US equities advanced for a fifth straight week last week, the S&P 500 and Dow Jones Industrial Average indices both topping record levels. The former advanced +1.1% and the latter by +1.2% in dollar terms as the third quarter earnings season started with banking giants JP Morgan Chase and Wells Fargo both surprising on the upside[1]. The positive momentum in US markets was retained despite Thursday’s CPI Inflation print exceeding expectations, albeit the +2.5% annualised figure covering September did still represent a 10 basis point (bp) reduction on the prior month[2]. The upside surprise likely put an end to hopes of another 50bp rate cut by the Federal Reserve at its next policy meeting with a 25bp move the expected outcome. Treasury yields also inched higher on the back of the inflation data publication.

In Europe, equity returns were mixed with the MSCI Europe ex UK index gaining by +1.0% whilst the FTSE 100 shed -0.3%, both in local currency terms. European gains were broad based across the various underlying countries with no specific catalyst although growing optimism that the European Central Bank (ECB) could accelerate its own rate cutting plans may have provided a boost. As for the UK, nervousness around the upcoming budget announcement is certainly playing its part with the more domestic centric FTSE 250 and FTSE AIM indices retreating by -0.7% and -0.6% respectively. Moving to Asia, significant volatility persisted in China where the Shanghai Composite declined by -3.6% (local currency) as optimism around the recent stimulus announcement waned. Conversely, Japanese equities climbed by +2.5% (local currency) with Yen weakness underpinning strong upwards momentum.

Looking at commodity markets, oil prices continued to advance with Brent Crude rising by +1.2% to $79.19 a barrel. Geopolitics in the Middle East continues to wield significant influence over the direction of travel for oil with future moves set to be heavily dictated by how the ongoing conflict unfolds. Elsewhere, gold declined modestly to $2,657 an ounce (-0.4%) although it has still recorded a near +10.0% gain over the past three months, reflective of those conflict escalation nerves as well as the expected direction of travel for US interest rates.

Week Ahead

Source: Refinitiv Workspace, 14/10/24

[1] T. Rowe Price – Global Markets Weekly Update

[2] US Bureau of Labor Statistics – Consumer Price Index September 2024

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