The stimulus package announced by China points to a global recovery for the coming period. The total size of the stimulus package aimed at economic recovery is worth $114 billion. China wants to support banks as soon as possible because major banks such as ICBC and BOC are struggling with falling profits and margins and bad debts. Under pressure from policymakers to support economic activity, banks have provided cheap loans to risky borrowers, from housing developers to cash-strapped local governments. In addition, some banks have paid interim dividends for the first time in their history in order to support the stock market while their profit growth and margins have fallen. Total profits of Chinese banks increased by only 0.4% in the first half of the year. This increase marks the slowest growth rate since 2020. The sector's net interest margins continued to narrow, falling to a record low of 1.54% at the end of June.
Following the announcement of the stimulus packages, the CSI 300 index, which includes companies traded in Shanghai and Shenzhen, closed the day with a 4.5 percent increase, while Hong Kong's Hang Seng index rose by 3.6 percent. China's benchmark index has gained 13 percent since the beginning of the week, its biggest weekly gain since October 1998 during the Asian financial crisis. The aim is to achieve the 5 percent economic growth target set for this year.
Israel has killed Hezbollah leader Hassan Nasrallah in a large-scale attack on Beirut. The latest attack is the latest in a series of devastating attacks on Hezbollah. Iranian state media reported that Abbas Nilforoushan, a senior commander of the Revolutionary Guards who was at a meeting with Nasrallah, was also killed.
Israeli Chief of Staff Herzi Halevi announced that they are preparing for a ground offensive in Lebanon. The Israeli army has increased its military presence in the region ahead of a possible ground offensive by deploying new reserve brigades to the north of the country. Israel has intensified its attacks against Hezbollah in the last two weeks, killing many of its senior commanders. Israel, which launched intense bombardments on various areas in Lebanon throughout the week, killed more than 600 people and displaced more than 90,000 people.
This week, we observed the Saudi Arabian influence on oil prices. There were serious pullbacks on both Brent and WTI sides. The Financial Times reported that Saudi Arabia was moving away from the kingdom's unofficial $100 oil target by planning to increase production. This development was interpreted as a signal that the kingdom was accepting lower oil prices.
There were expectations that Saudi Arabia would increase production on December 1, but for the last two years, there had been talk that the kingdom, which has been acting together with OPEC countries, could postpone this. This decision marks a significant change in Saudi Arabia's energy policies. Long-standing production cuts were part of a strategy to keep prices high. However, factors such as increased supply from the US and falling demand in China have weakened the impact of the OPEC+ cuts over time.
The kingdom is expected to increase production by 83,000 bpd every month starting in December. Saudi Arabia is currently producing 8.9 million bpd. This production figure is the same as the amount of oil produced during the coronavirus pandemic and the Aramco drone attacks. The kingdom’s biggest motivation is fears of losing markets. Non-OPEC+ countries such as Brazil and Guyana are causing market losses by increasing their oil supply.
Steel producers in Europe say that China’s increase in steel exports has lowered prices in Europe below production costs. China is expected to reach its highest export figures since 2016 this year. Genuino Christino, the finance director of Europe’s largest producer ArcelorMittal, said that the volume of exports from China is “enormous” and emphasized that they are returning to the crisis period caused by China’s high exports in 2015 and 2016. According to Thyssenkrupp Steel, imports of flat steel products to the EU increased by 30% in the first four months of 2024. The company said that this trend, together with weak demand and high energy costs, was putting “significant pressure” on the European industry.
Fires and a prolonged drought in Brazil’s major sugar cane plantations are raising concerns about sugar production, causing prices to rise rapidly. The fires in particular are reported to have negatively affected around 450,000 hectares of sugar cane. This has led to a sharp increase in sugar prices. The unexpected supply shock in Brazil has caused raw sugar futures in New York to rise by more than 20% this month.
The weakening outlook for sugar cane production in Brazil is the most important fundamental factor, said Mark Bowman, senior global markets analyst at ADM Investor Services. Dry weather and the potential for lower production have been known for some time, but recent reports have accelerated those concerns. The sharp increase in sugar prices coincides with rising prices for other commodities such as coffee and cocoa. “The sugar market is sitting on a powder keg and it needs another spark to ignite it,” said Henrique Akamine, president of sugar and ethanol at Tropical Research Services. Sugar prices will depend on supply from the two major sugar producers, Thailand and India, outside of Brazil. Sugar production in both countries is also determined by climate conditions. If rainfall continues into November, harvest could be delayed until January — about a month more than usual. This could lead to higher prices, especially in the beverage and sweet sectors, as costs rise.
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