Netflix was amongst those whose earnings reports underwhelmed, with its stock falling over 10% on Wednesday. However, of the S&P 500 companies who have reported so far, 87% have posted a positive earnings per share surprise, according to FactSet. On the trade front, there was unease on reports that the Trump administration was considering a plan to curb software-powered exports to China. Close attention will be paid to this week’s meeting between Presidents Trump and Xi. In less positive trade news, Trump announced that he was ending all trade negotiations with Canada.
Having been delayed by the government shutdown, Friday saw the release of the September CPI, in which inflation rose 0.3% month-on-month, slightly lower than the 0.4% expected. This reinforced the view that the Federal Reserve would cut interest rates again at its next meeting in November. In response, stocks rallied on Friday to close out the week at record highs. For the week, the S&P 500 gained 1.9% and the tech-heavy Nasdaq Composite was up 2.3%, both seeing their best performance since August. Meanwhile the Dow Jones Industrial Average added 2.2%, crossing the 47,000 mark for the first time. US Treasuries traded lower for most of the week - while the 10-year yield briefly ticked higher following the CPI report, for the week it ended lower, just below the 4% level.
European markets also saw positive performance for the week, lifted by the cooler US inflation report as well as earnings reports and economic data. The pan-European STOXX 600 gained 1.7%, closing at a record high. The Hamburg Commercial Bank eurozone composite purchasing managers’ index (PMI) rose to 52.2 in October, a 17-month high and a reading on consumer confidence also moved up. Regional indices saw gains, with the UK FTSE 100 was one of the best performers, rising 3.1%. UK inflation held steady while retail sales came in better-than-expected.
Japan’s markets saw strong gains in response to the election of Sanae Takaichi as the country’s first female prime minister. There was growing hopes that Takaichi would announce a large stimulus package to support the economy. Meanwhile the Japanese yen weakened and government bonds ticked higher. Positive momentum also carried across to China, whereby the Shanghai Composite was up 2.9%. This was even with some data suggesting weakness in areas of the economy with retail sales seeing their slowest growth pace since November.
Energy stocks were some of the best performers of the week thanks to higher crude oil prices. Brent crude gained 7.6% for the week, pressing higher on news that the US was sanctioning Russia’s Lukoil and Rosneft. On Monday gold had notched yet another record high, touching $4,381.21. However for the rest of the week it was on a downward path, partly due to profit taking as well as the easing of trade tensions. Overall gold was down 2.9%, ending a nine-week winning streak.