Even though the US government is shut down, stock markets continue to reach record levels. Investors remain positive on the expectation of interest rate cuts, while uncertainty prevails in the economic outlook. Here are the highlights of the week:
1/ Will Dollar Bears Return?
The dollar started the last quarter of the year relatively strongly. Although it lost 10% of its value throughout the year, it closed the third quarter with a 1% increase. Weakening employment data is increasing expectations of a Fed interest rate cut. According to analysts, the yen and euro, in particular, may strengthen against the dollar.
2/ Market in Data Shortage
Data flow is limited due to the US government shutdown. However, bond auctions and corporate earnings reports will be the focus of the markets. Delta Airlines and Levi Strauss are the standout companies of the week.
3/ Recovery in the Pharmaceutical Sector
The agreement between Pfizer and the US government has been a lifeline for healthcare stocks. The S&P healthcare index rose 5.6% this week; gains in Europe reached 7.6%. This development could be the strongest weekly rise in pharmaceutical stocks since 2008.
4/ Oil Under Pressure
Oil prices have fallen to levels around $65 due to increased supply and weak demand. OPEC+ will meet this weekend, and production restrictions are expected to be lifted quickly. Geopolitical risks will continue to be a determining factor for prices.
5/ Interest Rate Cut in New Zealand
A rate cut by the RBNZ is almost certain. September data showed the economy contracted by 0.9%. While money markets are pricing in a 0.25% cut, the probability of a 0.50% cut is also rapidly increasing.
