Industry Insights
Market Insights Week 43
As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA. The U.S. stock market saw notable movement last week, with the S&P 500 Index making gains, largely driven by the utilities and real estate sectors. However, the energy sector struggled due to falling oil prices, which dipped as fears of potential attacks on Iran’s oil infrastructure eased. Small- and mid-cap stocks performed particularly well, as demonstrated by the stronger returns from the Russell 2000 and the S&P MidCap 400 indexes. The tech-heavy Nasdaq Composite had a late-week rally, spurred by Taiwan Semiconductor Manufacturing's strong quarterly results. These results reignited enthusiasm for artificial intelligence (AI) stocks, with companies like Netflix surprising the market by exceeding earnings expectations. Netflix not only grew its subscriber base but also expanded its operating margins, contributing to the positive sentiment. In the bond market, U.S. Treasuries experienced slight gains after fluctuating throughout the week. Yields on intermediate- and long-term bonds rose on Thursday but retreated the next day due to weaker-than-expected housing data for September, which revealed declines in both housing starts and building permits. Additionally, the bank loan market was active, driven by repricing announcements and strong demand for discounted, higher-coupon loans. On the economic front, retail sales were a bright spot, increasing by 0.4% in September, which was slightly above expectations. This growth in consumer spending was broad-based, with most retail categories showing gains. However, industrial production fell by 0.3%, impacted by external factors such as hurricanes and a strike at Boeing. Unemployment claims saw a notable drop, as disruptions from Hurricane Helene subsided, reflecting a generally positive labor market. European equities ended the week with gains, as the STOXX Europe 600 Index rose by 0.58%, bolstered by expectations of continued monetary policy easing. The European Central Bank (ECB) cut its key interest rate for the second consecutive meeting, lowering the deposit rate to 3.25%. ECB President Christine Lagarde indicated that the disinflationary trend is continuing, and while future rate decisions remain data-dependent, market sentiment suggested further easing could be on the horizon. Major stock indexes across Europe performed well. Italy’s FTSE MIB led the way, up by 2.61%, followed by Germany’s DAX and France’s CAC 40 Index, which also posted gains. In the UK, the FTSE 100 Index advanced 1.27%, reflecting optimism driven by lower inflation and slower wage growth. Eurozone inflation figures were revised downward, with annual inflation for September coming in at 1.7%, slightly below initial estimates. This continues to be well below the ECB’s 2% target, suggesting that inflationary pressures in the region remain contained. In the UK, inflation also slowed to 1.7%, while wage growth decelerated. These developments may allow the Bank of England (BoE) to consider further interest rate cuts in the near future, as the pressures on wages and services inflation ease. In Japan, stock markets experienced declines, with the Nikkei 225 Index down 1.58%. The broader TOPIX Index also lost 0.64%. Domestic inflation eased as expected in September, reinforcing speculation that the Bank of Japan (BoJ) is unlikely to raise interest rates in the near term. The BoJ is cautious about making any sudden changes to its monetary policy, particularly given uncertainties in global economic conditions and domestic wage growth. Additionally, Japan’s exports declined by 1.7% in September, largely due to weakening demand from China, while imports grew by 2.1%, inflated by the weaker yen. In China, equity markets made gains following the central bank’s new support measures aimed at addressing deflationary pressures. The Shanghai Composite Index rose by 1.36%, while the CSI 300 added 0.98%. Despite these gains, Hong Kong’s Hang Seng Index declined by over 2%. China’s economy grew by 4.6% year-over-year in the third quarter, slightly below the government’s 5% target. However, there were signs of improvement, with industrial production rising by 5.4% in September and retail sales growing at a faster-than-expected rate of 3.2%. Inflation remained low, with annual inflation at 0.4%, reflecting continued deflationary risks. Overall, global markets remain influenced by central bank policies, inflation trends, and economic growth indicators. As monetary policy remains a key driver of market sentiment, investors are closely watching developments across the U.S., Europe, and Asia for signs of potential shifts in interest rates and economic conditions.
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