Global markets teeter amid uncertainty

Markets react to recent descent as S&P 500 hits lowest levels since May

By Ahmed Azzam | @3zzamous | 24 October 2023

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Morning
  • Stocks worldwide struggle for traction as S&P 500 hits May-like lows

  • Bitcoin's remarkable rally: Cryptocurrency doubles year-to-date gains

  • Oil industry faces transformation as IEA predicts decade-bound peak in demand

  • Economic insights: Manufacturing Data, Euro-Area PMI, and stagnation fears

  • Bank of Japan's surprise move: Markets await upcoming policy meeting

Asian equities, alongside their US and European counterparts, grappled for a clear direction in the wake of the S&P 500's recent descent to its lowest levels since May. The tides in the Treasuries market, marked by erratic fluctuations, seemed to find some semblance of stability. The ripple effects of the tightening measures implemented by global central banks have yet to be fully realized, and these monetary headwinds are expected to persist well into the year 2024.

Bitcoin doubles its year-to-date gains

Meanwhile, in the realm of digital assets, Bitcoin experienced a remarkable upswing, doubling its year-to-date gains as it surged past the $35,000 mark. This surge in prices was further catalyzed by a court ruling that favored Grayscale's pursuit to establish a spot Bitcoin ETF.

The IEA forecasts a decade-bound peak in global oil demand

Turning to the energy sector, the International Energy Agency (IEA) made a significant proclamation by forecasting that global demand for oil would reach its zenith within this decade, marking a historic first. This revelation came in the midst of the burgeoning popularity of electric vehicles and a moderation in China's economic growth. As a result, oil prices experienced an uptick, with Brent crude surpassing the $90 threshold and West Texas Intermediate (WTI) hovering around $86.

In the realm of natural gas, the IEA revised its expectations, anticipating even lower demand through 2040 than previously thought. In all projected scenarios, gas demand is now expected to peak by 2030, leaving limited room for expansion in either pipeline or liquefied natural gas (LNG) trade beyond that point.

Economic data in focus

Shifting our attention to economic data, it is anticipated that the Manufacturing Purchasing Managers' Index (PMI) likely dipped to 49.5 in October, down from the previous month's reading of 49.8. The Richmond Federal Reserve's factory gauge may also witness a decline, indicating potential challenges in the manufacturing sector.

On the European front, the Euro-area flash composite PMI is projected to inch up to 47.4 in October from its September reading of 47.2, offering an initial glimpse into economic activity for the fourth quarter. Expectations remain subdued for the bloc's economy, with the consensus suggesting stagnation in the latter half of 2023. The UK composite gauge, on the other hand, is anticipated to remain steady at 48.5.

BOJ's unscheduled move

In the ever-volatile world of central banking, the Bank of Japan (BOJ) made an unscheduled announcement of a bond buying operation, marking the fifth such move since the adjustment of its yield-curve control in July. Traders are keenly testing the BOJ's determination ahead of the upcoming policy meeting scheduled for next week.

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