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Market Insights

Market Insights – Week 44

Bas Kooijman

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 ended lower for a second week due to mixed corporate earnings and concerns over rising interest rates, with the 10-year U.S. Treasury note touching 5% for the first time in 16 years. Major tech companies, notably Amazon, Alphabet, Meta Platforms, and Microsoft, released their quarterly earnings. While the metrics largely showed growth and surpassed expectations, the market fixated on the rising expenses. Amazon’s report had a positive reception, with its shares rallying.

Economic updates revealed a 4.9% annualized GDP growth in Q3, the best since 2021's end. However, inflation concerns persisted, with core PCE price index data presenting mixed signals. Despite this, the Federal Reserve is anticipated to maintain current rates in its upcoming meeting. The 10-year U.S. Treasury yield retreated from the 5% mark to about 4.8% by week's end.

European stock indices declined amid uncertainties related to interest rates, economic conditions, and Middle Eastern conflicts. Notably, Germany's DAX dropped 0.75%, and the UK's FTSE 100 fell 1.5%. The ECB held short-term interest rates, hinting they might have peaked in the eurozone. After ten consecutive rate hikes, the ECB maintained its key deposit rate at 4.0%, stressing its efficacy in curbing inflation. Eurozone business activity decreased further, with the HCOB Eurozone Composite PMI dropping below expectations. Germany's economic indicators suggested more challenges ahead, and the UK saw an unemployment rise to 4.2% and contracting private sector business activity.

Japanese stock markets witnessed a slight decline with the Nikkei 225 Index dropping by 0.86%. External factors like rising bond yields and geopolitical tensions dampened sentiment, but rebounds in tech stocks and Chinese economic stimuli balanced the scales. Speculation of Bank of Japan's (BOJ) policy adjustments was rife, especially as the 10-year Japanese government bond yield hit a decade high. Currency-wise, the weakening yen sparked fears of government intervention. Japan’s core inflation rate increased to 2.7% in October, and Prime Minister Fumio Kishida proposed significant tax cuts.

Chinese equities saw gains, with the Shanghai Composite Index advancing by 1.16%. Indications of an economic stabilization were visible as industrial profits rose by 11.9% in September. However, the Chinese government authorized additional sovereign debt issuance and adjusted the fiscal deficit ratio, highlighting efforts to bolster the country's financial markets and economy amid a housing market crisis. The property development sector remained under pressure, with Country Garden Holdings defaulting on offshore debt payments, illustrating the deepening housing market slump that started with China Evergrande's default in 2021.

In conclusion, while markets across the U.S., EU, and Asia faced distinctive challenges, global investors remain vigilant, navigating uncertainties from interest rates to geopolitical events, underscoring the interconnectedness of the world's economies.

Bas Kooijman

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