September 30, 2024 (Investorideas.com Newswire) Investorideas.com (www.investorideas.com), a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com.
Oil prices continue their gains for the second session with a 0.7% and 0.8% increase for both West Texas Intermediate (WTI) and Brent crudes respectively.
The gains in crude come amid heightened geopolitical tensions in the Middle East amid concerns about a regional war that could target US interests. On the other hand, negative data is flowing from China with lackluster service sector performance and a deterioration in manufacturing activity in September.
Officials in the US and Israel fear an escalation that goes beyond the edge from Iran, according to Axios. This coincides with the possibility of Israel launching a ground military operation in Lebanese territory.
However, the impact of geopolitical factors will quickly dissipate and prices will return to their prevailing trend, while for oil, further declines are possible, especially in light of today's disappointing and weaker-than-expected PMI data, which may exacerbate concerns about the future of demand for crude.
Today, Caixin reports that operating conditions in China's manufacturing sector deteriorated in September as new orders, exports, employment and purchasing activity continued to decline. New orders fell at the fastest pace since September 2022 amid weak demand and competition. Unfavorable global economic conditions are also weighing on external demand. Moreover, sentiment in the manufacturing sector deteriorated substantially to its second lowest level since records began in April 2012.
Services activity barely held up in September and expanded slightly in September. However, despite expanding for the 20th consecutive month on improving demand conditions in the sector, the fading economic slowdown is keeping service providers' sentiment subdued.
There is more optimism that the Federal Reserve will cut interest rates by half a percentage point for a second time at its November meeting, which could mitigate the negative impact of the data from China.
In contrast, concerns about the impossibility of a soft landing for inflation have exacerbated downward pressure on crude prices. Despite the slowdown in monthly inflation as seen in Friday's data, the negative signals about the health of the US economy continue to flow, as seen in the weaker-than-expected growth in personal income and spending.
This week's release of key U.S. labor market data, highlighted by September's non-farm payrolls, could reinforce expectations for either a soft or hard landing in inflation.
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