According to its updated World Economic Outlook, the International Monetary Fund (IMF) projects global economic growth of 3.4% for both 2024 and 2025, slightly below the pre-pandemic average of 3.8% per year. The IMF also anticipates a decline in the global inflation rate to 4.3% by the end of next year, down from a peak of 9.4% in 2022, with advanced economies expected to achieve price stability sooner than their emerging and developing counterparts. While the growth outlook for the United States has been upgraded from earlier forecasts, other large, developed economies have seen their projections downgraded. The IMF highlights that risks to this growth outlook remain tilted to the downside due to elevated policy uncertainty. Additionally, the IMF predicts that the growth divergence between the U.S. and the European Union will continue to widen, driven by weak productivity and an aging workforce in Europe.
U.S. business activity experienced a positive uptick in October, driven by robust demand. According to S&P Global, the flash U.S. Composite PMI Output Index rose to 54.3 this month, up from 54.0 in September, reflecting continued expansion as the index remains above the neutral threshold of 50. This momentum persists despite challenges in the manufacturing sector, where the Manufacturing PMI edged up to 47.7, indicating ongoing contraction but at a moderated pace. Conversely, the services sector remains a key growth driver, with its PMI increasing to 55.3 from 55.2 last month.
In the UK, business activity growth showed signs of deceleration for the second consecutive month in October, with the S&P Global UK PMI Composite Output Index slipping from 52.6 in September to 51.7, marking the lowest reading in 11 months. Although this index remains above the neutral threshold of 50, signalling continued expansion, this decline indicates waning momentum as the economy enters Q4. The latest flash PMI suggests that the UK economy is expanding at a quarterly rate of just 0.1%, down from 0.2% in September and 0.25% for Q3 overall.
The Eurozone’s composite PMI remained relatively stable, rising slightly from 49.6 to 49.7 in October, reflecting a persistently weak economic environment characterised by slowing inflation due to softening demand. This stagnation in the PMI, which has been on a downward trend since June, raises concerns about the fragile recovery from the energy crisis. In response, the European Central Bank is set to accelerate its rate-cutting cycle, highlighting the urgency of addressing these economic challenges.
The People’s Bank of China (PBOC) injected RMB 700 billion into the banking system through its medium-term lending facility (MTLF) while maintaining the lending rate at 2%. This move comes as RMB 789 billion in loans are set to expire next month, resulting in a net withdrawal of RMB 89 billion from the banking system for October. Additionally, Chinese banks lowered their one- and five-year loan prime rates by 25 basis points to 3.1% and 3.6%, respectively, making borrowing cheaper for consumers. These rate cuts align with a broader stimulus package introduced by the PBOC in late September aimed at revitalising the economy. The central bank has also indicated potential further easing measures, including another cut to the reserve requirement ratio, depending on liquidity conditions.
The broad market S&P 500 Index declined by 0.96%, ending a six-week streak of gains. Equities appeared influenced by the U.S. Treasury market, where futures pricing now suggests a more gradual Fed rate-cutting cycle. Tesla emerged as the top performer in the S&P 500, surging 22% on strong earnings, which helped mitigate further losses in the index. The Dow Jones Industrial Average recorded significant weekly losses, down 2.68%, while the tech-heavy NASDAQ showed resilience with a slight gain of 0.16%. In local currency terms, the pan-European STOXX Europe 50 Index fell 0.87%, driven by expectations of a slower pace in Federal Reserve monetary easing. The UK’s FTSE 100 Index also declined by 1.31%.
In Asia, Chinese equities rose as the central bank introduced additional stimulus measures to support the economy. The Shanghai Composite Index gained 1.17%, whereas the benchmark Hang Seng Index in Hong Kong dropped 0.85%. Japan’s stock markets also lost ground over the week, with the Nikkei 225 Index decreasing by 2.74%.
Market Moves of the Week:
South Africa’s consumer price index (CPI) significantly declined to 3.8% year-on-year in September, down from 4.4% in August, marking the lowest level since March 2021. Released by Statistics South Africa (Stats SA), this data indicates a favourable environment for the South African Reserve Bank (SARB) to consider further interest rate cuts in the coming months, particularly as transport costs, including fuel, have decreased substantially. The next monetary policy meeting is set for November 21, 2024.
The 2024 BRICS Summit, held from October 22 to 24 in Kazan, Russia, focused on several key issues aimed at enhancing cooperation among member states. Russian President Vladimir Putin opened the summit by emphasizing the need for deeper financial collaboration, including the development of alternatives to Western-dominated payment systems. Leaders discussed expanding BRICS membership, highlighting interest from over 30 countries, and addressed strategies for sustainable development amid climate challenges. Political and security issues were also on the agenda, particularly concerning the Ukraine conflict. President Cyril Ramaphosa underscored the importance of BRICS as a platform for promoting equitable global governance and enhancing ties among developing nations. The summit concluded with a commitment to strengthen economic ties and create a new BRICS investment platform to support the Global South.
During the week, the JSE All-Share Index experienced a modest decline of 0.21%, primarily driven by losses in the financial sector (-1.7%) and the industrial sector (-0.23%). Conversely, the resource sector posted strong gains, increasing by 1.61%; while the property sector recorded moderate gains of 0.40%. By the close of trading on Friday, the rand weakened further against the U.S. dollar, trading at R17.65, marking a weekly depreciation of 0.37%.
Chart of the week:
South Africa’s CPI falls to 3.8% in September, the lowest since March 2021, signalling potential for SARB interest rate cuts.