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3110 2022

Market Insights

Market Insights - Week 44

Anupam Kumar

On one hand, signs of softening economic activity and disappointing earnings results from major tech companies were trying to pull the market down and on the other side, growing hopes for a Fed slowdown and lower bond yields proved to be the catalyst for market gains across the globe last week.

Almost half of the index market cap companies reported results in the last week and investors were impacted with the outlook and performance. Mega-cap technology companies like Amazon, Microsoft, Alphabet (Google parent company), Apple and Meta (Facebook) missed the expectations and lowered the outlook of the technology sector. It is worth noting here that these companies together account for 20% of the S&P 500 index and their stocks declined, on average, by 9% on their earnings release.

Let us highlight some of the significant movements of the last week:

  • Nasdaq and the S&P 500 index gained second week in a row and posted positive movement of 2.87% and 2.46% respectively.
  • Finally, snapping 12-week continuous gains, the yield of the 10-year U.S. treasury bond fell to settle around 4.02% over the last week.
  • However, the yield of the 3-month treasury gained and rose above the 10-year yield.
  • After showing negative results in the first two quarters, U.S. GDP returned to positive territory in the third quarter with an annual rate of 2.6%, as per the latest report, beating the expectation of around 2.4%.
  • In the energy sector, oil gained 3.7% to close at USD 88.19 on Friday, 28th Oct’22.
  • Shares in Europe also gained the positive momentum and the pan-European STOXX Europe 600 index advanced 3.65%. Germany’s DAX and France’s CAC 40 also gained 4.03% and 3.94% respectively.
  • In the wake of political changes, The UK’s FTSE 100 index rose only 1.12% whereas, Italy’s FTSE MIB index climbed 4.46%.
  • European government bond yields fell across the board to 3 to 5-week low.
  • The deposit rate in Europe advanced to 1.5%, at its highest level since 2009 after the European central bank (ECB) raised its key interest rate again by 75 basis points.
  • However, the ECB hike could not save the euro from falling below parity against the greenback, the U.S. dollar.
  • In Japan, the benchmark Nikkei 225 finished higher for the week and closed at 27,105. The broader index TOPIX finished flat at 1,899.
  • Investor sentiments in China was dampened by new COVID-related lockdowns and China’s stock market suffered loss over the last week of trading.
  • Shanghai Composite Index tumbled 4.05% and also, the 10-yr Govt. bond yield fell to 2.691%, down from the previous week of 2.75%.

This week is expected to be full of action as the U.S. Federal Reserve is expected again to hike the interest rate after its meeting ending on Wednesday. At the same time, all eyes will also be on the monthly U.S. labor market update which is due on Friday.

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Anupam Kumar

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