Equity Rally Resumes As Precious Metals Continue To Shine

Pepperstone

Economic

Forex

Commodity

Summary:

Once more, the ONS have failed at quite literally the only job they have, to provide accurate national statistics on the UK economy.

WHERE WE STAND – It's been a while since I began this note with a rant, but here goes.

Once more, the ONS have failed at quite literally the only job they have, to provide accurate national statistics on the UK economy. This latest descent into outright shambles stems from public finances data, in which the ONS have identified an error in the January to August period, largely as a result of issues with data pertaining to VAT receipts, which results in public borrowing being around £3bln lower than previously announced. Quite obviously, at a time when the Chancellor's headroom against the fiscal rules is wafer thin, and at a time when the Gilt market is on a knife-edge, accurate data on the state of the public purse is pivotal.

Furthermore, as frequent readers will know, this is not the first time that the ONS have had to admit to errors in published data. To recap, since mid-2023, the ONS have had issues with, or been entirely unable to produce, labour market, inflation, trade, growth, and retail sales statistics, as well as the PSNB issues announced yesterday. I don't say this lightly at all, but I strongly believe that we are now at a point where each and every release published by the ONS must be taken with a huge pinch of salt, particularly considering the incredibly high likelihood that there are further data gremlins lurking elsewhere that the folk in Newport either haven't found, or haven't publicly admitted to.

All this, though, does make me feel a degree of sympathy towards the BoE, the Treasury, and Chancellor Reeves – not something I feel especially often! Those three already have a tough enough job, yet trying to do that job without accurate economic data is nigh-on impossible. From a market perspective, all this just adds to the ‘basket case-ness' of UK Plc, which will do nothing to improve the attraction of UK assets, either Gilts or the quid, as far as international investors are concerned.

Anyway, rant over, and onto other matters.

Chiefly, precious metals, which continue to shine very brightly indeed. Gold, obviously, steals the show here, having broken north of $4,000/oz for the first time, though silver, platinum & palladium have all joined in with chunky gains of their own. While I don't want to start sounding like a stuck record, the bull case for this bunch remains a very solid one indeed, amid runaway fiscal spending, the risk of inflation expectations un-anchoring, and reserve allocators increasingly diversifying their holdings. Momentum clearly favours the bulls, with this being a wave that I remain content to ride higher – all I'd like is for Spandau Ballet to write another song, as I've run out of lines from ‘Gold' to riff off.

Elsewhere, yesterday was a day largely lacking in major catalysts, but one where stocks continued to take the path of least resistance to the upside, as Tuesday's brief wobble gave way to much more solid tones across the board. My view remains that stocks should continue to gain ground from here, as underlying growth remains robust, earnings growth solid, and the monetary backdrop becomes looser. Incidentally, for those arguing that the risk party might soon come to an end, I must admit that I struggle to get onboard with that view, not least as the Fed continue to actively top up the punchbowl.

The dollar also traded firmer against most peers yesterday, again reinforcing my bull case here as the Fed's ‘run it hot' approach tilts risks to the outlook firmly to the upside. Incidentally, all this does rather fly in the face of all the ‘debasement trade' nonsense that keeps getting thrown around. Quite how that holds water when the buck trades at 2-month highs is beyond me, but it shan't stop column inches being taken up by it. In any case, I remain a dollar bull, with the greenback still by far the ‘cleanest dirty shirt' in G10, with dips still but g opportunities.

I'll wrap up, this morning, with just one more mention of EGBs, after yet another technically uncovered German auction yesterday. That, for those keeping track, makes it two in two days, and three in the last week. Quite clearly, the market is sending a signal that there is simply too much supply to be absorbed right now – again, not a great backdrop for France to descend further into budgetary chaos, nor for Chancellor Reeves to deliver a budget at the end of next month. Maybe I'm not feeling so sympathetic for her position after all!

LOOK AHEAD – Another light-ish calendar ahead today, as the ongoing US government shutdown continues to leave us in a data vacuum, and with a resolution on that front still elusive.

As for scheduled events, monetary policy will be the main focus, not only amid the release of minutes from the September ECB meeting, but also with four FOMC speakers due, including Chair Powell. Before anyone gets too excited, though, Powell will be delivering welcoming remarks at a community banking conference, hence any fresh hints on the policy outlook are likely to be very thin on the ground indeed.

Besides that, there's the small matter of a 30-year Treasury sale this evening, which is likely to be very closely watched given ongoing concern over the US' fiscal trajectory.

Source: Pepperstone

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Samantha Luan

Forex

Political

Economic

Indian Prime Minister Narendra Modi and his British counterpart Keir Starmer began their bilateral meeting in Mumbai on Thursday, as the UK leader pushes for swift implementation of the free trade agreement the two nations signed earlier this year.Modi welcomed Starmer at Mumbai’s Raj Bhavan — the official residence of the Governor of Maharashtra — on Thursday, where the two leaders shook hands and posed for photographs. They are expected to issue a joint statement after their meeting and deliver keynote speeches at the Global Fintech Fest later in the day.

Both leaders are seeking to deepen commercial ties as they face growing risks from US tariffs. Starmer traveled to India on Tuesday with 125 UK business and cultural leaders to tout the free trade pact signed in July. It’s the first such trip by a British prime minister since Theresa May visited in the immediate aftermath of her country’s vote to leave the European Union nine years ago.

Starmer has spent the trip so far meeting with business leaders. According to his office, deals announced as a result of his trip to India will create almost 7,000 new jobs, with 64 Indian companies investing $1.7 billion in the UK.Top British firms are expected to announce new investments in the South Asian nation. Graphcore, the British chip designer owned by SoftBank Group Corp., is planning to announce a $1.3 billion investment package in India that includes a new research hub, Bloomberg News has reported.India’s Commerce Minister Piyush Goyal met his UK counterpart Business Secretary Peter Kyle on Wednesday, and reaffirmed commitment to swiftly implement the trade agreement, according to a statement from New Delhi.

On Wednesday, Starmer also met with Infosys Ltd. co-founder Nandan Nilekani — widely credited with implementing India’s Unique ID system in 2009 — to seek advice on introducing a similar program in the UK.

Still, tensions over migration are expected to linger. On the flight to Mumbai, Starmer said he would resist demands from business to allow more highly skilled workers from India to come to the UK.Speaking at a football pitch near Mumbai’s Oval Maidan cricket ground on Wednesday, Starmer said none of the business leaders had raised the issue of visas. “That wasn’t part of the FTA,” he said.“What this is about is providing opportunities for them to take advantage of the FTA, and even before it’s fully enforced, the mood is very, very strong between India and the UK, and I’m really pleased,” he said.

Source: Bloomberg Europe

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Gerik

Economic

This week, France lost its fifth prime minister in under two years, Sébastien Lecornu, just as the 2026 budget, including crucial debt-reduction measures, was about to be presented to parliament. This political instability raises concerns about whether the country can meet its fiscal goals.

The Rising Debt Burden

France's debt load has become one of the most significant challenges facing the country, with government debt standing at 116.5% of GDP in 2023. This is one of the highest in the developed world, surpassed only by the U.S., and comparable to other European countries like Greece and Italy that faced severe fiscal crises a decade ago. While the government has made efforts to control spending, the sheer size of the debt relative to the country's economic output makes progress slow and uncertain.

A key driver of France’s fiscal problems is its high social protection spending, which accounts for 23.3% of GDP—second only to Finland within the European Union. This includes state pensions, unemployment benefits, and other social programs. Such benefits are generous by global standards, contributing to France’s reputation as a welfare state. However, these expenses are increasingly difficult to sustain, particularly with France’s aging population and rising healthcare costs.

Political Instability and Policy Gridlock

The resignation of Prime Minister Lecornu and the continued turnover in leadership exacerbate France's ability to implement reforms aimed at reducing debt. The French government has struggled to push through measures to cut public spending, and attempts to reduce healthcare costs and reform pensions have been met with widespread protests. The government's recent pension reform, which raised the retirement age, sparked significant opposition, although it passed into law.

This political gridlock is a product of France’s fractured political landscape. President Macron's 2017 tax cuts for businesses, alongside his removal of the wealth tax, created significant backlash, particularly from lower-income groups who viewed these measures as benefiting the rich. The fallout from these policies, combined with mass protests against austerity measures, has contributed to the political paralysis that has defined much of Macron's second term.

The Market’s Growing Concern

France’s borrowing costs have been rising in recent months, signaling growing concern among investors about the country’s fiscal health. Bond yields are creeping higher, and the country is now viewed as a riskier borrower than Italy, despite having a higher debt burden. This is partly due to France’s inability to make meaningful progress in reducing its deficit, compounded by the political dysfunction that has paralyzed policymaking.

Analysts worry that France’s struggles could trigger broader market instability, particularly if extreme political candidates like Marine Le Pen or Jean-Luc Mélenchon gain traction in the 2027 presidential election. If such candidates were to follow through on their proposed economic policies, it could lead to a “freak-out moment” in bond markets, further escalating France's financial challenges.

The Path Forward

To address its debt issues, France will need to make tough decisions about balancing social protection spending with fiscal responsibility. Raising taxes could help, but France already has the highest tax burden in the EU, which could further alienate the public. Meanwhile, cutting social benefits may be politically unfeasible given the widespread reliance on these services.

The country is at a critical crossroads. The political instability and lack of consensus on how to address the debt crisis are exacerbating France’s financial challenges. Without significant reforms and a shift toward fiscal discipline, France’s debt problem will only continue to grow, posing risks both to its domestic economy and to the broader European Union.

Source: CNN

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Golden Gleam

Commodity

Economic

Gold took a breather from a record run on Thursday, as investors booked profits a day after bullion breached the key US$4,000 (RM16,858)-per-ounce level for the first time ever on economic and geopolitical uncertainties and hopes of further US rate cuts this year.

Spot gold had fallen 0.4% to US$4,020.99 per ounce as of 0302 GMT, after hitting a record high of US$4,059.05 on Wednesday.

US gold futures for December delivery fell 0.7% to US$4,040.70.

On Wednesday, Israel and Hamas agreed to the first phase of US President Donald Trump's plan for Gaza, a ceasefire and hostage deal that could open the way to ending Israel's bloody two-year-old war, which the United Nations says constituted a genocide.

"You can't look past the significance of the phase one deal between Israel and Hamas [given] one of the reasons why gold's been moving higher is geopolitical risks, but it's probably just a handy excuse to take profits after hitting another record," said Capital.com analyst Kyle Rodda.

Meanwhile, Federal Reserve officials agreed that risks to the US job market were high enough to warrant a rate cut, but remained wary amid stubborn inflation, per minutes of the Sept 16-17 meeting released on Wednesday.

Markets are pricing in a 25-basis-point cut each in October and December, with probabilities of 94% and 79% respectively, per the CME FedWatch tool.

Non-yielding gold thrives in a low-interest-rate environment and during economic and geopolitical uncertainties.

Global markets struggled this week amid political turmoil in Japan and France, coupled with an ongoing US government shutdown, sparking a flight to safety in gold.

Gold has climbed 54% year to date on strong central bank buying, increased demand for gold-backed exchange-traded funds, a weaker dollar and safe-haven demand.

Elsewhere, spot silver lost 0.1% to US$48.83 per ounce, after hitting an all-time high of US$49.57 on Wednesday. Platinum slipped 0.8% to US$1,649.81 and palladium dropped 0.1% to US$1,447.81.

Source: Theedgemarkets

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Gerik

Stocks

Economic

Oil and Gold Prices Adjust Amid Geopolitical Developments

U.S. benchmark crude oil prices fell by 0.64%, dropping to $62.11 per barrel, while Brent crude, the international benchmark, decreased by 0.57%, settling at $65.87 per barrel. Despite the pullback in oil prices, gold continued to maintain its strong performance, albeit with a slight reduction. Gold stood at $4,048.20 per ounce on Thursday, still holding impressive gains.

In Asia, mainland Chinese markets experienced strong growth, with the Shanghai Composite index up by 1.2%, reaching 3,931.07 points as it resumed trading after a week-long holiday. Japan’s Nikkei 225 saw a rise of 1.3%, boosted by an 11% surge in SoftBank Group shares after the company announced a $5.4 billion acquisition of ABB's robotics unit.

Other markets also saw positive movements: Hong Kong's Hang Seng index edged up slightly by 0.1%, Australia’s S&P/ASX 200 gained 0.2%, and Taiwan’s Taiex rose by 1.3%. The global stock rally was further reinforced by advancements in artificial intelligence (AI), with companies like Advanced Micro Devices (AMD) and Dell Technologies seeing strong gains, bolstered by AI-related announcements.

The global rally in AI stocks continues, with Nvidia, a leading AI company, climbing nearly 41% this year. AMD, Oracle, and Palantir Technologies have also seen substantial increases, with some stocks, including Oracle, rising by more than 70%. This surge has been a key driver of record performances in major U.S. indexes like the S&P 500 and Nasdaq, despite the ongoing U.S. government shutdown, which has delayed the release of key economic data.

Investor Caution Over AI Valuations

However, there is rising concern over the valuation of AI stocks, with some analysts warning that these stocks may be overvalued, reminiscent of the dot-com bubble in the early 2000s. Despite these concerns, the momentum surrounding AI continues to push stock prices higher, with investors betting on the transformative potential of AI technologies in various sectors.

In the currency markets, the U.S. dollar weakened slightly against the Japanese yen, falling to 152.57 from 152.70, while the euro strengthened against the dollar, rising to $1.1646 from $1.1629.

While the pause in hostilities between Israel and Hamas has alleviated some geopolitical risk, the markets remain heavily influenced by the ongoing AI boom, which has driven stocks to new heights. However, concerns about overvaluation persist, and the economic impact of the U.S. government shutdown is still uncertain. As investors navigate these factors, the AI sector remains both a source of significant growth and potential risk.

Source: AP

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Gerik

Economic

Commodity

The Ministry of Commerce announced that overseas exporters using Chinese rare earths must now obtain an official export license. This move adds a new layer of oversight on an already strategic industry and signals Beijing’s continued use of its dominance in rare earths as a geopolitical tool.

Scope of New Restrictions

The expanded regulations cover technologies related to rare earth extraction, magnet manufacturing, and mineral recycling. Military applications of these materials are largely prohibited, while certain items used in semiconductor research and development will be evaluated individually by the ministry. The enforcement mechanism for these measures has not been clearly outlined, creating uncertainty for international manufacturers dependent on Chinese rare earth inputs.

Strategic Importance of Rare Earths

Rare earth minerals are crucial to high-tech sectors, including automotive, electronics, defense, and renewable energy technologies. China produces approximately 70% of the world’s supply, giving it significant leverage in global trade dynamics. Historically, rare earths have been a point of contention in the trade relationship between Beijing and Washington, particularly during periods of trade negotiations and tariffs.

Recent Market Developments and Geopolitical Context

Following previous supply restrictions that prompted fears of a global shortage, China’s rare earth exports—including magnets—had begun recovering. However, this latest expansion of export curbs comes just weeks before a planned in-person meeting between President Donald Trump and President Xi Jinping, introducing potential friction at a critical time in broader trade discussions. Analysts suggest that Beijing’s move may be intended to strengthen its negotiating position while maintaining control over a sector with both economic and strategic significance.

Implications for Global Supply Chains

The tightened regulations could create ripple effects for international high-tech manufacturers, increasing compliance requirements and potentially elevating costs for products reliant on rare earth components. Companies involved in electronics, clean energy, and defense sectors may face greater uncertainty in sourcing critical materials. The combination of regulatory oversight and the strategic importance of rare earths highlights the delicate balance between trade policy and technological competitiveness in the global economy.

This latest development underscores China’s continuing strategy to leverage its dominant position in rare earth production while signaling to global markets the geopolitical weight of these minerals.

Source: Bloomberg

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Samantha Luan

Commodity

Forex

Political

Economic

China tightened its rare earth export controls on Thursday, expanding restrictions on processing technology, barring unauthorised overseas cooperation and spelling out its intention to limit exports to overseas defence and semiconductor users.The announcement from the Ministry of Commerce clarifies and expands sweeping controls announced in April that caused massive shortages around the world before a series of deals with Europe and the US resumed shipments.

China produces over 90% of the world's processed rare earths and rare earth magnets. The group of 17 elements are vital materials in products from electric vehicles to aircraft engines and military radars.Restrictions on exporting the technology to make rare earth magnets will be expanded to more types of magnets. In addition China will now also limit some components and assemblies that contain restricted magnets.China is the world leader in rare earth technology and equipment used to recycle rare earths will now also require a licence to export, adding it to the long list of processing technology already restricted.

The announcement also clarified for the first time some of the targets of China's restrictions. Overseas defence users will not be granted licences, the ministry said, while applications related to advanced semiconductors will only be approved on a case-by-case basis.A day earlier US lawmakers called for broader bans on the export of chipmaking equipment to China. Samsung Electronics declined to comment while chipmakers TSMC and SK Hynix did not immediately respond to questions.

China's rare earth shipments have been growing steadily over the past few months as Beijing granted more export licences, although some users still complain they are struggling to get them.In a nod to concerns about access, the ministry of commerce said the scope of items in its latest round of restrictions is limited and "a variety of licensing facilitation measures will be adopted".The new rules also bar Chinese companies working with companies overseas on rare earths without permission from the ministry.

Manufacturers overseas using any Chinese components or machinery must also apply for licences to export controlled items, the ministry said.