Key Market Movements and Insights
Resilience in US Markets Post-Election
Following the recent US election, American markets demonstrated remarkable strength, with the S&P 500 climbing by 4.6% last week—a standout performance since November 2023. This uptick reflects solid economic fundamentals, as steady consumer spending, rising incomes, and robust employment contribute to economic stability. Reduced market volatility, due to the clarity of the election outcome, has bolstered investor sentiment, particularly in cyclical and smaller-cap stocks. Additionally, the Federal Reserve’s recent interest rate reductions indicate a cautious yet supportive stance toward growth, creating opportunities for long-term returns in US fixed-income assets.
European Market Challenges
In contrast, European markets encountered headwinds, with the Euro Stoxx 50 index down by 1.5% last week. The anticipated impact of the Trump administration’s agenda—tax cuts and tariffs—poses risks for European exporters, especially in Germany. Trump’s preference for bilateral trade agreements over EU-wide deals could impact EU cohesion and dampen investor confidence. Additionally, rising US interest rates may further strengthen the dollar, leading to potential capital outflows from Europe and increasing borrowing costs, particularly for heavily leveraged firms.
Asian Market Sentiments
Asian markets also faced declines, as Chinese equities fell following a significant debt relief package that failed to lift investor confidence due to the absence of broader stimulus measures, especially for the struggling property sector. Most Asian indices posted losses, with deflation concerns persisting, especially in China, where consumer prices saw their slowest growth in four months.
Upcoming Economic Data to Watch
This week will be pivotal, as key economic data is expected to influence market movements. The October US Consumer Price Index (CPI) will be released on Wednesday, with anticipated increases of 0.2% in the headline CPI and 0.3% in core CPI. The Producer Price Index (PPI) on Thursday will provide additional insight into inflation trends, and Friday’s retail sales data will be closely watched after a strong September performance. In China, consumer prices showed a slowdown in growth, while producer price deflation deepened. Notably, while the US Treasury market is closed for Veterans Day, the New York Stock Exchange will remain open for trading.
Key Earnings Reports
While the week sees a lighter earnings schedule, prominent companies under coverage include Walt Disney, Applied Materials, Home Depot, and Cisco.
Recent Market Update: Asian and European Perspectives
Asian equities mostly declined on Monday, influenced by limited fiscal stimulus from China and persistent deflationary concerns. Japanese indices also weakened amid uncertainty around future interest rate changes.
European equities showed mixed performance at market opening, with economic concerns weighing on investor sentiment. Conversely, US index futures rose slightly as investors await key inflation data and potential Federal Reserve guidance on rates.
Oil and Cryptocurrency Updates
Oil prices fell during Asian trading as China’s stimulus measures underwhelmed, and Hurricane Rafael’s weakening reduced concerns about potential disruptions in US oil production. In the cryptocurrency space, Bitcoin reached an all-time high above $81,000 on Sunday, driven by hopes of pro-crypto regulation following the US election, while Ether hit a three-month high of $3,190.
Companies with Noteworthy Stock Movements
- TSMC: The company has been instructed by the US to halt shipments of advanced AI chips to China, impacting clients like Huawei. This measure aims to limit China’s access to critical semiconductor technology.
- Booking.com and Expedia: In the competitive online travel sector, Booking.com is exploring job cuts for increased efficiency, while Expedia’s limited growth led Deutsche Bank to downgrade its shares to ‘Hold’.
- Sony: Sony reported a 73% increase in operating profit in Q3, largely due to strong performance in its gaming and network businesses, even as TV production weakened.
- Enphase Energy: Facing a downturn in solar demand, particularly in Europe, Enphase will reduce its workforce by 17%, incurring restructuring costs of $17-$20 million by Q1 2025.
- Lowe’s and Home Depot: Both home improvement giants saw share price increases after receiving ‘outperform’ ratings, driven by factors like interest rate cuts and anticipated hurricane recovery demand.
- Rivian: Following higher-than-expected losses, Rivian’s stock was downgraded by Bank of America, with a reduced price target and a projected increase in EBITDA losses for 2024.
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