US bond yields rose, the yield curve de-inverted, equity markets gained, and the US dollar strengthened, while oil, gold, and Bitcoin increased.

U.S. bond yields experienced a decline over the past week, with the long end of the yield curve performing slightly better. The 2-year yield reached 4.00% before closing the week at 3.965%. Conversely, the 10-year yield dipped below 4.00% midweek but rebounded to 4.082% by the close on Friday. The U.S. yield curve is approaching inversion once again, with three weeks remaining until the upcoming election.

In equity markets, positive returns were recorded, marking the sixth consecutive week of gains. Small-cap stocks increased nearly 2%, while large-cap stocks saw a modest rise of 0.85%. Notably, the "Magnificent 7" stocks advanced by 1.91%. Additionally, the VIX index declined by approximately 2.34 points.

The U.S. dollar strengthened against the euro, reaching a value of 0.92286, as markets now perceive a higher likelihood of rate cuts in Europe compared to the U.S. In the commodities sector, WTI crude oil experienced a significant decline of 8.13%. This drop was primarily influenced by indications that Israel is likely to refrain from attacking Iran’s oil infrastructure—a concern that had weighed heavily on the market—as well as ongoing economic weakness in China. Chinese refinery output has now decreased for the sixth consecutive month due to tight refining margins and sluggish fuel consumption. In contrast, gold prices surged, returning to record highs and surpassing $2,700 per ounce. In the cryptocurrency market, Bitcoin rose by nearly 3.25%.

U.S. bond yields fell, with the yield curve nearing inversion. Stocks gained for six weeks, the dollar strengthened against the euro, oil prices dropped, and gold hit record highs.

U.S. retail sales rose 0.4%, surpassing expectations, with a notable 0.7% increase in the control group, reflecting consumer resilience amid inflation and weather impacts. The most significant growth was in miscellaneous goods (4%) and clothing (1.5%), while sectors like electronics and furniture saw declines. Meanwhile, U.S. industrial production fell 0.3%, primarily due to the Boeing strike and hurricanes, with manufacturing down 0.4% and aerospace production plummeting 8.3%. Year-on-year, industrial output decreased by 0.6%. In the housing market, starts slightly exceeded expectations at 1.354 million but fell 0.5% MoM due to a decline in multi-family projects; however, single-family permits rose 0.3%, indicating positive future construction prospects. Overall, housing market recovery is not anticipated before 2025.

U.S. retail sales rose 0.4% in September, with a robust 0.7% increase in the control group. Despite inflation and weather influences, consumer spending shows resilience, particularly in miscellaneous goods and clothing.

U.S. retail sales exhibited resilience in September, increasing by 0.4% MoM, surpassing the 0.3% consensus estimate, while the "control group" saw a notable rise of 0.7%, compared to the expected 0.3%. This control group excludes volatile items such as automobiles, gasoline, food services, and building materials, and is more indicative of broader consumer spending trends. When adjusted for a 0.2% MoM inflation rate, the "real" spending growth appears robust at approximately 0.5%, suggesting a stronger economic outlook than indicated by recent declines in consumer confidence surveys. However, it is important to note that recent hurricanes may have influenced purchasing patterns, as consumers tend to stock up on essentials such as batteries, flashlights, and food in anticipation of disruptions. The most significant growth was observed in "miscellaneous" stores, which experienced a 4% MoM increase, alongside gains in clothing (1.5%), health and personal care (1.1%), and food services (1%). Conversely, sectors such as electronics (-3.3%) and furniture (-1.4%) showed weakness, with declining fuel prices contributing to a 1.6% drop in gasoline station sales.

These trends indicate that the domestic sector remains resilient, and we do not anticipate any significant decline in consumer spending in the near term.

U.S. industrial production declined 0.3% in September due to the Boeing strike and hurricanes. Manufacturing fell 0.4%, while aerospace equipment production plummeted 8.3%.

U.S. industrial production fell by 0.3% in September, primarily due to the Boeing strike and the impacts of hurricanes Helen and Milton. The Fed estimated that the Boeing strike alone contributed to a 0.3% reduction in industrial production growth, while the hurricanes accounted for a similar decline. Within the various industrial sectors, manufacturing—which represents three-quarters of total industrial output—experienced a notable 0.4% decline, following a downward revision of the previous month’s figures. This downturn reflects broader challenges, including high interest rates and increasing uncertainty surrounding the upcoming U.S. presidential election. Additionally, mining and energy production declined by 0.6%. In contrast, utility production, particularly in electricity and natural gas, increased by 0.7%, marking the first rise in utility output in three months. Aerospace equipment production faced a significant decrease, plunging 8.3% during the month, highlighting ongoing challenges within that sector. Overall, year-on-year industrial production is down 0.6% compared to September 2023, indicating persistent struggles within the U.S. industrial landscape. Despite these challenges, domestic consumer demand remains strong, bolstering an increase in consumer goods production for the second consecutive month.

We anticipate that a recovery in the overall U.S. manufacturing sector is unlikely until early 2025.

Housing starts slightly exceeded expectations in September, but multi-family projects declined, while single-family permits and construction starts increased.

Housing starts for September slightly exceeded expectations, with a seasonally adjusted annualized rate of 1.354 million, marginally higher than the consensus estimate of 1.350 million. However, this represents a 0.5% decline from the previous month, driven primarily by a decrease in multi-family project openings. Building permits fell 2.9% MoM, more than anticipated, reaching 1.43 million annualized units. While single-family permits showed modest growth, multi-family permits continued to decline significantly.

In the single-family sector, permits increased by 0.3% MoM, marking the third consecutive monthly rise and signalling a positive outlook for future construction activity. Single-family home starts also grew by 2.7% from August and 5.5% YoY. Builder sentiment has improved modestly, driven by expectations of lower interest rates in 2025. However, momentum is tempered by persistent challenges, including high financing costs, limited housing inventory, and supply-side constraints such as rising construction costs and labour shortages. In contrast, the multi-family sector is facing a decline in both permits (down 8.9%) and construction starts (down 9.4%), although completions remain elevated. The continued decrease in starts suggests a potential undersupply in the coming years, despite an influx of new apartment units currently entering the market.

We are maintaining our position, as we do not anticipate a recovery in the housing market before 2025. While mortgage rates remain elevated, they are projected to gradually decrease in response to anticipated rate cuts by the Fed.