ECB – Data Dependency in Action
ECB lowered rates for third time this year – hastier retreat in inflation allows it to offer support to economy
- Deposit rate was cut by 25bp to 3.25% – as predicted by market
- Data dependency was applied as the tone in September deemed a cut in October unlikely
- With growth concerns increasing and an admission of downside inflation risks, cuts are likely at every meeting through March 2025
- President Lagarde indicated that a soft-landing, or at least the absence of a recession, was still the base case
- In the meanwhile Eurozone CPI slid to 1.7% in September year on year…
Gold and Silver – Where next?
Gold touched two new all-time highs during last week, closing at $2,721.2 (+32% in USD YTD)
- Funds investing in gold recorded their highest inflow in 12 weeks last week ($1.2bn) and being ‘long gold’ is now the second busiest trade in the market
- In the run-up to the BRICs summit (22-24 October), it is interesting to note the sharp increase in gold purchases by these countries. The accumulation of gold is strongly linked to America’s decision to freeze Russia’s dollar assets
- Silver has been rallying as well with one analyst predicting that prices for the metal will reach $40 an ounce or more before the end of the year, as supplies continue to come up short of demand
Luxury sector: Still in troubles!
Last week, the eagerly awaited figures of global luxury market leader LVMH were announced. The figures show a slowdown in global sales of luxury products:
- Growth deteriorated sequentially in all geographies – particularly in China & Asia in general
- Organic sales growth turned negative in Q3, a first since 2009, if we exclude the Covid period in 2020
- The impact of exceptional tax hikes, especially in France, is likely to weigh further on earnings
- For the coming month we expect fix cost under-absorption drag on EPS forecasts and excess inventories could be a theme again
China: More Supportive Policies
Chinese policy makers have unveiled a raft of new measures aimed at reviving the stock market:
- The PBC and the 7-day Reverse REPO rate cut are positive for mid-sized and large banks
- Notably the government also plans to inject core tier-1 capital to the big six state-owned banks to help shore up the banking system
- The measures also included more support to the property sector, though not any significant increase in destocking funding or debt restructuring
Seasonality: Impacts & Opportunities
Real Phenomenon or Mere Correlation?
- Seasonality refers to recurring, predictable patterns in market performance tied to calendar events
- Influenced by economic, behavioral, and psychological factors, supported by empirical studies
- Gone Fishin’ Effect: Summer trading slows as vacations reduce liquidity and market activity
- Caveats of seasonality: Leveraging these seasonal patterns can enhance tactical asset allocation, although macroeconomic shifts and unforeseen global events can disrupt these patterns, urging for flexibility in portfolio management
Key Seasonal Patterns
- “Sell in May and Go Away”: Markets often underperform from May to September due to lower volumes and summer vacations
- “Santa Claus Rally”: Bullish trend in the last quarter of the year, due to optimism and institutional rebalancing
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