Gold in the shadow of inflation and interest rate The alarm of debt in the heart of the artificial intelligence boom
Higher-than-expected inflation in the US and worries about the debt of artificial intelligence companies changed the course of the week's trading. Oil prices rose, tech stocks retreated and bond buying helped the ounce of gold return to higher levels.
World Economy - Daniyal Rahimi; The beginning of the week started with concern about the Saudi attacks and the security of Hormuz. Meanwhile, higher-than-expected US inflation bolstered the possibility of higher interest rates; Then pressure on chip suppliers' debt made the cost of financing the AI boom a major issue for stocks.
Selling stocks was accompanied by buying of government bonds, the dollar index retreated from its peak and global gold partially offset the decline. The words from monetary authorities also showed sensitivity to inflation, along with caution about the timing of the next hike.
Gold spent the first three days of the week with a decline; A strong dollar and high oil prices kept inflation and monetary tightening concerns high. On Wednesday, CPI lowered the cash ounce to $4073; On Thursday, with the return of the bond market, a large part of the loss was compensated. In Friday's survey, the price is close to $4157 and about 0.9% below the previous week.
The drop in bond yields and lack of interest rate pressure in the short term supported gold. After the CPI, the market expected a hot producer inflation. As a result, Thursday's data did not prevent the supportive effect of the decline in the dollar index and yields; However, the possibility of an interest rate increase in the near future still limits the rise of gold.
Oil in the shadow of going back and forth between more supply and fresh attacks
Hopes of more Russian diesel supply and an energy truce between Moscow and Kiev initially pushed oil down earlier in the week. The attacks on Saudi Arabia and doubts about the realization of the ceasefire turned the direction of the prices; The attack on the Aramco building and the threat to the ships in Hormuz also intensified the supply concern.
The Russian deal was aimed at product supply, while the Middle East threat was related to the transportation of crude oil. OPEC+ September production growth, Saudi pipeline expansion plan and accelerated release of emergency reserves bolstered supply hopes.
On Thursday, an 8.6-million-barrel drop in U.S. inventories after a hurricane-induced production disruption provided particular support for Texas crude. Brent futures price was 105.3 and WTI was around 97.4 dollars. These two oil indices registered 0.6 and 6.1% growth respectively in the period from the beginning to the end of this week.
In an Oct. 11 note, Goldman Sachs raised its December Brent forecast to $85 to $90, but kept the baseline scenario of a gradual decline in prices as supply adjusts. The Middle East LNG disruption has intensified the competition between Europe and Asia for alternative cargoes. Reuters warned on October 12 that Europe's low inventories, even with a normal winter, would keep the need to buy for next year high.
copper and silver; Friday recovery, after weekly pressure
Copper rose earlier in the week, but an agreement to avert a strike by Escondida supervisors eased supply concerns. Expectations of higher interest rates and a sell-off in stocks also weighed on the orange metal, an analyst told Reuters.
The Comex copper index, despite Friday's rebound, was around $6.63 per pound, nearly 1 percent below the previous week. After crossing $61 on Monday, silver fell heavily on Wednesday.
The Wall Street Journal cited surprising inflation, a stronger dollar and higher interest expectations as pressure factors. A subsequent recovery took the spot price to around $57.8, but the weekly drop remained close to five percent.
US stocks; Chipmaker's strong profits, customer debt worries
On October 12, Goldman Sachs improved its quarterly global stock outlook based on profit growth; But Wednesday's selloff tested that optimism. On Friday, the S&P 500 was near 7,741 points, down 0.9 percent for the week, and the Nasdaq was near 26,553 points, down nearly 3 percent.
On Thursday, a shift in money to healthcare and consumption helped the S&P improve; Nasdaq's greater focus on technology has weighed on selling pressure. Corevio, a lessor of processing capacity backed by Nvidia, became the focus of concern.
Reuters reported about the debt of 50 billion dollars, the yield of one of this institution's bonds exceeded 16% and the weekly loss of more than 22% of the stock in Friday trading. Concerns about credit risk and new financing spread to Nabius and other data center builders; The problem is getting enough income to cover debt and investment.
TSMC's official report showed a nearly 69% growth in third quarter profit compared to the previous year. Entropic still had high revenue growth, but its pace had slowed down; The increase in consumption should compensate for the drop in the price of services.
JP Morgan also considers the risk of the main concerns to be the transfer of interest rate pressure to demand, profit margins and profitability estimates of companies.
The status of the dollar index and developments in the euro
DXY rose to 102.94 with CPI after recording the 18-month high; Then falling yields and artificial intelligence concerns pushed it back. On Friday, the index was around 101.6 and about 0.6 percent below the previous week. ING's Rhys Turner told Reuters a more sustained drop in the dollar would require further cuts in short-term rates.
Euro returned to $1.1254; Nearly 0.5% weekly growth, with France's debt problem lingering. In its October 12 analysis, ING cited the lack of political urgency to curb France's deficit as a pressure factor and set a three-to-six-month euro target of $1.13. The October 13 note of this bank also considered the ECB's December interest rate hike as premature; Therefore, the additional support of this route is limited and the financial risk of France remains.
ING warns that the deepening of the debt crisis could also limit the ECB's room for continued tightening.
Yen; A possible pause with the continuation of the interest rate hike
The drop in USD/JPY to 157.83 was equivalent to a 0.3% weekly strengthening of the yen. The Bank of Japan raised rates to 1.25 percent in September, but the gap with the U.S. remains wide. ING sees Japan's growth improving; At the same time, expensive energy and a weak yen have raised the cost of imports.
Reuters reported on Friday that many Bank of Japan officials wanted to review the impact of previous hikes for the October 29-30 meeting. At the same time, Kazuo Ueda emphasized on continuing to raise rates and contain inflation. The discussion is about the time of the next action; The yen is still sensitive to the continued decline in US bond yields and the pace of action by the Bank of Japan.
In comparison between October 9 and 16, the yield of maturities of one to six months increased slightly and one year decreased slightly. The quarter was close to 4.18%; This part of the curve is consistent with the expectation of interest remaining at high levels.
In the two-year to seven-year, the decline was greater: the two-year was near 4.72%, down about seven basis points, and the five-year was near 4.88%, about 14 basis points lower than the previous week. T
Adeel's expectation of an immediate increase in October and buying bonds while selling stocks also affected this sector.
10 years reached 5.08% and 30 years reached 5.42%; Weekly drop of about 17 and 19 basis points. The ten-year and two-year gap was reduced from 45 to 36 basic units; The slope was still positive, but the curve became flatter.
Federal Reserve Board member Christopher Waller on Tuesday attributed the earlier rise in yields to stronger economic growth and subdued inflation expectations.
In the second half of the week, the growth concern intensified. On October 16, JP Morgan considered the long-term purchase as a search for security against the drop in stocks; Therefore, the return of the defensive role of bonds coincided with maintaining the expectation of higher interest rates.
Federal Reserve; Common sensitivity to inflation, differences in the urgency of action
The minutes of the October 7 meeting warned about the contagion of energy costs and artificial intelligence demand pressure; Officials' assessment of the durability of these pressures is still different. New York Federal Reserve President John Williams said Tuesday ahead of the CPI that another increase this year is likely; At the moment, he did not see the need for an increase in 2027 and did not consider the economy to be hot in general.
San Francisco Federal Reserve President Mary Daly on Wednesday said more hikes were likely, but she was not in a rush for October. Michelle Bowman, the Federal Reserve's deputy supervisor, also wanted a chance to evaluate the data.
Austin Goolsby, president of the Chicago Federal Reserve, was concerned about continued service inflation and the economy being overheated by AI investment.
Cleveland Federal Reserve President Beth Hammock warned on Thursday that sharper interest rate hikes may be needed if inflation expectations worsen.
Federal Reserve Chairman Kevin Warsh said on Friday that AI investment would boost demand and price pressure before increasing production capacity; He was optimistic about its productivity in the medium term, but did not foresee the October decision. The result of the positions is to maintain the option of more strictness with caution in the timing.
stabilization in October; Increase in December
According to Friday's CME FedWatch live table, the market expects rates to remain in the 3.75-4% range at 85.1% and a 14.9% increase at the Oct. 28 meeting.