The Week That Was

Equities delivered a mixed performance last week as softer economic data and heightened geopolitical uncertainty weighed on sentiment. The S&P 500 advanced 0.3%, supported by a strong performance in Communication Services (+4.7%). Alphabet (+11%) was the standout contributor after an anti-trust ruling confirmed it would not be required to divest its Chrome browser or Android operating system.

In Europe, equities edged modestly lower (-0.2%) as ongoing political instability in France, weaker German factory orders, and marginally hotter-than-expected Eurozone core inflation dampened investor confidence. Across the Atlantic, US industrial activity in August was mixed, though a pick-up in new orders pointed to a more constructive outlook. Conversely, weaker payrolls data, alongside negative historic revisions, pushed the dollar lower against major currency pairs and drove the US 10-year yield to a five-month low of 4.1%. Gold climbed through the $3,500 level, supported by softer US data and confirmation that China had boosted its gold reserves for the tenth consecutive month.

The Week Ahead

Markets have started the week on a positive footing, with equities in Hong Kong and Tokyo trading higher. In Japan, expectations of fiscal loosening from potential successors to outgoing PM Shigeru Ishiba supported equities but weighed on the yen and longer-dated government bonds. Meanwhile, data from China indicated exports slowed to their weakest level in six months over August, which should prompt fresh calls for stimulus particularly given tomorrow’s CPI release should confirm consumer prices also likely slipped back into deflationary territory on weak domestic demand. Oil prices (WTI) also opened the week higher after OPEC+ announced a smaller-than-expected production increase for October.

Political and economic developments are set to dominate the days ahead. Later today, the French government is expected to lose a confidence vote on unpopular spending cuts, which will likely force President Macron to appoint his fifth Prime Minister in two years. On Wednesday, the ECB is widely expected to keep rates unchanged, though markets will be watching for dovish guidance from President Lagarde, which could reinforce expectations of an expected 25bps rate cut before year-end. Thursday brings US core inflation data, an August reading significantly hotter than the 3.1% YoY forecast would be required to dissuade the Fed from initiating rate cuts at next week’s meeting. Finally, Friday’s University of Michigan data release is expected to show US consumer sentiment broadly unchanged in September.

On the corporate front, earnings season is drawing to a close but still features several key releases. Updates from Adobe, TSMC, and Oracle, whose cloud infrastructure business has been gaining share in recent quarters, will be closely followed. Apple is also set to unveil its first major iPhone redesign in nearly five years on Tuesday, a catalyst that could determine whether the stock maintains its strong recent momentum. In Europe, results from Associated British Foods and Inditex, as well as Ryanair’s AGM, will garner attention. Meanwhile, an international defence conference in London is likely to shine a spotlight on European defence shares, which have already rallied strongly year-to-date.

Key Market-Moving Events This Week

• Macro: US/China CPI; ECB rates decision
• Corporate: Oracle, Apple, Inditex, Ryanair (AGM)
• Political: French confidence vote

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more details on individual securities or to discuss how we can support your investment needs, please get in touch.

Written by John Mullane, CIO, Cantor Fitzgerald Ireland