Oil Prices Rise on Escalating Middle East Tensions

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Main Content:

1.    Major indexes weekly performance 

2.    U.S stocks weekly wrap 

3.   S&P 500 sector index weekly/month performance 

4.    China/Hong Kong stocks weekly wrap 

5.    Singapore stocks weekly wrap 

6.    Major indexes weekly chart and technical support & resistance levels

U.S.

For the week of Oct 4, U.S three major indexes closed higher for the volatile week, thanks to a monster Sep jobs growth data released on Friday, though the same data sent odds of a 50-basis point rate cut next month to zero in futures trading.

After a strong three quarters of the year, with the S&P 500 up over 19%, stock markets began the fourth quarter on a volatile note. This was in large part because of elevated uncertainty around four key areas: The U.S. labor market, port strikes on the East Coast, tensions in the Middle East, and the looming U.S. presidential election. Refer to below major indexes performance table for the month and the week.

Major indexes monthly performance for September

Key highlights for the week and next:

1.    U.S. labor market was perhaps the biggest upside surprise for the markets in the week. The U.S. nonfarm-jobs report for September on Friday indicated that not only did jobs added well-exceed expectations, coming in at 254k versus forecasts of 150k, the unemployment rate also ticked lower, from 4.2% to 4.1%. Last month's total jobs added was also revised higher, from 142k to 159k. 

2.    Strong labour report impact on Fed rate cut: After the labor-report data was released, markets immediately reacted, pushing Treasury bond yields sharply higher and pricing in rate cuts of 0.25% rather than 0.5% for either the November or December meeting this year. Overall, we continue to see the Fed gradually bringing interest rates down toward the 3.0% - 3.5% range through next year, which should be supportive of both consumer and corporate spending. 

3.    Geopolitical tensions also escalated in the Middle East early this week, as Israel faced an Iranian missile strike and deliberated retaliation. From a market perspective, the immediate response to the escalation was a rise in oil and commodity prices, as well as sharp move higher in the VIX volatility index. However, safe-heavy assets such as gold and Treasury bonds have largely reversed to moving back lower. 

4.    Inflation data ahead coming Friday on Oct 11.

 

SPX sectors in play

Six out of the 11 SPX sectors closed with gains for the week. Energy(XLE) and Financials(XLF) stocks outperformed, while Materials(XLB) and Consumer Staplers(XLP) stocks lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

The three major indexes had a strong rally after a surprising Sep jobs data released before market open on Friday, the indexes since recovered all their losses earlier in the week and closed positive for the week. Sentiment turned bullish and bulls are still in charge by now. Click below three indexes for their weekly charts.  

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

 

China/HK

China stocks surged in a holiday-shortened week as optimism about Beijing’s comprehensive support measures offset disappointing data. The Shanghai Composite Index(SSE) gained 8.06% and the blue chip CSI 300 added 8.48%. In Hong Kong, the benchmark Hang Seng Index rallied 10.2%. (Refer to the above weekly performance table). Markets in mainland China were closed on Tuesday for the National Day holiday and will reopen on Tuesday, October 8. Hong Kong markets were closed Tuesday but reopened Wednesday.

Key highlights for the week and outlook for China/HK:

1.    China’s factory activity contracted for the fifth consecutive month amid weak demand. The official manufacturing Purchasing Managers’ Index (PMI) rose to an above-consensus 49.8 in September from 49.1 in August, according to the country’s statistics office but remained below the 50-mark threshold separating growth from contraction. The manufacturing PMI has now been in contraction for all but three months since April 2023, according to Bloomberg. The nonmanufacturing PMI, which measures construction and services activity, fell to a lower-than-expected 50 in September, its lowest level in 21 months. 

2.    Separately, the private Caixin/S&P Global survey of manufacturing activity eased to 49.3 in September from the prior month’s 50.4, its lowest reading since July 2023 and below economists’ forecasts. The Caixin services PMI fell to 50.3 from 51.6 in August but remained in expansion. 

3.    The value of new home sales by the country’s top 100 developers fell 37.7% in September from a year ago, accelerating from August’s 26.8% drop, according to the China Real Estate Information Corp. However, market sentiment improved after three of China’s largest cities relaxed homebuying restrictions on the back of the central government’s extensive stimulus package unveiled the prior week. On Sunday, Guangzhou became the first so-called Tier 1 city to remove all restrictions on home purchases. Shanghai, China’s financial center, and Shenzhen, the country’s tech hub, also announced reductions in minimum down-payment ratios for first and second homes in an effort to stoke demand.

Click below SSE and .HSI indexes for their weekly charts. 

SSE weekly chart

.HSI weekly chart

Singapore

STI index (STI) closed with a modest 0.44% increase, bringing its YTD performance to 10.77%. The index displayed a mixed performance across its component stocks, with notable divergences between top weekly gainers and losers. Seatrium was top gainer with 15% weekly gain, possible implication of crude oil price surge. The three local banks saw obvious divergence this week, DBS gained 1.17% while UOB and OCBC declined 1.12% and 1.46% respectively. Refer to below index stocks weekly performance.

Click below for STI weekly chart.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.