U.S. businesses in China are seeing a drop in optimism, with only 47% having a positive five-year outlook, the lowest since 1999, according to an AmCham Shanghai survey. Key challenges include geopolitical tensions, China's slowing economy, and tough domestic competition, contributing to record-low profitability. The uncertain U.S.-China relationship and regulatory hurdles are causing 40% of U.S. firms to shift investments, mainly to Southeast Asia and India. Meanwhile, China plans to gradually raise the retirement age starting in 2025 to address demographic challenges, though public concerns remain given the economic slowdown.
EQUITY
Stock indexes continued higher, with the Nasdaq championed at 1%. Slightly higher producer price index data did not faze investors that continued to forecast a 25-basis point rate cut. All sectors closed higher, led by communication services, with Warner Bros. Discovery and Kroger among the top performers. Moderna lost 12% after planning to cut back on new research.
GOLD
Gold prices reached record highs right after producer inflation data was released, increasing confidence in rate cuts that drove up safe-haven demand. Dollar index below 101 and declining Treasury yields further supported the rally. While industrial metals like copper also saw gains, HSBC analysts warn of growing downside risks for commodities due to slowing global demand and geopolitical uncertainties. However, supply-side constraints, ongoing geopolitical risks, and the global energy transition continue to provide support for various commodities, particularly those essential for renewable energy technologies.
OIL
Oil prices had a nice short rally, with prices rebounding due to supply disruptions caused by Hurricane Francine in the U.S. Gulf of Mexico and a weaker dollar. However, major organisations and Wall Street banks have revised their oil consumption projections and price targets downward, with demand problems in China and increased production from non-OPEC countries. While there's potential for a short-term price rally due to record-low net long positions, analysts at BCA Research advise reducing exposure to oil, as market fundamentals suggest continued price declines over the next six to nine months.
CURRENCY
The dollar fell to its lowest level this year against the yen and other major currencies with renewed interest in a potential 50 bps cut next week. Comments from former New York Fed President Bill Dudley, suggest a larger rate cut is still on the table. The euro and pound also enjoyed upside against the dollar, with the euro rising after the ECB's recent rate decision and President Christine Lagarde's comments lowered expectations for an October rate cut.
