A Look at the Day Ahead in U.S. and Global Markets

By Mike Dolan

With tensions in the Middle East rising, U.S. port workers on strike, and global industries facing challenges, the last quarter of 2024 appears to be more uncertain for world markets compared to the calmer first nine months.

The fourth quarter began with renewed conflicts in Gaza and Lebanon, leading to escalated tensions between Israel and Iran. This situation has slightly unsettled energy markets, prompting some cautious risk management from investors.

Iran announced an end to its missile attacks on Israel, while both Israel and the U.S. have vowed to retaliate against Tehran, raising fears of broader conflict.

Market reactions to this geopolitical shift have been limited so far. Crude oil prices rose above $70 per barrel, returning to levels seen the previous week, despite significant year-on-year declines affecting global inflation.

No major changes in OPEC policy are anticipated, although output is set to increase by 180,000 barrels per day starting in December. Saudi Arabia has warned that if production targets are not met, oil prices could fall to $50 per barrel.

In the U.S., ongoing port strikes may distort economic data and inflation readings at a crucial time for decision-makers, further complicated by challenges faced by European automakers. The global industrial economy appears to be struggling, as illustrated by recent U.S. and global manufacturing surveys.

JPMorgan’s global factory index indicates substantial contraction, bordering on the worst downturn since the pandemic’s aftermath, although some U.S. data reflects improvements in new orders and declining input prices.

This week is pivotal for labor market data, with the ADP payrolls report set for release alongside further Federal Reserve commentary. Despite geopolitical tensions, interest rates and stock markets remain relatively stable, with the S&P 500 only slightly down from record highs.

Treasury yields have returned to just above 3.75% after brief fluctuations. Gold prices remained unchanged, while the dollar gained slightly, particularly against the weakening euro, reflecting concerns about the European economy and anticipated moves by the European Central Bank.

Market sentiment on Wednesday was cautious, with Asian stocks mainly declining, particularly in Japan. However, Hong Kong markets showed optimism following recent economic stimulus efforts.

In corporate news, Nike retracted its annual revenue forecast amid leadership changes and anticipated challenges during the holiday season, causing a 6% drop in its shares.

Upcoming Key Developments:

• U.S. September ADP private sector payrolls report
• OPEC+ meeting to review oil policy
• Fed and ECB officials scheduled to speak
• High-profile meetings between European leaders
• U.S. corporate earnings releases from various companies.

(By Mike Dolan, editing by Gareth Jones; [email protected])