchange-traded funds also continue to grow at a record-setting pace. They added US$60 billion (1,000 tonnes) worth of gold to their holdings from January to September, as per the World Gold Council. Silver also climbed higher this session, starting the period at US$23.95 per ounce and moving as high as US$24.70 on Friday morning. Having added as much as 37 percent to its January start price of US$18.02, silver is keeping pace with its sister metal, and according to many analysts it is bound to outperform the yellow metal. Platinum made a modest uptick mid-week but was subsequently pushed lower later on. Despite starting the period at US$881 per ounce, the metal edged as high as US$893 before shedding those gains. By the end of the week, platinum was back in territory seen on Monday). On Friday, platinum was trading for US$880. Palladium registered the largest gain this week, climbing from US$2,250 per ounce on Monday to a six-month high of US$2,384. The 5.9 percent uptick marks one of the metal’s best weekly performances since January. Since the start of the year, palladium has risen more than 18 percent, but is still well off its year-to-date high of US$2,614, seen in February. On Friday, palladium was selling for US$2,368.

As mentioned, the base metals were able to edge higher this week, with nickel making the most significant gains. Starting the session at US$14,360 per tonne, the metal added 2.2 percent to its value to sit at US$14,687. The value increase was attributed to the return of Chinese business and deals following a week-long national holiday. Nickel was holding in the US$14,687 range on Friday. Copper ended the five-day session in the green. The red metal surged higher mid-week, going from US$6,509 per tonne on Tuesday (October 6) to US$6,611.50 by Thursday. Since hitting a year-to-date high in September, copper has shed some of it gains. Despite the losses, it still remains well above its year-to-date low of US$4,617.50, seen on March 23. Copper was selling for US$6,611.50 on Friday. Zinc was able to pull out a modest gain for the week, edging from US$2,298 per tonne to US$2,356. Despite the broad gains benefiting the sector, analysts are awaiting some clarity when a report from the Chinese congress is released later this month. Lead ended the week slightly higher, reversing three weeks of losses. While the metal squeaked out a small gain, it is still well short of the US$2,000 per tonne value it attained earlier in the year. Lead ended the week at US$1,779.

Energy and Oil

Oil prices have posted strong gains this week, although opened trading on Friday slightly down. WTI was trading at $41 and Brent was close to $43, putting crude close to a 10 percent gain from last week. Saudi Aramco said it intends to increase oil production in the years ahead in an attempt to monetize its oil reserves with an eye on peak demand. Even in a world of lower oil prices, Saudi Arabia has some of the lowest production costs in the world, allowing it to undercut the competition. Aramco is aiming to increase its production capacity to 13 mb/d from 12 mb/d currently.  The oil market has already priced in the slowing global demand recovery and the growing uncertainties about the economy amid resurging coronavirus cases in many parts of the world. Analysts largely concur that oil prices are not expected to move much higher than current levels of around $40 a barrel until the rest of the year, but neither are they likely to fall much as bearish factors have been priced in.

Natural gas spot prices rose at most locations this week. The Henry Hub spot price rose from $1.63 per million British thermal units (MMBtu) last week to $2.03/MMBtu this week.

At the New York Mercantile Exchange (Nymex), the price of the November 2020 contract increased 8¢, from $2.527/MMBtu last week to $2.606/MMBtu this week. The price of the 12-month strip averaging November 2020 through October 2021 futures contracts climbed 2¢/MMBtu to $2.919/MMBtu.

World Markets

European shares rose on hopes that the U.S. government would pass additional measures to stimulate the economy. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 2.11% higher, while Germany’s DAX Index rose 2.85%, France’s CAC 40 advanced 2.53%, and Italy’s FTSE MIB added 2.79%. The UK’s FTSE 100 Index climbed 1.94%.

Brussels shuttered cafes, beer halls, drinking establishments, and tea rooms for a month as part of a lockdown to counter soaring coronavirus infections and hospital admissions. COVID-19 cases continued to rise sharply in Spain, Italy, France, and the UK despite targeted measures to control the disease’s spread. Fatalities and hospital admissions rose in the UK, where the government was poised to close pubs and restaurants in northern England as the increase in cases threatened to overwhelm the health care system. France is ready to place more cities on maximum alert after the daily case count rose above 18,000 for a second consecutive day. Spanish Prime Minister Pedro Sanchez is considering whether to declare a state of emergency in the Madrid region, after the regional High Court ruled against the central government’s latest measures to restrict people’s movement, Spanish newspaper El Pais reported.

China’s stock markets rose Friday after being closed from October 1 to 8 for the national Golden Week holiday. The Shanghai Composite A-share Index rose 1.7% and the large-cap CSI 300 Index gained 2.0%. Bonds sold off after the People’s Bank of China (PBOC) set out to drain a net RMB 560 billion of liquidity from money markets via open market operations. The yield on China’s 10-year sovereign bond increased 4 basis points to 3.21%.

The PBOC’s more hawkish stance, along with the relatively higher yields on Chinese bonds, added to the carry appeal of the renminbi over other currencies. The U.S. dollar/renminbi exchange rate rose 1.3% on Friday to close at 6.702. The dollar’s relative weakness against other Asian currencies has reduced concerns that the renminbi has become stretched. However, many analysts believe that the PBOC wants to support the currency ahead of U.S. elections in early November, which is expected to spur heightened volatility in foreign exchange markets.

The Week Ahead

Economic data being released include inflation on Tuesday and retail sales and consumer sentiment on Friday.

Key Topics to Watch
                       

• NFIB small-business index
• Consumer price index
• Core CPI                                 
• Producer price index
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claims (federal & state, NSA)
• Philly Fed index
• Empire State index
• Import price index
• Retail sales
• Retail sales ex-autos
• Industrial production index
• Capacity utilization
• Consumer sentiment index
• Business inventories

Market Summary

Stock Markets

Stocks brushed off the uncertainties around the economic recovery and finished the week higher on hopes that Congress will reach a deal on another coronavirus-relief bill. Attention turned back to the virus and its effects after news that President Trump and First Lady Melania Trump have both tested positive for COVID-19 and that they will be going into quarantine. On the economic front, the U.S. economy added 661,000 jobs, marking a slowdown in the pace of job gains, but the unemployment rate came in better than expected at 7.9%. Analysts believe that the economic recovery is entering a slower phase, but a gradual improvement in the labor market, along with low interest rates and fiscal stimulus, should provide support.

US Economy

The political environment seemed to play a large role in driving sentiment over the week. Investors kept a close eye on conflicting signals on stimulus negotiations between Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi, with reports surfacing Tuesday that Republicans were willing to approve a fourth coronavirus stimulus package totaling as high as USD 1.6 trillion—somewhat closer to the Democrats’ latest USD 2.2 trillion proposal. On Wednesday, Pelosi said that she was “hopeful” a deal would be reached, and Mnuchin said there would be “one more serious try.” 

Metals and Mining

The gold price rallied above US$1,900 per ounce early on Friday following news that US President Donald Trump and the First Lady have both tested positive for COVID-19. Markets experienced a flurry of activity in the wee hours on Friday after Trump’s Twitter announcement, with the Dow Jones Industrial Average shedding 304 points. Volatility is expected to be muted if the president is asymptomatic, or conversely could ratchet up if his condition deteriorates. The positive diagnoses pushed safe havens higher, with gold breaking past US$1,900 in the hours after. The yellow metal could draw more appetite in the coming weeks if senior cabinet members or other high-ranking officials who work alongside POTUS also test positive. The author of “Why Gold? Why Now?” sees the asset breaching US$2,500 by the end of the calendar year, motivated by government stimulus, inflation and the devaluation of the US dollar. Silver moved higher early in the week, hitting US$24.28 per ounce on Tuesday ahead of first presidential debate. Volatility sent the white metal back below US$24 on Wednesday and Thursday, but Tucker sees the white metal breaking the US$40 mark this year, propelled by many of the same catalysts as sister metal gold. Silver was trading for US$24.05 at 11:12 a.m. EDT on Friday. For its part, platinum experienced a sharp price fall mid-week. Climbing to US$883 per ounce on Tuesday, recovery pressure forced the metal 2.9 percent lower a day later. While platinum struggled this session, palladium spent most of the period edging higher. On Monday, the metal was priced at US$2,153 per ounce, but by Wednesday its weekly high of US$2,251 had been achieved. On Friday, platinum was priced at US$874, while palladium was at US$2,207.50.

With markets around the globe reacting the president’s COVID-19 test results, base metals were pushed lower, prompting concerns that a larger decrease may be in store if prices follow the drop in equities. Copper prices, which began slipping in mid-September, regained some lost ground on Monday and had broken past US$6,600 per tonne by Wednesday. The red metal continued a modest increase on Thursday. Copper was selling for US$6,614 on Friday morning. Zinc performed a similar mid-week rally, hitting US$2,418 per tonne for its five-day high. Unable to sustain its momentum, the metal pulled back, falling sharply to its Monday trading range. Zinc was valued at US$2,365 on Friday. Nickel was less volatile for the first week of October but could face challenges ahead. “Broad risk-aversion across the LME base metals complex emerged on Thursday afternoon, when US House Representative Nancy Pelosi and Treasury Secretary Steve Mnuchin failed to strike an agreement on a fiscal stimulus package to continue the United States’ fight against Covid-19,” said Metal Bulletin. This could be further challenged by the US leader’s newly reported COVID-19 status. Nickel was priced at US$14,430 per tonne on Friday. Lead fell to a four-week low on Wednesday but managed to hang in above US$1,800 per tonne. Lead started the last day of trading for week valued at US$1,809.

Energy and Oil

Crude prices fell on Friday following news that President Donald Trump tested positive for the coronavirus. Broader equities also tumbled. As of midday trading, Brent was down more than 4 percent, dipping below $40 per barrel. A Wall Street Journal analysis found that the median pay for executives of U.S. oil and gas companies rose for four consecutive years to $13 million in 2019, up from $9.9 million in 2015. Over that time period, median shareholder returns fell 35 percent. Energy was the worst-performing sector in the S&P 500, but shale CEOs received larger raises last year than in all but two of the 11 major industries analyzed. A combination of legal challenges to natural gas pipelines, policies aimed at reducing emissions, and public scrutiny over natural gas could lead to a “measured reduction” in natural gas demand over the next two to three decades, according to a new report from Moody’s Investor Relations. “We’re raising the flag,” Ryan Wobbrock, vice president and senior credit officer at Moody’s Investors Service Inc. and the lead analyst on the report, told E&E News. “We’re talking about a multidecade horizon of risk.” The highly volatile U.S. natural gas benchmark prices are set to trend higher in the coming months amid lower domestic production, higher demand in the winter, and recovering global gas prices in Europe and Asia. Henry Hub prices have been volatile over the past few weeks, but have firmed up at around $2.50/MMBtu, sharply higher than levels from just a few months ago.

Natural gas spot prices fell at most locations this week. The Henry Hub spot price fell from $1.74 per million British thermal units (MMBtu) last week to $1.63/MMBtu this week. At the New York Mercantile Exchange (Nymex), the October 2020 contract expired Monday at $2.101/MMBtu, down 2¢/MMBtu from last week. The November 2020 contract price decreased to $2.527/MMBtu, down 27¢/MMBtu from last week to this week. The price of the 12-month strip averaging November 2020 through October 2021 futures contracts declined 7¢/MMBtu to $2.901/MMBtu.

World Markets

Shares in Europe rebounded as investors snapped up beaten-down stocks, especially in the financials sector. News that President Trump and his wife had tested positive for COVID-19 eroded some of the market’s gains. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 2.02% higher, with major indexes also posting gains. Germany’s Xetra DAX Index rose 1.76%, France’s CAC 40 gained 2.01%, and Italy’s FTSE MIB climbed 1.96%. The UK’s FTSE 100 Index added 1.78%.

Core eurozone bond yields declined overall. The 10-year German bund yield fell markedly as worries resurfaced over the effect of a second coronavirus wave on the economic recovery as well as low inflation. Uncertainty in U.S. politics following an acrimonious first presidential debate and President Trump testing positive for the coronavirus also put downward pressure on yields. Peripheral eurozone bond yields also fell on the week.

Chinese stocks rose slightly in a holiday-shortened week, lifted by several economic readings showing that the recovery was on track, but they ended September with their biggest monthly loss since May 2019. Technology shares outperformed, and Shanghai’s tech-focused STAR 50 Index rose 4.0% ahead of the initial public offering of Chinese fintech company Ant Group, which could raise up to USD 30 billion in a Hong Kong-Shanghai dual listing set to happen in the coming weeks. China’s stock markets are closed from October 1 to October 8 for a national holiday. In fixed income markets, the yield on China’s 10-year sovereign bond edged up four basis points and ended at 3.17%. The yuan strengthened 0.4% against the U.S. dollar and ended the week at CNY 6.79 per dollar.

The Week Ahead

Economic data being released include the ISM services index on Monday, JOLTS job openings on Tuesday, and the September Fed meeting minutes on Wednesday.

Key Topics to Watch                          

• Markit services PMI
• ISM services index
• Trade deficit    Aug.
• Job openings   Aug.
• FOMC meeting minutes                                             
• Consumer credit
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (state program, SA)
• Continuing jobless claims (total, NSA)
• Wholesale inventories

Market Summary

Stock Markets

Stocks fell last week, marking the longest weekly slide since 2019, as investors continue to digest news that U.S./China trade tensions are rising, a coronavirus vaccine won’t be widely available until April of 2021, jobs data came out worse than expected, and expectations are fading that a new fiscal stimulus package will be passed. Mega-cap stocks outperformed the S&P 500 last week, but Microsoft, Apple, Netflix, Amazon and Facebook are all still down for the month. Small-cap and cyclical stocks were hardest hit by the news that a vaccine is further away than initially thought. Ruth Bader Ginsburg’s death has ushered in fears that stimulus talks between Republicans and Democrats could be overshadowed by a political battle for a Supreme Court nominee. A surge in coronavirus cases in Europe has also seen investors shun some European stocks on fears that economic restrictions could be reestablished.

US Economy

Analysts believe the newly emerging bull market will prove durable, but not without growth scares and setbacks, as the range of economic outcomes remains wide (though narrower than in the spring). Following a powerful six-month rally, returns will likely slow, but the gains are not necessarily exhausted, and a correction could prove healthy. While today’s environment is unique, it is helpful to gauge the range of historical outcomes during past early recoveries. The table below provides a historical view of the S&P 500’s performance during the first year of the rebound following bear markets and offers the following takeaways:

Corrections are common, as conditions coming out of recessions are typically wobbly.

Looking at the distribution of market gains, the bulk of gains were mostly captured in the first six months of the first year of the rebound but returns continued to be above average in the second half, even as the pace of gains slowed.

At this juncture, analysts are recommending investors stay balanced and diversified but also opportunistic, deploying available cash towards long-term goals, if appropriate. As the correction plays out, lagging asset classes and sectors (including defensive areas like utilities, staples and health care) can present rebalancing opportunities to fill gaps in underrepresented areas within portfolios.

Metals and Mining

The gold price slumped this week, dipping below US$1,900 per ounce for the first time in eight weeks. It shed as much as 3.1 percent, largely due to a rebounding US dollar. The American greenback is on track for its best performance since April, and that has weighed on the yellow metal’s safe haven appeal. The strong US currency is also dragging on the precious metals as a whole, and all of them were in the red on Friday morning. The base metals did not fare any better, with that sector experiencing a marked decline as well. Gold has sat flat for most of September but spent the last full week of the month trending lower, even dropping as low as US$1,850 midway through the period. Analysts have attributed the decline to risk-aversion sentiment working against the yellow metal. The price drop led to some dip buying, helping the metal hold above US$1,850 on Friday. The silver price began falling early on Monday and has faced little resistance in its decline. Opening the session at US$26.02 per ounce, a 15 percent drop brought the white metal down as far as US$21.89, its lowest point since mid-July. Like its sister metal gold, silver spent the latter half of August and the early September trading flatly. Locked at the US$27 level, the metal made its sharpest decline this week. Silver later saw a small uptick to the US$23 range, and on Friday it was at US$22.93. After slowly edging higher throughout September, platinum was challenged during the last full session of the month. The pressure prompted the metal to slip below US$900 per ounce. Despite the recent value drop, the World Platinum Investment Council (WPIC) still anticipates investor interest in the metal. The palladium price also lost some recent gains when the metal pulled back from its three-week high of US$2,251 per ounce early on Monday. Although the other precious metals benefited from dip buying, palladium was unable to gain momentum on Thursday, and fell to the lowest point for the week on Friday morning. That day, palladium was moving for US$2,091.

Copper prices sank this week as reality began to set in on the markets. It fell 4.3 percent from its Monday value of US$6,837 per tonne on the back of a volatile broad-based selloff in US equities. By week’s end, copper was holding at US$6,538.50 as buying pressure began to re-emerge. Headwinds also pushed nickel lower. But despite its late September selloff, the metal was able to hold above US$14,000 per tonne, ending the session at US$14,179. Zinc also ended the week 4 percent lower, dragged down by a slump in demand. Despite the widespread slip, analysts are expecting the inflationary tone set across economies globally to translate to higher prices for all commodities. On Friday, zinc was priced at US$2,379.50 per tonne. Lead experienced the most modest decline this period, falling from US$1,871.50 per tonne to US$1,856 by Friday. However, lead has been on a downtrend for most of September. After approaching year-to-date high territory early in the month at US$1,984, prices continuously fell and hit US$1,856 this week.

Energy and Oil

Oil prices continue to exhibit a familiar trading pattern, bouncing around in a narrow range. EIA data was bullish last week, showing inventory declines. But that optimism has been offset by concerns about the coronavirus and new restrictions in Europe. Still reeling from historic wildfires, California Governor Gavin Newsom is seeking to end the internal-combustion engine. Governor Newsom ordered state regulators to come up with rules to phase out the sale of new gasoline or diesel vehicles by 2035. The move will have a dramatic impact on in-state refiners and oil producers, but because California consumes nearly 1 mb/d of oil, the impact will be felt globally. However, successful implementation is uncertain as it relates to ongoing legal battles, the makeup of the Supreme Court and the outcome of the presidential election. The UK is aiming to bring forward its ban on gasoline and diesel vehicles from 2040 to 2030. Prime Minister Boris Johnson is expected to roll out the announcement this autumn in an effort to accelerate the transition to electric vehicles. Three out of four oil executives surveyed by the Dallas Federal Reserve believe that U.S. oil production has already hit a peak. The Fed survey also shows business activity rebounding a bit from a low point in the second quarter, but nearly half of the respondents said that WTI would need to rise to $51-$55 for drilling activity to accelerate. Another third said WTI would need to increase to $56-$60, while 15 percent of respondents said it would require WTI above $60. The EIA reported a crude stock draw of 1.6 million barrels for the week ending on September 18. Notably, distillate stocks also declined, falling by 3.4 million barrels. A glut of diesel had become a particular concern in recent weeks, so the drawdown was positive news for oil markets.

Natural gas spot price movements are mixed this week. The Henry Hub spot price fell from $2.06 per million British thermal units last week to $1.74/MMBtu this week. At the New York Mercantile Exchange (Nymex), the price of the October 2020 contract decreased 14¢, from $2.267/MMBtu last week to $2.125/MMBtu this week. The price of the 12-month strip averaging October 2020 through September 2021 futures contracts climbed 3¢/MMBtu to $2.911/MMBtu. The net injections to working gas totaled 66 billion cubic feet (Bcf) for the week ending September 18. Working natural gas stocks totaled 3,680 Bcf, which is 16% more than the year-ago level and 12% more than the five-year (2015–19) average for this week.

World Markets

Shares in Europe tumbled as a surge in coronavirus infections prompted some countries to implement stricter containment measures. Signs that the economic recovery may be stalling also weighed on stocks. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 3.60% lower, while Germany’s DAX Index dropped 4.93%, France’s CAC 40 fell 4.99%, and Italy’s FTSE MIB slid 4.23%. The UK’s FTSE 100 Index lost 2.74%.

IHS Markit’s composite purchasing managers’ index (PMI) showed that the recovery in eurozone business activity lost steam in September as rising coronavirus infection rates and social distancing weakened demand in the services sector. An early estimate of the September PMI came in at 50.1, down from 50.9 in August. (A PMI reading of 50 marks the level between expansion and contraction.) The services portion of the index slipped below 50, hitting a four-month low. The manufacturing index, however, reached a 31-month high on stronger exports.

Stocks in China fell in tandem with the global correction, with the benchmark Shanghai Composite Index and CSI 300 Index dropping 3.6% and 3.5%, respectively, in their biggest weekly loss since mid-July. In fixed income markets, the yield on China’s sovereign 10-year bond shed three basis points to 3.13%. China’s central bank left its loan prime rate, the reference rate for new bank loans, on hold for the fifth straight month, as expected. The yuan weakened to CNY 6.82 per U.S. dollar in a risk-off week characterized by broad dollar strength.

The Week Ahead

Important weekly economic data coming out next week includes personal consumption, the unemployment rate, and the Consumer Confidence Index.

Key Topics to Watch

• Advance trade in goods
• Case-Shiller national home price index (year-over-year change)
• Consumer confidence index                                      
• ADP employment report
• GDP revision (SAAR)
• Chicago PMI
• Pending home sales index                 
• Initial jobless claims (regular state program, SA)
• Initial jobless claims) (total, NSA)
• Continuing jobless claims (regular state program)
• Continuing jobless claims (total, NSA)
• Personal income
• Consumer spending
• Core inflation
• Markit manufacturing index
• ISM manufacturing index
• Construction spending
• Varies  Motor vehicle sales (SAAR)   
• Nonfarm payrolls
• Unemployment rate
• Average hourly earnings
• Consumer sentiment index
• Factory orders Aug.               

Market Summary

Stock Markets

U.S. stocks closed at a six-week low, driven by weakness in technology stocks, which exert an outsized influence on major indexes because of their size. Even though more than 70% of the S&P 500 stocks were higher, the index closed lower for the third week in a row. On the flip side, cyclical, small-cap and international stocks, and oil, all rebounded, finishing positive for the week. The Federal Reserve signaled that it will keep rates near zero through at least 2023 to help the economy weather the health and economic crisis. Economic data showed that the economic recovery is progressing, but the pace of improvement is slowing. In this environment, analysts believe, as last week demonstrated, that well-diversified portfolios can be better prepared to weather volatility.

US Economy

Fall officially ousts summer this week, ushering in traditional seasonal changes (back to school, weather, holidays, etc.) that may pose particular implications for economic conditions over the remainder of the year given the unique environment. Fresh economic readings, politics and the latest Fed meeting were all on stage last week, highlighting three key market matchups that will shape the investment landscape as we advance through 2020.

History shows that over time market performance is driven principally by fundamentals, not elections. Trends in economic conditions, corporate profits and interest rates have been the more powerful and lasting guide for investment values. Analysts contend that the combination of a sustained but gradual economic expansion, a rebound in corporate profits, and an ongoing monetary-policy stimulus – though not immune to presidential policies – will set the broader course for the markets regardless of the election outcome.

Metals and Mining

Gold faced some headwinds this session, leaving gains muted, but poor data paired with a pressured US dollar helped the yellow metal rally late in the week. The other precious metals are on track to end the week in the red; meanwhile, the base metals sector has faced similar challenges, prohibiting the space from locking in gains. After slipping to US$1,938.50 per ounce on — a three-week low — the yellow metal was climbing back towards US$1,950 on Friday. Reports that US jobless claims topped 30 million in August bolstered the metal’s appeal late in the week. Silver’s performance this week was also punctuated by volatility. The white metal trended higher from mid-August until September 11, but then shed some 2 percent and fell to US$26.64 per ounce. This week, silver spiked back above US$27 on Tuesday before dipping back to US$26.52. Analysts see more price growth ahead for silver. Silver was priced at US$26.89 as Friday. Platinum was on track to end the week in the red after prices broke a three-week high, hitting US$968 per ounce before plummeting as low as US$920. An uneven recovery in China’s auto sector is credited with the dip in platinum prices, while the same industry is responsible for palladium’s recent price surge. Despite the recent volatility, platinum is in its pre-pandemic range, but still shy of its year-to-date high of US$1,022. Platinum was moving for US$924 on Friday. As mentioned, palladium prices have been supported by China’s recovering automotive manufacturers. On Monday the autocatalyst metal was selling for US$2,206; a mid-week surge took prices north of US$2,289 before pressure sent the metal lower By Friday, an ounce of palladium was valued at US$2,213.

Copper hit a two year high this week of US$6,813 per tonne. However, the metal’s gain was short-lived, and it fell below US$6,800 shortly after. During a digital event held by Euromoney’s Global Investor Group, panelists discussed the potential for a commodities super cycle coming out of COVID-19. While experts were hesitant to say that will happen, they did note that copper and nickel could see significant upticks as a result of automation, electric vehicles (EVs) and robotics. Nickel shed some of the gains it made early in the week, slipping from US$15,090 per tonne on Monday to US$14,895 by Friday. Zinc also made strides mid-session, climbing to US$2,505 per tonne. It’s expected that prices for the both zinc and lead could spike in the weeks to come due to news that base metals producer Central Asia Metals will curtail production due to a tailings dam leak. The shutdown will cut some 400 to 500 tonnes per week of zinc-in-concentrate and another 500 to 600 tonnes per week of lead-in-concentrate. The shutdown comes as the Chinese economy continues to recover from COVID-19-mandated lockdowns. On Friday morning, zinc was priced at US$2,454.50. Lead was valued at US$1,858 per tonne, a slight dip from Monday’s US$1,873.50.

Energy and Oil

Oil rebounded above $40 at the end of the week after EIA data showed a drawdown in oil storage and Hurricane Sally forced offshore platforms offline. Oil gained more ground after the Saudi oil minister warned speculators gambling in the market. To short-sellers betting on a slide in prices, he said: “Make my day.” He added that OPEC+ will actively and pre-emptively manage the market. The group also pressured laggards to increase their compliance. Goldman Sachs sees Brent rising to $49 per barrel before the end of the year. “We estimate that the oil market remains in deficit with speculative positioning now at too low levels,” Goldman Sachs said.

Democratic Presidential candidate Joe Biden once again reiterated support for fracking in a CNN town hall event in Pennsylvania on Thursday. “Fracking has to continue because we need a transition,” Biden said. “We’re going to get to net-zero emissions by 2050, and we’ll get to net-zero power emissions by 2035. But there’s no rationale to eliminate, right now, fracking.”

Natural gas spot prices fell at most locations this week. The Henry Hub spot price fell from $2.19 per million British thermal units (MMBtu) last week to $2.06/MMBtu this week. At the New York Mercantile Exchange (Nymex), the price of the October 2020 contract decreased 14¢, from $2.406/MMBtu last week to $2.267/MMBtu this week. The price of the 12-month strip averaging October 2020 through September 2021 futures contracts declined 8¢/MMBtu to $2.880/MMBtu.

World Markets

The pan-European STOXX Europe 600 Index overcame concerns about a resurgence in the number of coronavirus cases to eke out a 0.22% gain. However, the major European indexes lost ground: Germany’s Xetra DAX Index slipped 0.66%, Italy’s FTSE MIB tumbled 1.49%, France’s CAC 40 pulled back 1.11%, and the UK’s FTSE 100 Index gave up 0.42%.

The STOXX Europe 50, STOXX Europe 600, FTSE 100, DAX, and Spain’s IBEX were set to rebalance on Friday, with additions and deletions going into effect after the European close.

Hans Kluge, the World Health Organization’s European director, warned that Europe was facing a “very serious” situation as the number of new coronavirus cases reported weekly in Europe hit 300,000 for the first time. Kluge noted that in the past two weeks, more than half of European countries had registered a greater than 10% increase in coronavirus infections. He advised against “even a slight reduction in the length of the quarantine.”

Chinese stocks rallied as a batch of indicators highlighted the country’s economic momentum, and investors hoped for more fiscal stimulus to boost the coronavirus-hit economy. The benchmark Shanghai Composite Index and blue-chip CSI 300 Index each rose 2.4% for the week after two straight weeks of losses. In fixed income markets, the yield on China’s sovereign 10-year bond was broadly flat for the week as of Friday morning despite signs of the improving economy. The yuan strengthened against the U.S. dollar for the eighth consecutive week.

A trio of economic readings offered more evidence of a strong recovery unfolding in China, the first country to successfully control the coronavirus. Retail sales rose 0.5% in August from a year ago, the first year-over-year growth since the pandemic began. Industrial production, seen as the best proxy for gross domestic product, rose a better-than-expected 5.6% in August from a year earlier. Fixed-asset investment in the first eight months of 2020 declined slightly from a year ago, narrowing the 1.6% decline from January to July and in line with forecasts.

The Week Ahead

Economic data being released include existing home sales on Tuesday, the September preliminary Purchasing Managers’ Index on Wednesday, and durable goods orders on Friday.

Key Topics to Watch

• Chicago national activity index
• Household debt (SAAR)
• Existing home sales (SAAR)
• Markit manufacturing PMI
• Markit services PMI
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (federal & state, NSA)
• Continuing jobless claims (regular state program, SA)
• Continuing jobless claims (federal & state, NSA)
• New home sales (SAAR)
• Durable goods orders
• Core capital goods orders

Market Summary

Stock Markets

Stocks declined for the second straight week, as technology stocks experienced their worst pullback since March. There was no single catalyst for the move lower, which left the Nasdaq about 10% below its all-time high reached just six trading days ago. However, broad valuation concerns, skepticism about a compromise on a coronavirus stimulus package before the election, and signs of slowing progress in the labor market all contributed to the negative sentiment. Analysts continue to believe a longer-term recovery is under way, but stocks are likely to enter a more volatile period than the one experienced during the summer months. The path forward could be bumpier and the pace of the recovery slower, and as a result, stocks could start to consolidate some of the recent gains.

US Economy

Last week stocks fell 2.5%, posting their second consecutive week of losses1. We don’t think that last week’s pullback is a sign that the rally has come to an end. But it does highlight the view that we’ve reached a bumpier stage in the economic recovery, prompting occasional downward swings in stocks even as the overall rally continues. Despite the unprecedented, unpredictable and unruly path of the COVID-19 pandemic, we’ve observed a pattern to the economic recovery to date that analysts believe can be defined by three distinct stages:

Stage 1: A severe recession

Stage 2: A sharp early rebound

Stage 3: A slow recovery back to pre-pandemic levels.

Because the economic fundamentals supporting the rally are likely to be less vigorous as we move from Stage 2 of the recovery to Stage 3, analysts expect occasional pullbacks in the equity rally. Maintaining diversification across asset classes, sectors and geographies can help investors reduce the impact of temporary downward swings on long-term portfolio performance within the broader market climb. Despite the bumpier growth path ahead, focusing on achieving financial goals over time rather than on short-lived market moves can help make the economic journey from recession to recovery a smoother ride for investors.

Metals and Mining

Gold remained in the green on Friday after seeing some volatility late in the week. A strengthening US dollar pulled the yellow metal back late in the session, although fears of a prolonged economic recovery continued to benefit the precious metals. The base metals weren’t as lucky, spending most of the second week of September trending lower. Gold was on track to end the week higher after spending the last half of August moving lower. The currency metal started the week at US$1,929.70 per ounce before volatility brought it to US$1,913. A subsequent rally drove the value of the yellow metal to US$1,962.80, a three-week high. Silver also moved higher this week despite experiencing some headwinds mid-session. Its price fell to US$26.04 per ounce on Tuesday and had surged past US$27 by Thursday. After testing the US$29 threshold in August, the white metal has held below US$28. The platinum price climbed 3 percent this session, reversing a steady decline that started in mid-August. After dropping to US$600 per ounce in March, platinum has added 32 percent to its value and is approaching its year-to-date high of US$1,022, set on January 17. On Friday, platinum was selling for US$932.50. While the other precious metals experienced a price slump in mid-August, palladium’s story was the opposite. The automotive metal steadily ticked higher through the first week of September before facing some resistance. Palladium started the session at US$2,197 per ounce, before slipping to US$2,135. By Friday morning, palladium was moving for US$2,208.

Copper felt pressure this session, but even though it ended the week 1 percent lower, the base metal has surpassed its January high of US$6,300 per tonne. After hitting a year-to-date high of US$2,554 on September 1, the zinc price has been on the retreat. The steady run-up that the metal saw in July and August has now consolidated after resistance set in. That said, the price pressure may be temporary as mine supply is still being impacted and seasonal slumps are starting to dissipate, which may set the stage for new price highs. Zinc was selling for US$2,383 on Friday. Nickel also marked its year-to-date high in early September, when its price hit US$15,660. Analysts at Fastmarkets note that the metal’s late-summer bump was likely the result of Tesla (NASDAQ:TSLA) CEO Elon Musk calling for more nickel mining. Lead took a drastic dip this week — the metal opened at US$1,961.50 per tonne and had shed 5.2 percent by the end of week. Despite the dramatic slump, lead values are still holding at their pre-pandemic levels after falling to US$1,578 in May. Friday saw the lead price sitting at US$1,859.

Energy and Oil

Oil prices edged up just a bit during midday trading on Friday, with Brent climbing back above $40 per barrel. Sentiment remains more pessimistic than in previous weeks. Low prices are hitting OPEC+ members, just as they began ramping up production. Should OPEC stay on course with the cuts, hoping that demand recovery picks up next year, enduring low-for-longer oil prices that crush OPEC budgets? Should they cut deeper? ExxonMobil suspended work on a third floating production, storage and offloading vessel in Guyana. The company awaits approval from the government of Guyana for its Payara project. Natural gas spot prices fell at most locations this week. The Henry Hub spot price remained flat at $2.19 per million British thermal units (MMBtu). At the New York Mercantile Exchange, the price of the October 2020 contract decreased 8¢, from $2.486/MMBtu last week to $2.406/MMBtu this week. The price of the 12-month strip averaging October 2020 through September 2021 futures contracts declined 1¢/MMBtu to $2.964/MMBtu.

World Markets

Stocks in Europe rose on the continuing economic recovery, shaking off disappointment that the European Central Bank (ECB) did not announce additional stimulus, as well as renewed fears of a hard Brexit. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.67% higher. Germany’s Xetra DAX Index rose 2.80%, France’s CAC 40 added 1.39%, and Italy’s FTSE MIB advanced 2.21%. The UK’s FTSE 100 Index gained 4.02%, which benefited from weakness in the British pound. UK stocks tend to gain when the pound falls because many companies in the index are multinationals that generate meaningful overseas revenues.

Mainland Chinese A-shares shed roughly 3.0%, taking their cue from the U.S. sell-off. In addition to the U.S. tech stock downturn, news that the Trump administration was considering adding Semiconductor Manufacturing International Corporation (SMIC), China’s top chip foundry, to a list of U.S.-sanctioned companies dealt a blow to investor sentiment. Shares of many Chinese technology companies fell on the news, reflecting SMIC’s importance as a key semiconductor supplier to the domestic market and the company’s close ties to Beijing and the defense industry.

The yield on China’s 10-year sovereign bond was unchanged. The tone of China’s fixed income market remained firm: Term spreads have narrowed since June, as have the spreads between bonds with the same maturity but different credit ratings. Most analysts expect domestic liquidity conditions will improve in September, providing a positive backdrop to the bond market. The yuan rose 1.7% against the U.S. dollar.

The Week Ahead

Economic data being released include industrial production on Tuesday, retail sales along with the Federal Reserve interest rate decision on Wednesday, and consumer sentiment on Friday.

Key Topics to Watch

• Empire State index
• Import price index
• Industrial production index
• Capacity utilization rate
• Real median household income
• Poverty rate (supplemental rate)
• Uninsured rate (health insurance)                            
• Retail sales
• Retail sales excluding autos
• NAHB homebuilders’ index
• Business inventories
• Federal Reserve meeting announcement                                         
• Federal Reserve Chair Jerome Powell press conference                                          
• Initial jobless claims (state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (state program, SA)
• Continuing jobless claims (total, NSA)
• Housing starts
• Building permits
• Philly Fed manufacturing index                     
• Current account deficit
• UMich consumer sentiment index (preliminary)

Markets Index Wrap Up

Stock Markets

The equity markets saw volatility return last week, with Thursday seeing declines of 3% and Friday 1%1. Before this last week, the S&P 500 advanced for four straight weeks, with technology stocks leading the index to a new record high. The strength of the stock market, though, seemingly disconnected from current economic fundamentals, has been supported to date by aggressive fiscal and monetary stimulus and stronger-than-expected economic indicators of future growth. The Department of Labor released data last week showing initial jobless claims coming in at 881,000, beating analysts’ estimates. The economy also added 1.4 million jobs in August, with 10.1% growth in productivity. On the trade front, the U.S. deficit reached a 12-year high.

US Economy

We’re two-thirds of the way through 2020, but the year so far has produced more than its fair share of extraordinary statistics. With Labor Day bringing the unofficial end to an unusual summer, here’s some of the year’s unusual figures and where they are now:  While market volatility increased sharply this year, it was particularly notable in March, which included a single-day decline of 12% — the second-worst day in the last 50 years – as well as two 9% daily gains (the third- and fourth-best days) a handful of days apart. After bottoming in late March, the stock market has been on a steady path higher, with relatively modest fluctuations along the way, including only 22 daily moves larger than 2% during that time. Last week saw a return of volatility, with the market falling 3% on Thursday, as many of the higher-flying segments of the market, such as tech stocks, sold off following a lengthy winning streak. Analysts don’t see this as the beginning of a new broader direction lower for the market, but instead a more normal breather for a market that has been on quite a run.

Metals and Mining

The bears in gold could only manage one day in keeping prices down as the yellow metal bounced back Friday from a brief selloff across markets forced by the shock collapse of U.S. gross domestic product in the second quarter.

“Gold mania continues and after tentatively clearing the $2000 level, traders are starting to doubt whether a profit-taking pullback is in the cards,” said Ed Moya, analyst at New York-based online trading platform OANDA. Spot gold, a real-time indicator of trades in bullion, last traded up $19.47, or 1%, at $1,976.11. It fell a meagre 0.6% in the previous session, touching a session low of $1,939.69 that remained well above the level it attained when it rewrote for the first time this week record highs from 2011. On New York’s Comex, the August futures contract last traded up $28.90, or 1.5%, at $1,971.20 before expiring and going off the board. On Thursday, August fell just 0.5%. For July, Comex gold ended up 9%, for its biggest monthly gain since February 2015. For the year, gold futures are up 28%. Further, December gold hit a record high of $2,005.40 in Friday’s Asian session, before the start of European and U.S. trading. That also means the new front-month for Comex would likely aim for a higher peak in the new week to sate gold bulls pursuing $2,000-territory.

Moya expounded that “Gold will continue to shine bright as real yields continue to fall deeper into negative territory, virus surges will keep economic recoveries limited, and the stimulus trade will not go away until the labor market bounces strongly back.” Silver, which rallied along with gold through most of July, rose 36% for the year, outperforming not just the yellow metal but the entire commodities complex as well. Silver’s front-month contract on Comex, September, last traded up $1.263, or 5.4%, on Friday at $24.625 per ounce.

Energy and Oil

Oil prices hit a rough patch this week, falling back in concert with broader financial markets. The dollar gained strength, which also pushed down crude. The demand rebound is also sputtering. WTI was driven below $40 for the first time since June. Iraq is looking for an exemption from the OPEC+ deal for the first quarter of 2021, raising fears that the group’s compliance may start to slip. A separate report says that Iraq wants a two-month extension on the extra production cuts that it agreed to implement in August and September. Kuwait’s budget deficit is expected to reach $46 billion this year. But oil revenues collapsed after the 2014-2016 downturn and never recovered. Now the country is grappling with tapping its sovereign wealth fund as the days of huge oil revenues appears to be over.  A new report from the European Commission warns that the shortage of critical materials could threaten the EU’s push to become climate neutral by 2050. The EU estimates that it will need up to 18 times more lithium and five times more cobalt in 2030, a figure that rises to 60 times more lithium and 15 times more cobalt by 2050. Natural gas spot price movements were mixed this week. The Henry Hub spot price fell from $2.51 per million British thermal units (MMBtu) last week to $2.19/MMBtu this week. At the New York Mercantile Exchange (Nymex), the September 2020 contract expired this week at $2.579/MMBtu, up 12¢/MMBtu from last week. The October 2020 contract price decreased to $2.486/MMBtu, down 9¢/MMBtu from last week to this week. The price of the 12-month strip averaging October 2020 through September 2021 futures contracts climbed 10¢/MMBtu to $2.973/MMBtu.

World Markets

European shares pulled back in sympathy with the technology-led decline in U.S. equities. However, news of merger talks between Spanish lenders Bankia and CaixaBank helped to curb losses. In local-currency terms, the pan-European STOXX Europe 600 Index ended the week 1.76% lower. Germany’s Xetra DAX Index fell 1.46%, France’s CAC 40 slid 0.76%, Italy’s FTSE MIB declined 2.27%, and the UK’s FTSE 100 Index dropped 2.76%.

An early estimate of eurozone consumer prices showed inflation of -0.2% in August—the first decline since May 2016—heaping more pressure on the European Central Bank (ECB) to increase stimulus. Speculation that the ECB would have to act soon to counter a stronger euro had mounted before the release of the latest data on consumer prices. The euro’s strength is worrying policymakers, who warned that further appreciation would weigh on exports, drag down prices, and hold back the economic recovery, according to the Financial Times newspaper. Evidence of this unease emerged earlier when the euro briefly rallied to more than USD 1.20 for the first time since 2018, prompting ECB Chief Economist Philip Lane to say the euro-dollar rate “does matter” for monetary policy. The consensus calls for the ECB to keep its policy settings unchanged at its meeting next week.

Mainland Chinese stock markets fell, with both the large-cap CSI 300 and benchmark Shanghai Composite Index shedding 1.5% following the overnight sell-off on Wall Street. The yield on China’s 10-year bond increased and ended the week at 3.14%.

The People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) announced simpler rules to facilitate trading of domestic bonds by overseas investors. Under the new measures, foreign investors can access onshore foreign exchange and rate-hedging tools and invest in exchange-traded bond products. Separately, the PBOC said on August 31 that the depositary institutions repo rate (DR) would now be the key short-term reference rate. Following the move, DR rates will become the pricing basis for most money and liquidity products. Along with the medium-term lending facility rate, the new key rate will form the backbone of China’s policy rate system and brings the country a step closer to the rate-setting systems of other major central banks.  

The Week Ahead

Important economic releases this week include Consumer Credit, CPI data, and hourly earnings growth.

Key Topics to Watch

• NFIB small-business index
• Consumer credit
• Job openings
• Initial jobless claims (regular state program, SA)
• Initial jobless claims (total, NSA)
• Continuing jobless claims (regular state program)
• Continuing jobless claims (total, NSA)
• Producer price index
• Wholesale inventories
• Consumer price index Aug.
• Core CPI
• Federal budget

Markets Index Wrap Up