Markets Last Week - 11/10/2024

Stocks Reach New Highs as Earnings Season Kicks Off

The S&P 500, Dow Jones Industrial Average, and S&P Mid-Cap 400 reached record highs, driven by earnings surprises. JPMorgan Chase and Wells Fargo saw smaller-than-expected declines in profits, while NVIDIA’s rise helped growth stocks outperform. Tesla and Alphabet faced declines, with Alphabet under scrutiny from the Justice Department over potential breakup orders.

Inflation Modestly Higher Than Expected

September saw inflation slightly exceed expectations, with core prices rising 3.3% year-over-year. Medical care and transportation services saw sharp price increases, while energy prices dropped. Weekly jobless claims unexpectedly jumped, partly due to Hurricane Helene and job losses in Michigan.

Hopes Fade for Another Half-Point Rate Cut

Higher-than-expected inflation decreased chances of another significant Federal Reserve rate cut. Futures markets reflected expectations for a smaller cut, and bond yields increased, with the 10-year Treasury note yield rising to its highest since July.

Stocks Rise Amid Rate Cut Hopes and China Stimulus Speculation

European stocks climbed, with Italy, Germany, and France seeing gains. Hopes for quicker European Central Bank (ECB) rate cuts and potential Chinese stimulus boosted market sentiment.

Germany’s Economy to Shrink Again; Factory Orders Drop

Germany’s economy is expected to contract by 0.2% in 2023, a downward revision from a previous growth estimate. Factory orders in August fell by 5.8%, though industrial production increased due to a rebound in the automotive sector.

More ECB Officials Favour Rate Cuts

ECB officials indicated a potential rate cut in October, as inflation is expected to slow. The market anticipates faster policy easing amid a weakening economy, with some policymakers supporting multiple rate cuts by year-end.

UK Economy Returns to Growth

After stagnating, the UK economy grew by 0.2% in August, driven by manufacturing and construction gains.

Stocks Rise as Yen Weakens

Japan’s stock market rose, with the Nikkei 225 Index gaining 2.45%. A weaker yen supported exporters' profit outlooks. The 10-year Japanese government bond yield also rose, following U.S. Treasury yields.

Wage Decline May Delay Interest Rate Hikes

Real wages fell by 0.6% in August, dampening expectations for further interest rate hikes by the Bank of Japan (BoJ). Policymakers signalled a cautious approach to rate increases, citing ongoing economic uncertainty.

Stocks Fall as Stimulus Optimism Fades

Chinese equities declined during a holiday-shortened week, with the Shanghai Composite Index down 3.56%. Hopes for stimulus measures diminished, with economic planning agencies reiterating existing support plans.

Spending Lags Behind Pre-Pandemic Levels

Consumer spending during China’s National Day holiday was below pre-pandemic levels, despite moderate growth in passenger traffic and spending. However, spending per trip showed an increase compared to earlier holidays.