Key Stories from the past week: Conflict, Central Banks, and China

It made for a busy week with different events around the globe all vying for market reaction. China’s stimulus story dominated APAC, tensions in the Middle East had far reaching market consequences, while comments from the BoJ, BoE, and Fed all warrant attention too. This meant Saxo client flow was spread across multiple different asset classes, sectors and geographies. More below on this week’s key stories.

Conflict heats up
This week, as much as any so far, saw the conflict in the Middle East affecting broader market sentiment as attacks were stepped up on all sides and threaten to drag more actors into the conflict. Crude prices ramped, the broad Bloomberg Commodity Index is back to levels not seen since late June on geopolitical risks and China’s efforts to stimulate the economy. The safe haven currencies of USD, JPY and CHF came into play.
Further geopolitical tensions: Is your portfolio ready?

Oil prices rally
Oil prices have rallied more than 8% this week as China’s stimulus and Middle Eastern tensions push up prices. The move is on track for oils biggest weekly gain since March 2023. Futures remain the favored product used by Saxo clients to get exposure to the oil market although energy stocks have also seen attraction. Onward price direction hinges on potential retaliation from Israel while elevated prices raise concerns about prolonged inflation.
Israel, Iran Oil Risks Will Test the Market

China buoyed despite market holiday
Last week’s stimulus measures kickstarted a surge for Chinese assets, and despite Chinese markets remaining closed for Golden Week, that didn’t stop investors using HK to get exposure. Saxo clients mainly used Hang Seng Index CFD and Futures. The view on the stimulus is somewhat divided with some reasoning authorities have considerable resources to drive the economy, while others say the measures do little to mitigate the real structural issues. For clients interested in investing in the space but remain uncertain, one useful strategy could be dollar-cost averaging (DCA) explained in the link below.
Is China's Stock Market Surge Sustainable? How Investors Can Navigate the Risks and Opportunities

BoE falling into line
The British pounds recent run of strength was brought to an abrupt end after dovish comments from BoE Governor Bailey. He said the bank could be a "bit more aggressive" and “a bit more activist” in cutting rates provided the news that inflation continues to be good. Markets are now expecting the Bank of England to cut rates by 25bps on 7th November.
GBPUSD broke through support at 1.3137

Next week includes FOMC minutes from last month’s meeting where the FED decided to cut 50bps (Weds). September CPI data is due from US (Thurs), Germany (Fri). Germany’s August Factory orders (Mon) and Industrial production (Tues) may be poured over more than usual considering the recent run of poor data. Earnings season will kick off with Pepsico (Tues), Delta Airlines (Thurs) and major US banks JP Morgan, Wells Fargo, Bank of New York Mellon along with Blackrock (Fri). Further geopolitical developments will also be keenly watched over.