Week 43 Market updates: US slowdown, Euro weakness, China’s stimulus

22 October 2024

Abrar Bhatti

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How will the US slowdown, Euro weakness, and China’s stimulus affect your trading strategy? Exness expert Abrar Bhatti breaks down the key market moves you need to watch for week 43.

Global markets are reacting to a variety of key developments this week, from a potential US economic slowdown to China’s fresh stimulus measures and Eurozone deflation risks. For traders, these updates across the US, UK, Germany, and China present critical opportunities and risks across major asset classes, including stocks, forex, and commodities. Whether you're eyeing moves in the dollar, euro, or Chinese yuan—or positioning yourself for volatility in real estate and property-linked stocks—understanding these trends will be essential for successful CFD trading strategies. Let’s break down how these news items may impact markets.

US leading index signals slowdown

The US Leading Economic Index (LEI) fell by 0.5% in September, marking its seventh straight monthly decline. This follows a 0.3% drop in August and a 2.6% slide over the six months from March to September 2024. The primary drivers were a drop in new orders and a widening yield spread, signaling that while the US economy may not be heading for a full-blown recession, a slowdown seems likely.

Impact on markets: This data may put pressure on US equities, especially cyclical stocks that are sensitive to economic growth. Investors could shift toward more defensive sectors like utilities and healthcare, which tend to perform better in slowing economies. The US dollar might remain stable, benefiting from its safe-haven appeal, but traders should watch for volatility in US Treasury yields. CFD traders may want to consider short positions on growth-sensitive sectors while maintaining caution around volatility.

UK housing market cools as asking prices rise marginally

In the UK, asking prices for homes increased by just 0.3% in October, well below the usual 1.3% rise seen during this time of year. While buyer demand remains robust, the increase in available properties—up 12% year-over-year—has tempered price growth. Uncertainty surrounding upcoming tax policies and the government’s budget has also made buyers more cautious.

Impact on markets: The slower growth in housing prices may ease concerns about overheating in the UK property market, but it could also weigh on real estate-linked stocks and sectors. Mortgage lenders and homebuilders may feel the pressure from cautious buyers, which could ripple through to the broader UK equity market. In the forex space, the British pound could see slight weakness as this housing data reinforces concerns over economic fragility. Traders could find opportunities in CFDs related to UK housing or in GBP-based currency pairs.

Euro weakens as Germany’s PPI signals deflation risks

Germany’s Producer Price Index (PPI) dropped by 1.4% year-over-year in September, steeper than the previous month’s 0.8% decline. This deflationary signal has raised concerns across the Eurozone, with speculation growing that the European Central Bank (ECB) may be forced to consider further rate cuts to counteract a slowing economy.

Impact on markets: The euro’s recent weakness is likely to continue, especially if the ECB hints at further rate reductions. Eurozone stocks could face pressure, particularly in export-heavy industries that depend on stronger consumer demand. For forex traders, the EUR/USD pair may present shorting opportunities as the euro remains under pressure against a strengthening US dollar. Similarly, traders in European indices could explore short positions, particularly in sectors sensitive to global demand and interest rates.

China cuts rates and stimulates property sector

China is pushing forward with a fresh round of stimulus aimed at stabilizing its property sector and boosting consumer spending. The People’s Bank of China (PBoC) lowered the one-year Loan Prime Rate (LPR) to 3.10% and the five-year LPR to 3.60%. Alongside these rate cuts, the PBoC also reduced the reserve requirement ratio by 0.50% and the seven-day reverse repo rate by 0.20%. These actions are intended to shore up economic growth as China faces ongoing headwinds.

Impact on markets: China’s stimulus efforts could provide a lift to Chinese equities, particularly in the property and consumer sectors, which are direct beneficiaries of these policy moves. However, the longer-term outlook remains uncertain, especially as global growth slows. The yuan could weaken further as interest rates are cut, making forex markets a key area of focus for traders. Those with exposure to commodities, particularly metals like aluminum and steel, should watch for increased volatility as China remains a major consumer of these materials. CFD traders might consider long positions in Chinese equities or short positions on the yuan against stronger currencies like the US dollar.

Key takeaways for traders

  1. US economic slowdown: The US LEI data suggests a potential slowdown, which could weigh on growth-sensitive stocks but boost defensive sectors.
  2. UK housing market: Modest price growth and increased housing supply may pressure real estate stocks, while the pound could experience mild weakness.
  3. Eurozone deflation risks: Germany’s negative PPI reading could keep the euro under pressure, with potential rate cuts from the ECB looming.
  4. China’s stimulus push: China’s rate cuts aim to boost property and consumer spending, creating opportunities in Chinese equities but posing risks for the yuan.

With these developments shaping global markets, traders should remain vigilant and ready to adapt their strategies to capitalize on emerging trends. Whether you're focusing on currency pairs, equities, or commodities, flexibility and a careful read on economic signals will be crucial in navigating the volatility ahead.

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