Multi-Asset Weekly: Global Equities Dip Amid a Cooling Labour Market
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Chief Investment Office9 Sep 2024
  • Equities: Markets dip on concerns over US economic strength as labour market momentum slows down
  • Credit: Recent US job figures boost rate cut prospects; investors should be cautious of credit risks
  • FX: US Presidential debate on 10 Sep pivotal for USD
  • Rates: Longer-term yields resistant to heading lower despite the rout in equities
  • The Week Ahead: Keep a lookout for US Change in Initial Jobless Claims; Japan Industrial Production
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Equities: Slowdown concerns weigh on markets

US labour market data fails to reassure investors. US job openings fell to its lowest since the start of 2021 and nonfarm payrolls (NFP) increased by 142,000 jobs in August after a downwardly revised 89,000 increase in July, the smallest gain since Dec 2020. These add to recent data which show the labour market continues to cool, reigniting growth concerns. The S&P 500 Index suffered its worst weekly drop in 18 months, falling 4.2% while the Dow Jones and NASDAQ Composite lost 2.9% and 5.8% respectively. Europe stock markets ended the week lower with the STOXX 600 dipping 3.5% while the FTSE declined 2.3%. Japan equities were not spared as the TOPIX and Nikkei 225 slipped 2.0% and 2.1% respectively, while the yen’s strength posed headwinds for Japan’s export-oriented companies. China equities retreated as investors digested weak corporate earnings and sluggish economic data. The Shanghai Composite tumbled 2.7% for the week, while the Hang Seng declined 3.0%.

Topic in focus: Gold miners to shine as a leverage play on gold. The recent bullish trend in gold prices is expected to benefit gold mining companies significantly. As a leverage play on gold, gold miners tend to see amplified gains from rising gold prices with profit margins expanding alongside increased production values. With the YTD average gold price at USD2,265, up from last year’s average of USD1,943, gold miners are poised for substantial margin growth.

Inflation, however, is a double-edged sword for the sector – in particular for miners. Driven by global inflationary pressures, the 2022-2023 period saw surging costs and rising wages amid persistently high interest rates. Given that inflation and interest rates have moderated in recent months, cost pressures on gold production have eased. This should support margin expansion, enhancing profitability for mining companies.

As a relatively niche sector, gold miners have quietly outperformed this year with expectations of lower inflation, potential Fed rate cuts, and a weakening US dollar bringing positive tailwinds for the sector. As gold prices continue to rise on the back of haven demand as macroeconomic and geopolitical uncertainties rise, gold mining stocks are likely to attract more fund flows, especially as investors and fund managers seek to capitalise on the positive momentum of gold prices.

Figure 1: Margin expansion on falling cost inflation

Source: Bloomberg, DBS



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