Leading the way was the tech-heavy Nasdaq Composite, powered by renewed confidence around artificial intelligence (AI). Of particular note was Oracle, which surged almost 36% on Wednesday, closing in on the one trillion dollar market cap level, following a number of multi-billion dollar cloud deals which had improved its guidance. For the week the Nasdaq Composite added 2% and ended at a record high. The S&P 500 and Dow Jones Industrial Average pulled back on Friday but nevertheless were up 1.6% and 1% for the week, respectively.
Keen attention was paid to the latest inflation figures. The consumer price index increased 2.9% year-on-year in August, its biggest increase since January but in line with expectations. Meanwhile producer prices eased to 2.6% for the month. While the figures remain above the Federal Reserve’s inflation target, this did little to rate expectations, with traders widely expecting a rate cut this week and an outside chance of a 50bps cut. This comes as the labour market exhibits signs of weakening, with the Bureau of Labor Statistics stating that non-farm payrolls in the year through March could have been overstated by 911,000 jobs. Furthermore, the University of Michigan’s consumer sentiment index declined in September. Treasury yields moved in response to the data, with the 10-year yield briefly dropping below 4% but ending the week little changed overall.
European markets made gains, also hotly anticipating rate cuts from the Fed this week. The pan-European STOXX 600 added 1%, snapping a three week losing streak. Aerospace and defence stocks led the advance, with the index jumping 6% to a new high. This was owing to ongoing geopolitical tensions, in which Poland shot down a possible Russian drone. Bank stocks also made gains, picking up from their slump seen in late August. The European Central Bank left interest rates on hold as expected, with President Christine Lagarde reiterating that the bank remained in wait-and-see mode for any future moves. France’s CAC 40 was up almost 2%, in a week where the government once again collapsed following a no confidence vote over the deficit cutting budget, with Sebastien Lecornu replacing Francois Bayrou as prime minister. While French government bond moves were not as sharp as the prior week, they remained under pressure, with 10-year borrowing costs moving above Greece and Italy. On Friday Fitch downgraded France’s credit rating from A+ to AA-.
Japanese indices joined in the positive momentum, with the Nikkei 225 particularly strong, rising 4.1% and the broader Topix was up 1.8%. The week saw the resignation of Prime Minister Ishiba, which was received positively by markets, with the next leadership election due on 04 October. The Nikkei got a boost from SoftBank which jumped amid the renewed AI enthusiasm. Similarly, in South Korea, chipmaker SK Hynix surged on announcing it was preparing for production of its next generation high-bandwidth memory chips. South Korea’s Kospi led in the region, up 5.9%. In Hong Kong the Hang Seng was up 3.8% for the week and on the mainland the Shanghai Composite gained 1.5%.