FALL BACK
Last week, global markets were hampered by worries over inflation pressures, while the potential for a government shutdown in America and new tariffs were also in the background, all of which helped push US equities lower.
With US government funding expiring tomorrow there is likely to be a focus on whether a deal can be reached to prevent a shutdown, with President Trump set to meet with Republicans and Democrats today. Later in the week, the main point of interest is likely to be the September employment on Friday to gauge labour-market conditions and the likely path of Fed policy.
Global PMIs - a business sentiment survey - for September indicated continued healthy activity. US manufacturing and services PMIs both fell from August levels, with broad-based weakness in services, but both remained in expansionary territory.
The Eurozone composite (manufacturing and services) PMI rose to the highest level since May 2024. This was driven by a rise in services and robust readings from Germany, where the rise in the composite PMI was due to a strong increase in the services sector.
The US announced a 100% tariff on branded or patented pharmaceutical imports, 50% for kitchen cabinets, 30% for upholstered furniture and 25% on heavy trucks, all effective from 1st October. Trump said that pharma companies building a factory in America will be exempt from the 100% tariff.
Concerns over oil output came to the fore amid reports of Ukraine carrying out drone strikes on several Russian oil refineries. Last week, Donald Trump stated on social media that Kyiv could "win all of Ukraine back in its original form" if it has the EU's support while German Chancellor Merz advocated for "the mobilisation of financial resources on a scale that will secure Ukraine’s military resilience for several years", all of which could lead to an escalation in the conflict. The Brent crude oil price was up by 5.2% last week to $70.1/barrel.
Equity markets pared back recent gains amid profit taking partly due to risks around higher inflation, the Russia-Ukraine conflict, a potential US government shutdown and new tariff announcements. The S&P 500 ended the week down by 0.3% while the Stoxx 600 was up marginally (+0.1%).
Bond yields were up last week in the US (bond yields rise as bond prices fall) as increased inflation risks and robust activity data weakened the case for further rate cuts. The 10-year US Treasury yield rose by 5bps over the week to 4.18% while the German bund equivalent was flat on the week at 2.74%.
In France, continued difficulties are expected around passing the budget with unions announcing demonstrations against austerity to take place on Thursday and new Prime Minister Sébastien Lecornu set to provide a budget proposal to parliament in mid-October. These ongoing issues helped push up the 10-year government bond yield, which closed as high as 3.59% last week, the highest level since 2011.
- Tue 30th US - Job Openings and Labour Turnover Survey (JOLTS), consumer confidence • Germany - Retail sales, labour-market data
- Wed 1st US - ISM manufacturing • Eurozone - Consumer prices
- Thu 2nd US - Initial jobless claims, factory orders • Eurozone - Unemployment rate
- Fri 3rd US - Employment report, ISM services
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.