NAGA Weekly Recap October 9 – October 13 — 2023

In this week's financial update, we delve into significant market shifts. From the decreased consumer demand due to rising oil prices to the nuanced dance between the EUR/USD pair amidst global economic pressures. As central banks make pivotal decisions and oil prices sway economies, we're here to break it all down for you.

Dive in for insights on these and more ⬇️

The US inflation report for September showed similar price increases as in August

The US inflation report revealed a decline in price increases when excluding volatile categories like food, energy, and shelter. Despite this, the Federal Reserve still faces challenges in achieving its 2% inflation target. Market predictions indicate a reduced likelihood of a rate hike in November, but a possible increase in December. Michael Pearce of Oxford Economics stated that inflation's underlying trend is still downward.

Recent job reports show a robust US labor market, but wage growth has been slow. Elevated yields and the Fed's prolonged interest rate position have impacted stocks, with the Dow Jones, S&P 500, and Nasdaq all experiencing declines. Fed officials suggest that market trends might deter a November rate hike.

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US electric-vehicle sales hit record high, Tesla ($TSLA) loses market share

Electric vehicle (EV) sales in the US surpassed 300,000 units in the third quarter, marking a first-time achievement. However, Tesla's market share decreased to 50% from 62% earlier this year, despite initiating a price war to strengthen its position in the EV sector. The upcoming Cybertruck launch might boost Tesla's market performance.

In response to Tesla's pricing strategy and challenges like inflation and increased borrowing costs, other automakers have reduced their prices, pushing the average EV price to $50,683 in September. Q3 EV sales witnessed a nearly 50% year-over-year increase, accounting for 7.9% of total industry sales. Rivian exceeded delivery expectations for Q3, while Tesla faced delivery shortfalls due to factory upgrades for the new Model 3 version.

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Oil prices at $100 a barrel look too high for global demand to sustain

The International Energy Agency (IEA) reported that the surge in oil prices last month led to reduced consumer demand. As Brent crude oil approached $100 a barrel, gasoline deliveries dropped to their lowest in two decades, signaling a decline in demand.

The rise in crude oil prices, driven by OPEC's production cuts, was deemed too high as Brent crude prices fell by over $12/bbl to $84/bbl in early October. This decline was attributed to economic concerns and significant demand reduction in the US. Emerging markets experienced even greater demand declines due to currency fluctuations and the removal of fuel subsidies.

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EUR/USD advances to mid-1.0500s on softer US Dollar

EUR/USD is trading near 1.0550, influenced by the decline in the US Dollar and bond yields. Despite starting the week higher, the EUR/USD fell due to a strong US Dollar, driven by factors favoring the Greenback and increased Treasury yields. The European Central Bank's minutes from its September meeting showed support for a 0.25% interest rate hike, but this didn't majorly affect the Euro.

Upcoming events include Eurostat's Industrial Production data release and ECB President Lagarde's discussion at a World Bank and IMF meeting. The US Dollar's recent strength came from higher US yields and data indicating prolonged higher interest rates.

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This concludes our weekly recap. Have a great weekend and see you next week! 👋