Chinese equities extended their surge last week as excitement around Beijing’s announcement of economic support continued to capture investor’s attention. Mainland equities jumped by +8.1% (Shanghai Composite) whilst Hong Kong’s Hang Seng became the best performing major market this year with its YTD gains having moved beyond the +30.0% mark last week (in local currency). Whether underlying company fundamentals will match investor optimism over the next year remains to be seen but for now, confidence is high.

Elsewhere, Middle East tensions continued to loom large although US equities managed to make a fourth straight weekly gain. The +0.2% advance in the S&P500 (in dollar terms) came after a late rally with strong jobs data on Friday providing a boost. Previously,  the market had taken solid employment numbers as a situation that could delay Fed interest rate cuts (possibly inflationary) although given the evolving situation in the Levant, good economic data provided comfort for investors. 

Moving across the Atlantic, the MSCI Europe ex UK index retreated by -2.1% despite data showing headline inflation falling below the European Central Bank’s (ECB) 2.0% target level. In the UK, the FTSE 100 and FTSE 250 declined by -0.5% and -1.6% respectively with dovish comments from Bank of England Governor Andrew Bailey, who suggested that the Bank could become more aggressive in cutting interest rates, not enough to prevent a weekly decline. Japanese equities endured heavy selling pressure, the Nikkei 225 slumping by -3.0% (local currency) after Shigeru Ishiba became the country’s new Prime Minister. Ishiba is viewed as a more hawkish politician and his election victory led to selling pressure in equity markets.

In the commodity space, oil prices rallied strongly, reflective of the growing nervousness surrounding the situation in the Middle East. Brent Crude prices spiked by +9.2% to $78.23 a barrel, the strongest weekly advance for nearly two years with prices also buoyed by data showing ongoing low levels of global oil inventories.

Week Ahead
 

Source: Refinitiv Workspace, 07/10/24

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