Global Equity Markets in Review
Global Equity Markets in Review
- Wall Street extended its uptrend, as investor optimism remained intact due to the continued flow of healthy economic data.
- European stocks managed to edge higher despite muted trading activity as the Catalonia crisis continued to weigh on investor sentiment.
- Government reforms, optimism over the earnings season and healthy economic data lift Asian markets.
Wall Street continues its uptrend
The US stock market extended its record-setting streak, as big banks marked the beginning of the third-quarter earnings season with forecast-beating results. JP Morgan Chase reported better-than-expected revenues, despite a 27% yoy decline in fixed-income trading revenue. Citigroup’s earnings results beat analyst expectations too, supported by a robust global consumer business. Banking stocks were tepid, despite largely upbeat earning results from JP Morgan Chase and Citigroup, as declining Treasury yields kept financial-sector stocks in check. Walmart surged to a two-year high after it unveiled a US$20 billion buyback plan and forecast 40% growth in its online business in the US for the next fiscal year. A rally in the company’s stock supported the benchmark indices. Healthcare services-related stocks were under pressure, as President Trump signed an executive order to end subsidies to insurance companies that provide Obamacare health plans.
Investors’ reaction to the recently released minutes of the Federal Reserve’s September 19–20 meeting was largely muted. The minutes revealed nothing new, while prospects of another rate hike before the end of the year remained intact, subject to how the economy plays out.
The economic docket showed that producer prices increased 0.4% m/m, while core producer prices (excluding food and energy) increased 0.4% m/m (higher than the forecast 0.2%). Also, the US retail sales witnessed solid rebound in September, rising 1.6% m/m after shrinking 0.2% in August. September’s headline inflation rose 2.2% yoy on account of disruptions in fuel supplies (caused by the hurricanes). Yet, the more closely followed core inflation (excluding food and energy) was unchanged at 1.7% yoy for the fifth month in a row.
The Dow Jones Industrial Average gained 0.4%, S&P 500 added 0.2% and NASDAQ advanced 0.2% during the week.
Most of the European markets (except France) edge higher
The continued flow of largely upbeat economic data bolstered investor sentiment in Europe. Eurozone industrial production was up 1.4% m/m, well above analysts’ expectations of 0.4% growth. Germany’s exports jumped 3.1% m/m in August after recording a meager 0.2% rise in July. In France, Bank of France released its forecast for the country’s GDP, putting third-quarter growth at 0.5% qoq, the same as the last quarter.
Banking sector stocks were under pressure after the European Commission proposed new measures to reinforce the banking sector against future crises. In stock-specific events, Vedanta Resources fell after declaring its second-quarter production numbers. The UK’s decision to hold up a decision on introducing an energy price ceiling for the coming winter aided utility sector stocks. The luxury goods firm LVMH witnessed heavy buying interest after reporting a 14% rise in revenues for the first nine-months of 2017.
European investors cautiously tracked further developments concerning Catalonia’s independence from Spain. Catalan leader Carles Puigdemont refrained from making a formal declaration of the region's independence. Spanish equity funds witnessed heavy outflows, yet the benchmark IBEX index posted solid recovery, ending the week in positive territory (up 0.7%).
Britain’s FTSE 100 hit a record high, as weakness in the pound boosted investor confidence in the multinational companies. The pan-European Stoxx 600 gained 0.1% during the week. The UK’s FTSE 100 edged up 0.2%, Germany’s DAX added 0.3%, while France’s CAC lost 0.2%.
Most Asian markets post strong weekly gains
Australia’s stock market finished the week close to a four-month high, as the benchmark S&P/ASX pulled out its best weekly performance since March 2017. S&P/ASX 200 gained 1.8% during the week, ending the week at 5,814 points. Health-insurance related stocks advanced after the government announced a healthcare reform programme to promote private cover among young Australians. Moreover, financials gained ground during the week, pushing the benchmark index into positive territory.
Japan’s Nikkei 225 surged above the 21,000 mark, as the benchmark index hit a 21-year high during the week. Optimism over the upcoming earnings season and the economy’s strength lifted the benchmark Nikkei 225 index 2.2% higher over the week. Political uncertainty eased after news reports suggested that Shinzo Abe’s party is most likely to retain its majority in the upcoming snap elections. Japanese benchmark indices rallied regardless of the dollar-yen movement, as confident investors returned to markets for bargain hunting. Technology and retail-sector stocks outperformed the market.
Largely positive economic data pushed China’s Shanghai Composite Index higher (up 1.2%) during the week. China’s exports grew 8.1% y/y in September, after a 5.5% rise in August. Whereas, imports rose 18.7% y/y, reflecting solid domestic demand and higher commodity prices. Moreover, the country’s foreign exchange reserves increased for the eighth successive month in September to US$3.1 trillion.
Indian markets ended the week with sharp gains, as the benchmark Nifty (up 1.9%) closed at a record high. The Indian stock market witnessed a broad-based rally due to better-than-expected economic data and healthy earnings results. India’s industrial production surged 4.3% y/y in August, beating market expectations. Telecom sector stocks gained momentum, as consolidation activity in the sector ramped up after the sector leader Bharti Airtel announced a decision to acquire Tata’s consumer mobile business.