Our CIO, John Mullane, shares the latest Market News and Views and gives insights for the week ahead.

The Week That Was

Equities Performance

Equity markets were little changed on a week in which resilient macro data saw investors scale back US rate cut expectations. The S&P 500 closed down 0.3%, bucking a three-week winning streak, with Intel (+20%) among the stand-out performers on reported discussions about an investment from Apple and expectations that the US government is formulating a plan to reduce its reliance on overseas semiconductor producers. European equities closed broadly flat, with the Energy sector (+4.7%) the stand-out performer as Total (+5.2%) and Shell (+4.5%) benefited from a step-up in oil prices as the US government put pressure on Russian energy buyers to curtail purchases.

US & Eurozone Economic Data

From an economic perspective, Eurozone consumer confidence improved modestly in September, as did industrial activity, where weakness in France was offset by strength in Germany. Across the Atlantic, data confirmed that the US economy grew at 3.8% in Q2, faster than previously expected. US consumer spending rose over the month of August, whilst core inflation was broadly in line. The relatively robust data emboldened some Fed members to strike a more hawkish tone, contributing to rate cut expectations being trimmed, a step-up in the US 10-year yield, and EUR/USD slipping back to 1.17. Gold notched its sixth consecutive weekly advance, pushing through the $3,700 level on the back of elevated geopolitical tensions and continued buying by global central banks.

Asia Markets

Markets in Asia were mixed. Equities in Tokyo fell as a rally in the Yen negatively impacted the export sector, whilst equities in Hong Kong moved higher as markets responded positively to a rebound in Chinese industrial profits that have been weak since May. Investors are also positioning ahead of Golden Week, which commences on Wednesday and could point to a much-needed pick-up in the domestic consumer’s propensity to spend.

The Week Ahead

Corporate Updates

From a corporate perspective, markets remain in the fallow season ahead of the commencement of Q3 earnings season, but there are still several key releases due. In the US, Nike and Carnival reported quarterly numbers, whilst CRH hosted an Investor Day in New York, aimed at showcasing the depth of its senior leadership team and highlighting the scale of the group’s multi-year growth potential. Closer to home, Tesco and Kenmare Resources released quarterly updates. With increased speculation that next week’s Irish budget could bring incentives to boost construction, such as the potential abolition of VAT on new apartments, Irish housing-related names such as IRES, Glenveagh, and Cairn Homes will likely be in focus.

Political and Economic Drivers

Economic and political developments are likely to be the dominant drivers of market sentiment in the week ahead. Negotiations between Democrats and Republicans on Capitol Hill will be in focus on Monday and Tuesday, as in the absence of a budget or stop-gap funding bill being agreed, a government shutdown is likely this week. Past shutdowns have been resolved quite quickly but have caused short-term furloughs of government workers, delays in macro data releases, and general market volatility.

Key Economic Releases

Tuesday is expected to bring more supportive economic news from China, with September’s PMI reading of industrial activity set to have moved modestly higher, whilst US consumer confidence is also expected to step up slightly. On Wednesday, Eurozone core inflation data is expected to remain steady in September, but a step-up in the headline rate to 2.2% YoY, tied to energy, is likely to keep the ECB on hold short-term. Wednesday is also expected to confirm US manufacturing activity continued to contract in September; however, the important services reading likely continued to expand. The key market-moving release of the week will be the US September employment report on Friday. Whilst hiring trends will likely have improved month on month, if only 50,000 jobs are created as currently forecast, it will likely increase the prospects of a Fed rate cut next month.

Key Market-Moving Events

• Macro – Eurozone inflation, US payrolls, Chinese PMIs
• Corporate updates – CRH, Nike, Tesco
• Political developments – Negotiations to avert a US government shutdown

Further Reading
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