HEATING UP
Last week, equities were supported by optimism around global growth after US retail sales showed strong household consumption. This suggested that there may be fewer rate cuts from the Fed, while the ECB reduced its policy rate as expected at its meeting and guided for further to come.
This week, focus is set to be on Thursday's global PMIs - a business survey - to gauge current and expected economic conditions.
US retail sales for September were strong. Those for the control group, which is used to calculate GDP, rose by 0.7% m/m. This was more than double both expectations and the pace in August (0.3%) and suggested that American household consumption is robust.
The ECB cuts its deposit rate by 25bps to 3.25% at its meeting last week and suggested that further rate reductions would be forthcoming given falling inflation and weaker than expected economic activity.
In China, Q3 GDP rose by 4.6%y/y, the slowest pace in 18 months. This lacklustre growth backdrop justifies the stimulus measures from the authoirites over the past month. For more details on China's stimulus and the market reaction, please see ILIM's Chart of the Month for October in the link below.
Last week, the S&P 500 rose by 0.9%, closing at a new all-time high on Friday, while the Euro Stoxx 600 was up by 0.6%. Tech stocks were weighed down earlier in the week by downbeat guidance from chipmaker ASML but rebounded after strong results and projections from Taiwan Semiconductor.
Strong data in the US implied the Fed may cut its policy rate by less than projected, which contrasted with the ECB guiding for further policy easing.
This was reflected in bond yields last week, with those of German bunds falling (bond prices rise as bond yields fall). The 10-year German bund yield declined by 11bps to 2.19%, while the equivalent US Treasury yield was unchanged 4.08%.
- Wed 23rd US - Fed Beige book • Eurozone - Consumer confidence
- Thu 24th Global PMIs • US - Initial jobless claims
- Fri 25th US - Durable goods • Germany - IFO business survey
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.