JUST G2 OF US
Equity markets in the US logged another positive week last week buoyed by positive US/China trade developments, another interest rate cut and more AI optimism.
European equity markets moved in the opposite direction as ECB comments appeared to pour cold water on any further hopes of interest rate cuts in Europe.
This week, with the US Government still shut down, focus will be on private data releases including the ADP payroll report. The New York Mayoral election will also be in focus with maverick outsider Zohran Mamdani the current front runner.
In Europe, markets will look to PMI and consumer sentiment surveys whilst in the UK, the Bank of England is expected to leave rates unchanged at 4%.
The Chinese and US governments released positive statements following a meeting between President Xi and President Trump. Reports suggested that a 1 year deal has been reached which secures supply lines for rare earths and semiconductors. President Trump referred to the meeting as a 'G2' suggesting an acknowledgement of parity between the two global superpowers.
The US Federal Reserve announced a widely expected 0.25% reduction in interest rates and also announced an end to the current cycle of Quantitative Tightening (QT). Fed Chair Jerome Powell pointed to the weakening labour market as justification for easing policy but also stated that the future path was far from clear and a December cut is not a foregone conclusion.
Earnings season continued apace with 64% of S&P500 companies now having reported and 83% of those beating analyst estimates. Microsoft, Alphabet and Meta all announced record profits last week but markets gave a mixed reaction. Meta shares dropped 11% on the day as investors expressed concerns over plans to ramp up spending on AI infrastructure.
In Europe, continued stable inflation and robust growth data convinced the EBC to leave rates on hold cementing the belief that the current rate cycle is now complete.
Driven on by trade news, AI optimism and another rate cut, US equity markets notched up gains to close out a positive month of October. The S&P 500 closed up 0.71% and the NASDAQ added 2.24%. The S&P has now logged 6 positive months in a row while the NASDAQ has managed 7. In Europe, with no further rate cut expectations to buoy markets, the STOXX 600 closed down 0.67%
Bond yields diverged last week, falling slightly in Europe on robust data while rising in the US (bond yields rise as bond prices fall) as the US Fed signalled the end of the current QT cycle. The 10-year US Treasury yield rose by 50bps over the week from 4.03% to 4.08%. The German bund equivalent was down by 10bps from 2.64% to 2.63%.
- Mon 3rd - EU PMI data : US - ISM Manufacturing data
- Tue 4th EU - President Lagarde Speech
- Wed 5th EU - PPI data : US - ADP payroll data
- Thur 6th EU - retail sales : UK - BoE rate decision
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.