Shares hold gains amid volatility in China

written on October 25, 2022

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

US equities ended Monday’s session higher, adding to last week’s rally, which was the biggest advance since June. Treasury yields were mixed as longer-term rates reversed to the upside and seemingly weighed on growth sectors. The Dow Jones Industrial Average rose 1.3%, the S&P 500 Index increased 1.2%, and the Nasdaq Composite advanced 0.9%. Similarly, European bourses were also higher across the board despite some lacklustre economic data. 

Summary

  • Asian equity markets mostly rose on Tuesday, led by shares in Australia, Japan, and South Korea. Meanwhile, Hong Kong shares were volatile while mainland China markets continued their decline. 
  • European and US equity markets are set for a flat open in early hours on Tuesday as investors await big tech earnings. 
  • Oil prices edged higher this morning to reverse some of the previous session’s losses as the US dollar eased, while weaker US business activity data lowered expectations for more aggressive interest rate hikes in the world’s biggest economy. 
  • Rishi Sunak will be named the UK’s new prime minister after his sole competitor, Penny Mordaunt, dropped out of the race moments before votes from members of Parliament were due to be announced on Monday afternoon. 
  • US business activity contracted for a fourth straight month in October at both manufacturers and services firms, a monthly S&P Global survey of purchasing managers showed yesterday. The Manufacturing PMI dropped to 49.9 from September’s unrevised 52.0 figures and versus the consensus estimate of a decrease of 51.0. The Services PMI also surprised to the downside, as the key US sector fell to 46.6, compared to expectations of a modest gain of 49.5 from September’s 49.3 figure. 
  • UBS this morning reported a 24% fall in third quarter net profit on a decline in market activity, although it beat expectations due to a rise in client funds. The bank reported a net profit of $1.73 billion, outpacing the $1.53 billion consensus forecast. 
  • HSBC reported on Tuesday a 42% tumble in third-quarter pre-tax profit on the back of losses on the sale of its French unit and rising bad loans, but its interest income surged as banks benefit from rising rates around the world. The bank posted a pre-tax profit of $3.15 billion in the third quarter, down from $5.4 billion of a year ago, but well above the $2.45 billion average expected by analysts.  
  • Earlier today SAP confirmed its profit and sales outlook for the year after posting higher third-quarter revenue, led by growth at its cloud business.  
  • Tesla was in focus yesterday after the electric vehicle maker lowered its prices for its Model 3 and Model Y cars in China as the company faces increased competition from local EV manufacturers. 

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Life’s full of mysteries. Your money shouldn’t be one of them.