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Market Watch: US leads gains in equity markets

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Team Asset Management offer their weekly round-up of global markets. By Matthew Boxall

GLOBAL equity markets showed varied performance in the past week, with US indices leading the gains. The Dow increased by 0.7%, the S&P 500 by 1.0%, and the Nasdaq by 1.8%. The S&P 500 posted eight consecutive daily gains but fell one day short of matching its longest winning streak in almost 20 years when it closed lower on Thursday.

In a quieter week for economic data releases, third-quarter corporate earnings reports grabbed more attention and the technology sector continued to drive the broader market performance through positive surprises.

In the entertainment industry, Hollywood actors reached a tentative agreement with major studios, ending a 118-day strike. This allowed media companies to replenish their content libraries, positively impacting stocks like Disney, which rose by 4% last Wednesday in after-hours trading.

Disney’s rise was further bolstered after it reported better-than-expected growth in streaming subscriptions and aggressive cost-cutting measures.

US Treasury debt auctions had a notable impact on both equity and bond markets. Early in the week, sales of three-year and ten-year Treasury notes were well received, lifting market sentiment.

However, Thursday’s auction of US$4bn of 30-year US Treasury bonds saw the weakest demand in two years, forcing primary dealers to absorb the 25% of the debt sale not taken up by investors.

The very disappointing auction comes at a sensitive time, with markets focused on the vast supply of US Treasuries that will need to be issued to fund the government’s borrowing needs.

Comments from Federal Reserve chair Jerome Powell during an IMF event also influenced traders. Powell expressed uncertainty over whether monetary policy was restrictive enough to bring inflation down to 2% over time, leaving on the table the possibility of further interest rate hikes.

In Europe, the broader STOXX 600 index posted a gain of 0.3%.

The prospect of enduring high interest rates was also reinforced by ECB president Christine Lagarde’s statement that rate cuts were unlikely in the next few quarters. Similarly, Bank of England governor Andrew Bailey indicated it was premature to discuss rate cuts.

Negative economic and trade data, including the British economy’s weakest performance in four quarters, weighed on the pound, which fell against most major currencies. The FTSE 100 was also a laggard on the back of some disappointing earnings. Diageo, the drinks manufacturer, hit a three-year low and fell 14% on Friday after issuing a profit warning, citing slower growth expectations because of weaker performance in Latin America and the Caribbean.

Asian markets were mixed. In China, a report showed a sixth consecutive month of declining exports, a 6.4% drop in October compared to the previous year, reflecting challenges in the world’s second-largest economy.

The shine of gold faded over the week as the tensions between Israel and Hamas took a back seat on investors’ radars. While the conflict rages with Gaza, other countries in the region remain on the sidelines.

Oil prices also decreased for the third consecutive week, reaching their lowest since mid-July owing to mixed global economic data affecting oil demand projections.

In the cryptocurrency market, anticipation of the SEC’s approval of a Bitcoin spot ETF led to a 5.8% increase in Bitcoin’s value. Blackrock’s filing for an Ethereum spot ETF further boosted the digital asset market, with the total cryptocurrency market cap ending the week 7% higher.

Towards the week’s end, Icelandic authorities prepared for a potential volcanic eruption in the south-west following earthquakes and signs of rapid magma movement. This could impact travel stocks and airlines, reminiscent of disruptions seen in 2011.

Looking ahead, earnings reports from major consumer companies like Home Depot, Walmart, Target, JD.com and Alibaba are anticipated. These reports will shed light on US and Chinese consumer spending amid ongoing inflation and higher interest rates. Investors will also closely monitor the US Consumer Price Index figures for October, scheduled for release on Tuesday.

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