A Week of Ups and Downs in the Global Economy

The global economy has been navigating through uncertainty, and last week had its share of ups and downs across different sectors. Economic data on Monday led to a market plunge, but it was mostly recovered by Thursday. From the growth in US services activity and cautious moves by central banks to changes in oil inventories and mixed company earnings, these key economic indicators and events give us a snapshot of the current financial landscape. Here’s a summary of the major developments that influenced the markets.

Monday, August 5

ISM Services PMI (USD)

In July 2024, economic activity in the services sector expanded. The Services PMI® increased to 51.4% from June’s 48.8%, marking the 47th expansion in 50 months. The Business Activity Index rose to 54.5%, New Orders increased to 52.4%, and the Employment Index grew to 51.1%, indicating positive trends. The Supplier Deliveries Index fell to 47.6%, showing faster deliveries. The EUR/USD finished the day with a 0.4% increase compared to the previous day.

Tuesday, August 6

RBA Interest Rate Decision (AUD)

The Board decided to maintain the cash rate target at 4.35% along with the interest rate on Exchange Settlement balances at 4.25%. Despite a significant drop from its 2022 peak, inflation remains above target, with underlying CPI rising 3.9% over the year to the June quarter. This persistent inflation has stayed above the 2-3% target range for 11 consecutive quarters. The economic outlook remains uncertain, and the path to returning inflation to target has been slow. The AUDUSD exchange rate was up 0.4% compared to the previous day.

Retail Sales (EUR)

According to Eurostat, the seasonally adjusted retail trade volume fell by 0.3% in the eurozone and rose by 0.1% in the EU in June 2024 compared to May 2024. The EURUSD finished the day with a slight increase of 0.2%.

Employment Change q/q (NZD)

In the June 2024 quarter, New Zealand’s unemployment rate rose to 4.6% from 4.4%, and the underutilization rate increased to 11.8% from 11.2%. Employment came in at 0.4%, beating analysts’ expectations of -0.2%. The NZDUSD was up by 0.2% by the end of the day.

Wednesday, August 7

Ivey PMI (CAD)

The Ivey Purchasing Managers Index (PMI), a month-to-month index that measures changes in economic activity across Canada based on data from purchasing managers, came in at 57.6, beating economists’ expectations but falling shy of the previous month’s 62.5.

The exchange rate between the US and Canadian Dollar marked a decrease of 0.2%.

Friday, August 9

Employment Change (CAD)

In July, Canada lost 2,800 jobs, which kept the unemployment rate at 6.4%, its highest in over two years. Despite expectations for job growth, the labor force shrank for the first time since September 2022. The weak job market will likely lead to further interest rate cuts by the Bank of Canada. The price of USDCAD remained unchanged, showing a -0.02% difference.

Crude Oil

In the week ending August 2, there was a 3.7 million-barrel decrease in US commercial crude oil inventories, and gasoline production increased to 10.0 million barrels per day. The average crude oil imports were 6.2 million barrels per day, showing a decrease of 729,000 barrels compared to the previous week. The total commercial petroleum inventories saw an increase of 1.2 million barrels. Additionally, there was a 2.5% rise in crude oil prices compared to the previous week.

The price of XAUUSD has risen by approximately 33% since the start of 2023 and by over 17% so far this year. This recent increase has been attributed to expectations that the US Federal Reserve may start lowering interest rates in September, along with growing geopolitical tensions that have boosted demand for this safe-haven asset.

The precious metal Gold (XAUUSD) concluded the week on Friday with a 0.5% weekly decline.

• S&P 500 declined by 0.13%
• DJIA was down by 0.3%
• NASDAQ 100 increase by more than 0.6%

Company Earnings

Devon Energy’s stock (DEV) increased following strong Q2 results. The company announced earnings of $1.41 per share, surpassing the expected $1.26, and recorded a revenue of $3.917 billion, marking a 13.4% increase over the previous year. Additionally, the company achieved record oil production and expanded its share repurchase program. Devon also raised its full-year oil production guidance by 5% and set Q3 capital expenditures in the range of $870 million to $930 million. The stock saw a 5% weekly increase.

Caterpillar Inc. (CAT) expects higher annual profits for 2024 due to lower manufacturing costs and favorable prices despite predicting slightly lower full-year sales. The company reported strong Q2 earnings, with profit margins exceeding targets. While sales in construction and resources dipped slightly, the energy and transportation segment saw a 20% increase in profit. Caterpillar remains optimistic about the mining sector despite a cautious outlook for the second half of the year. Shares rose more than 5% compared to the previous week.

Disney (DIS) reported its first streaming profit of $47 million since Disney+ launched in 2019, offsetting weak theme park performance. Overall earnings beat expectations, and the film studio saw a $254 million profit. Disney plans to raise streaming prices and may pay up to $5 billion more for Comcast’s Hulu stake, with arbitration concluding in 2025. The stock price decreased by over 4% for the week.

This week’s events painted a dynamic picture of the global economy, highlighting both resilience and emerging challenges. As markets digest these shifts, the trends we’ve seen will undoubtedly influence the strategies and movements that define the weeks ahead. The economic landscape is anything but static, and the coming days promise to be just as intriguing.