Market Review: October 16, 2024

Today's economic data provides mixed signals for inflationary pressures. Both the Export and Import Price Indexes showed price declines in September, reflecting weaker pricing power for U.S. goods and cheaper imported goods. However, a sharp drawdown in API Weekly Crude Oil Stock signals tighter energy supply, which could support oil prices moving forward.

Today's Event Overview

• Export Price Index (MoM) (Sep): Export prices fell by -0.70%, worse than the forecasted -0.40% but better than the previous month’s -0.90%. This suggests that U.S. exports are becoming cheaper, which may indicate weakening global demand for U.S. goods.
• Import Price Index (MoM) (Sep): The index fell by -0.40%, slightly below the forecast of -0.30% but above the previous -0.20%, suggesting lower inflationary pressure from imported goods.
• API Weekly Crude Oil Stock: Crude oil inventories showed a substantial drawdown of -1.580M barrels, compared to the forecasted build of 3.200M and the previous week’s 10.900M increase. This indicates tighter supply or stronger demand for crude oil.

Impact Analysis

• Impact on USD:
  The combination of falling export and import prices is generally bearish for the USD, as lower prices reduce inflationary pressures and can signal slower economic growth. However, the unexpected drawdown in crude oil stockpiles supports the USD by boosting expectations for higher energy prices, which could strengthen the U.S. energy export market.
• Impact on Gold:
  Weaker export and import prices are neutral for gold, as they do not significantly shift inflation expectations or demand for safe-haven assets. However, the drawdown in crude oil inventories could be bullish for gold, as it might raise inflation expectations due to higher energy prices.
• Impact on Equities Futures:
  Falling export and import prices are generally bullish for equities, as they reduce inflationary pressure and support lower input costs for businesses. The significant decline in crude oil inventories is also bullish for energy stocks, as it suggests higher oil prices, which can boost profitability in the sector.

Today’s data points to a complex economic landscape. Lower export and import prices suggest softer inflationary pressures, which is positive for equities but could weigh on the USD. The significant drawdown in crude oil stockpiles, however, is a notable bullish signal for energy markets, potentially supporting both the USD and gold through rising energy prices.