It was a busy week for earnings with five of the so-called Magnificent 7 companies reporting. Amazon’s shares rose on strong cloud revenue and Alphabet was up with its artificial intelligence investment plans being well received. In contrast Microsoft, Apple and Meta Platforms all fell after their results. Nvidia has not yet reported however it notably became the first company to hit $5tn in market value. For the week the S&P 500 was up 0.7%, the Dow Jones Industrial Average added 0.8% while the Nasdaq Composite gained 2.2%. Much of the gains were driven by tech, with seven of the S&P 500’s sectors actually declining. In addition, small caps underperformed their large cap peers.
Another notable event of the week was the Federal Reserve’s October meeting. As expected, the central bank cut its federal funds rate by 25 basis points to a range of 3.75%-4.00%. Less expected was that the Kansas City Fed President voted to keep rates unchanged, while Governor Stephen Miran voted in favour of a 50bps move, highlighting a growing divide amongst policymakers. Comments from policymakers also signalled that a December rate cut was not a foregone conclusion, with some taking a more cautious approach owing to the lack of economic data, as a result of the ongoing government shutdown. In response US Treasury yields moved higher and the dollar also strengthened.
The European market kicked off the week by logging yet another record high, however it subsequently reversed recent momentum and saw daily declines for each of the remaining sessions. For the week the pan-European STOXX 600 lost 0.7% while regional performance was mixed; German and French indices fell while Italian and UK indices logged gains. The European Central Bank (ECB) left its interest rate unchanged at its latest policy meeting, although the mood was dented as prospects for further rate cuts diminished. The ECB views price pressures as contained, reinforced by preliminary data released the following day in which eurozone annual inflation slowed to 2.1% in October.
In China, the Shanghai Composite added 0.1%, with optimism around progress in US-China trade talks somewhat offset by economic growth concerns. One of the strongest performers of the week was Japan’s Nikkei 225 index which surged 6.3% and ended at an all-time high. Furthermore, the index closed out October with a gain of 16.6%, its best monthly performance since 1994. It was lifted by a rally in tech names following the results out of the US, while the weaker yen was a boost to exporters. The Bank of Japan met and held rates unchanged however Governor Kazuo Ueda provided hawkish comments suggesting that the probability of a near-term rate hike was rising. The best performing index of the week however was Argentina’s Merval which saw a significant rally after President Milei’s party performed better-than-expected in the midterm elections.