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

The Week That Was

Equity markets rebounded last week as US–China trade tensions eased and strong Q3 earnings offset concerns about the health of US regional banks. The S&P 500 ended 1.7% higher, with the Communication Services sector (+3.6%), and Alphabet (+6.5%) in particular, a standout performer, as it unveiled a model that predicted previously unknown cancer cell behaviour.

It was a volatile week for the US Financials sector as cautious outlook statements and concerns over underwriting standards at some regional lenders offset what has so far been a strong quarter from an earnings perspective. European markets ended the week modestly higher (+0.4%), with luxury goods maker LVMH (+10.9%) one of the standouts on the back of a strong sales rebound. French equities outperformed over the week, while 10-year yields moved lower as Sébastien Lecornu’s government survived two votes of no confidence.

In commodities, gold rallied for its ninth straight week to close at $4,252 an ounce, while oil (WTI) fell to $57.50 a barrel, well below the average of the previous three years, on the back of supply glut concerns.

Summary Economic Releases

The Week Ahead

Markets started the week on the front foot overnight, with equities in Asia moving higher, buoyed by several factors. Japanese markets were lifted by a coalition agreement that will see Sanae Takaichi elected as the country’s first female Prime Minister on Tuesday. Chinese equities benefited from a raft of better-than-expected economic data, including a Q3 GDP print of 5.2%. Furthermore, confirmation that the US will hold further high-level trade talks with China this week, and that a formal agreement with India appears close, has been positive for sentiment.

Corporate earnings enter their second week and will remain the key driver of market sentiment in the near term. Reports likely to garner the most attention include those from Intel, Tesla, and Netflix. For the streaming giant, the market is looking for revenue growth and guidance in the mid-teens on the back of a strong content slate. For Tesla, a robust quarter is expected as consumers brought forward demand ahead of the expiry of EV tax credits. As a result, focus will be on demand outlook and the sales prospects of the lower-cost Model 3 and Model Y, along with AI initiatives.

Closer to home, attention will centre on European financial names such as UniCredit and Barclays, which should have benefited from solid trends in capital markets and retail banking reported by their US counterparts last week. European market bellwether L’Oréal will also release results; however, management commentary on the prospective purchase of Kering’s beauty business for $4.7bn is likely to attract greater attention than the earnings themselves.
The week’s key economic releases will be back-end loaded, with UK core CPI on Wednesday forecast to rise to 3.7% in September, making it difficult for the Bank of England to cut rates in the short term. On Thursday, data is likely to confirm that US existing home sales picked up in September on the back of falling mortgage rates.

Friday will bring the main market-moving economic data point of the week: US inflation data for September. The core reading is expected to hold steady at 3.1% year-on-year; however, risks are to the downside given deflation in hotel rates and airfares, which could increase the prospect of a rate cut by the Fed next week. The market should also receive confirmation that Eurozone industrial production continued to expand in October.
From a political perspective, the French parliament will be under pressure to pass a budget following the recent credit ratings downgrade by S&P, while negotiations on Capitol Hill will also garner attention as the US government shutdown enters its fourth week.

Key Market-Moving Events This Week

• Macro: US and UK inflation data
• Corporate updates: L’Oréal, Netflix, Tesla, Kerry Group
• Political developments: French budget, US government shutdown negotiations, US trade talks with India and China

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