Weekly house view | Chickening out?
The week in review
Global stocks rose last week on robust corporate earnings and cooler-than-expected US inflation, which reinforced expectations that the Federal Reserve will cut interest rates this week. Expectations for the cut, which has been well telegraphed, are fully priced in despite US inflation still running at 3%. Is the Fed chickening out of its mandate to provide stable prices – usually defined as 2% – to focus on its other mandate, to promote maximum employment? With employment barely growing, something needs to change. Despite the soft labour market, leading US companies are in robust health, with the majority so far beating earnings and sales expectations.
The S&P 500 rose 1.9% last week. In Europe, more than half of STOXX Europe 600 companies that have reported so far have surpassed earnings expectations though their sales are disappointing, partly due to the euro’s appreciation against the US dollar.
Last week, gold suffered its biggest one-day drop in 12 years, falling by over 6% as this year’s rally experienced a correction.
The US and Australia signed a critical minerals deal after China earlier this month announced export controls on rare earths.
Quote of the week
“Today we reached a turning point, today begins the construction of a great Argentina,” President Javier Milei said after his party won midterm elections, allowing him to continue his reforms.
Key data
US CPI rose to 3% year-on-year in September, up from 2.9% in August but below expectationsfor 3.1%. Core CPI came in below consensus expectations.
The euro zone composite PMI Output Index rose to 52.2 in October, exceeding expectations and reaching its highest level since May 2024.
Headline UK CPI remained stable at 3.8%, below expectations.
In Asia, China’s Q3 real GDP growth slowed to 4.8% year-on-year from 5.2% in Q2 and 5.4% in Q1. Japan’s annual core inflation rate accelerated to 2.9% in September, the first increase since May.