Global Market Overview
Global markets faced a challenging week, marked by uncertainties stemming from the upcoming US presidential election. Major indices across both the US and Europe are poised to close lower as the race intensifies between Trump and Harris. Michael McCarthy, Market Strategist and Chief Commercial Officer at Moomoo Australia, commented, “The most concerning outcome for global markets is a stalemate – no clear winner,” adding, “Such a scenario could very well derail the ongoing bull market in US stocks, leading to a significant downturn in global equities.”
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- Trump asserts that the ‘lovely’ EU will have to face a ‘big price’ for trading with the US
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In the meantime, the US dollar weakened ahead of the upcoming non-farm payroll data, as expectations of a cooling labor market loom. Safe-haven assets such as gold, silver, and cryptocurrencies experienced a retreat from their recent weekly highs on Thursday, indicating that investors are repositioning in anticipation of a potentially tumultuous period. Yields on government bonds continued to climb due to inflation concerns, further exacerbated by the ‘Trump Trade.’ Crude oil prices bounced back from earlier declines as traders reassessed Middle Eastern tensions alongside recent Chinese economic data.
Europe’s Economic Landscape
In the Eurozone, headline inflation increased to 2% in October, up from 1.7% the previous month, as reported by Eurostat’s preliminary estimate. Core inflation held steady at 2.7% year-on-year, exceeding expectations. This data could prompt the European Central Bank to adopt a more cautious stance regarding rate cuts, providing support for the euro, which reached a near two-week high against the US dollar.
European stock indices recorded declines throughout the week. The Euro Stoxx 600 fell by 2.61%, Germany’s DAX decreased by 1.98%, France’s CAC 40 dropped by 1.96%, and the UK’s FTSE 100 slipped by 1.68% over the past five trading days. At a sector level, all categories reported weekly losses driven by risk-off sentiment, with technology stocks lagging the most. ASML shares plummeted by 6.64%, while SAP shares dropped by 1.76%. These declines mirrored the downturn observed on Wall Street, as major US tech companies negatively impacted growth stocks globally.
Conversely, mining stocks demonstrated resilience, buoyed by encouraging Chinese manufacturing data. Over the week, shares of Rio Tinto gained 1.16%, Glencore rose by 1.09%, and Anglo American climbed by 1.01%. In terms of earnings, HSBC exceeded profit expectations for the third quarter and announced a multi-billion share buyback program, resulting in a 4.4% boost in its shares for the week. On the other hand, UBS shares fell by 4.5% amid regulatory uncertainties, with the bank cautioning that geopolitical events, the US election, and declining interest rates could affect its outlook for the final quarter.
In the UK, Labour’s recent budget proposals, which include a £41bn (€48.6bn) tax hike and increased welfare spending, have raised concerns regarding economic growth. Analysts are apprehensive that these measures could exacerbate inflation and lead to economic stagnation. The pound reacted sharply, with GBP/USD falling to its lowest level since August 15 following the announcement.
Wall Street’s Performance
On Wall Street, US stock markets also followed a downward trajectory this week amid risk-off sentiment and mixed results from key tech earnings. Over the past five trading days, the Dow Jones Industrial Average decreased by 0.83%, the S&P 500 fell by 1.77%, and the Nasdaq Composite lost 2.29%. Within the S&P 500, ten out of eleven sectors reported weekly declines, with technology shares dampening overall sentiment, down 2.67%. This trend suggests that investors are reallocating funds from growth stocks to safer assets.
Alphabet shares rose by 5% for the week, driven by strong earnings as Google Cloud’s growth accelerated. In contrast, Microsoft slipped 4.33%, while Meta’s shares remained flat on a weekly basis due to concerns regarding heavy AI infrastructure spending impacting profitability. Apple’s disappointing results were attributed to ongoing weakness in the Chinese market, whereas Amazon exceeded market expectations across all key metrics.
The US economy recorded a growth rate of 2.8% in the third quarter, slightly below expectations, yet still reflecting a resilient trajectory that supports a soft-landing scenario. Market participants are now keenly focused on the October non-farm payroll data, with consensus indicating a possible slowdown in employment growth.
Asia-Pacific Market Insights
In the Asia-Pacific region, stock markets exhibited mixed results, reflective of divergent economic dynamics. Japan’s benchmark Nikkei 225 saw a modest increase of just under 1% for the week, erasing earlier gains as the yen strengthened following the Bank of Japan’s decision to maintain interest rates at 0.25%, while signaling the potential for a rate hike in December. Chinese stock markets experienced gains on Friday following positive economic data, though they remained flat for the week. Notably, October’s manufacturing PMI expanded for the first time since April, suggesting that recent stimulus measures may finally be yielding positive effects.
