Today, the Bank of Canada announced its October monetary policy decision. The expectation was for a 50 basis point rate cut to 3.75%, but there was a possibility of a smaller cut. The actual decision was a 25 basis point cut to 4.0%, which was slightly more hawkish than anticipated.
In the euro area, the focus is on consumer confidence for October. While consumer confidence has improved over the past year, it is still below historical averages. This could be a contributing factor to weak private consumption in the region.
Investors are keeping a close eye on the earnings season as most asset classes have been declining since Monday. Oil and metals, however, have been gaining as unrest in the Middle East prompts investors to seek safe havens.
In the US, equities remained stable as investors considered higher treasury yields, earnings reports, and polls related to the upcoming presidential election. Regardless of the election outcome, US-China relations are expected to intensify. A potential new trade war under Trump could lead to global economic uncertainty and a weakening Chinese yuan. On the other hand, a Harris win would likely continue Biden’s strategy of managed competition.
In the EU, concerns about inflation falling below the ECB’s 2% target, coupled with sluggish growth, are worrying central bank policymakers. There is a debate among market economists about whether inflation is already close to target and if rates need to be adjusted.
In Hungary, the central bank decided to keep its rate at 6.5%, in line with market expectations. Meanwhile, tensions in the Middle East escalated as Israel carried out strikes in Lebanon and Hezbollah announced new attacks on Israeli targets. The situation worsened as the US Secretary of State visited Israel in an attempt to facilitate peace talks.
The demand for metals as safe haven assets continues to drive up prices due to unrest in the Middle East, the US election, and falling interest rates. Gold, silver, and platinum all saw significant gains recently.
In oil markets, futures prices increased following a decline last week. Both Brent and WTI prices rose by 2.2% as investors remained skeptical about the potential for peace talks in the Middle East.
Global equities experienced broad declines, marking the first back-to-back declines in the S&P 500 since early September. This trend is attributed to uncertainty following positive labor market data over the past month and a half. Investors are adopting a cautious approach ahead of the upcoming US election on November 5th.
Overall, the economic and market landscape remains uncertain as geopolitical tensions, central bank policies, and global events continue to influence investor sentiment. The search for safe havens persists, driving demand for certain assets while others experience volatility. Investors are advised to stay informed and monitor developments closely to make informed decisions in these challenging times.
