This was fuelled by a rally in technology shares, following news that Nvidia was to invest up to $100bn in OpenAI. However, momentum changed as investors locked in to comments from Federal Reserve policymakers for signs on the future path of monetary policy. Speaking on Tuesday, Chair Powell stated that the economy was in a “challenging situation” as it weighs up downside labour market risks against upside inflation risks. Furthermore, he noted that “equity prices are fairly highly valued” raising concerns about valuations.
The key data for the week was the personal consumption expenditures (PCE) index, released on Friday, in which inflation rose 2.7% year-on-year in August, while core PCE rose 2.9%. With the figures coming in as expected this helped to support the market mood. Despite stocks managing to snap their three-day losing streak this was not enough to prevent weekly losses. The S&P 500 declined 0.3%, the Dow Jones Industrial Average fell 0.1% while the tech-heavy Nasdaq Composite dropped 0.7%. The majority of S&P sectors ended weaker, however the energy sector advanced. It was supported by higher oil prices, following a surprise drop in US stockpiles as well as President Trump putting pressure on the EU to phase out Russian oil and gas. US Treasury yields nudged slightly higher, with the 10-year yield ending at 4.18%. meanwhile the US dollar saw its second consecutive week of gains.
European markets also assessed the monetary policy situation, with the Swiss National Bank going on hold while Sweden’s Riksbank cut its policy rate by 25 basis points. Healthcare stocks came under pressure after the US Department of Commerce revealed that it had launched a national security probe into personal protective equipment and medical items, as well as robotics. Later President Trump announced that branded and patented drug imports would face a 100% tariff. The fact that this would not apply to those who already have or plan to build manufacturing plants in the US helped to lessen the blow. For the week the pan-European STOXX 600 ended little changed, while regional indices saw some gains.
Japanese pharmaceuticals were also hurt by the Trump tariffs. However, markets overall advanced for the week, with the Nikkei 255 up 0.7% while the broader Topix index rose 1.3% to end at a record high. The Tokyo consumer price index remained steady in September but came in softer-than-expected complicating the picture as to how soon the Bank of Japan will hike interest rates. There were little catalysts in China, but the market continued its recent gains with a high level of domestic liquidity. For the week, the Shanghai Composite was up 0.2% however Hong Kong’s Hang Seng dipped 1.6%.