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Rory McPherson reviews investment market activity and looks ahead to the forthcoming week in Wren Sterling’s Market Briefing
Global stock markets rose by about 1%, with all of the gains coming at the end of the week following a very strong US jobs number. Strong US data made for a strong Dollar, which provided a further boost to UK investors, as the Pound fell back vs the Dollar (which benefited their Dollar based holdings). There were also continued gains for emerging market shares, with Chinese equities (despite Chinese markets being shut for much of the week!) powering gains: the Chinese share market is now up a staggering 30% since the stimulus measures were announced at the end of last month! US inflation and US earnings is likely to grab the focus this week, with developments in the Middle East also likely to set the tone.
Last week
- Global stock markets rose by about 1%, with strong US jobs data boosting confidence.
- Emerging market stocks continued their climb higher, with Chinese stocks leading the way.
- Oil prices rose sharply as conflict escalated in the middle east.
- Eurozone inflation came in at 1.8%
This week
- It’s a pretty quiet week as regards scheduled data!
- US Q3 earnings season kicks off, with some of the Banks on Friday (e.g., JP Morgan Chase and Wells Fargo)
- US inflation (CPI) is released on Wednesday.
- UK growth data for August is released on Friday.
Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.
More detail:
- Global stock markets rose by just over 1% last week, with all of the gains coming on Thursday and Friday. The drivers (for UK investors) were a weak Pound (on the back of comments from Bank of England Governor Andrew Bailey) and strong gains in US stocks on Friday on the back of a bumper jobs number from the United States.
- Energy shares (although just a 4% weighting within the Global Share index) were the best performing sector on the week. The rise here was driven by a 9% advance in the Oil price, which advanced following escalated levels of conflict in the middle east.
- The rise in the Oil price helped support the UK market, with BP and Shell both rising strongly on the week; by 7.4% and 6.3% respectively. This rise in energy stocks (which carry a c11% weighting in the UK FTSE 100 index) helped to avert losses which came through from most other sectors.
- Friday’s US jobs number was the big news of the week, with 254,000 new jobs seen to have been created in September. This was much higher than the 150,000 figure that had been penciled in (by economists surveyed by Bloomberg), was the biggest monthly gain since March and it also came with upwards revisions to August’s reading: it was a big number!! Digging into the detail, the report showed a drop in the unemployment rate (to 4.1% from 4.2%) and an uptick in wages.
- The better-than-expected US Jobs data made for a re-pricing of US interest rate cuts. Specifically, the bond futures markets moved from pricing three further interest rate cuts this year to pricing just two interest rate cuts. This is in line with what has been indicated from the Federal Reserve (via their Summary of Economic Projections) and was consistent with comments made by Fed Chair Jerome Powell at the start of last week on Monday.
- Emerging market shares were the standout gainer last week, rising by 3.3%. This followed a 6% gain in the week prior. China (c27% of the index) was the key driver, with the index rising by 13.8% on the week. This gain came despite many markets in China being closed for some of the week due to the “Golden Week” celebrations but demonstrated the market’s warm reception to the stimulus measures (the largest since the Pandemic) announced at the end of September.
- Bank of England Governor Andrew Bailey said (in an interview with the Guardian newspaper) that the Bank could become “a bit more aggressive” in lowering borrowing costs. This, combined with the better jobs data in the US, had the impact of weakening Sterling vs a strengthening Dollar, with the Pound down by 1.9% vs the US Dollar on the week.
- Eurozone inflation (CPI) came in at 1.8% last week which was in line with consensus. This helps support the case for a further interest rate cut from the European Central Bank when they meet next Thursday.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
