Major US equity indices closed in negative territory on Friday, as unrest in the Middle East, rising yields and mixed earnings weighed on market sentiment.  The S&P 500 and the Nasdaq declined by 1.2% and 1.5%, respectively, while the Dow lost 286 points.  Treasury yields remained elevated, with the 10-year yield slightly retreating after crossing the 5% mark.  For the week, the S&P 500 slid 3%, the Nasdaq lost 3.8%, and the Dow declined by 2.3% to book their worst week in a month.  European equity markets also closed sharply lower on Friday, with the Dax and the Euro Stoxx 50 index both sinking by 1.6% to their lowest point since May.   

Summary for 23.10.2023 

  • Asian shares drifted lower this morning as the risk of a wider conflict in the Middle East clouded sentiment in a week laden with data on US growth and inflation as well as earnings from some of the world’s largest tech companies.  Shares in Australia, Japan, South Korea and China all declined, while Hong Kong markets are closed for a holiday. 
  • European equities are on course for a steady start and US equity futures also rose on Monday as investors look ahead to corporate earnings reports from mega-cap technology names this week. 
  • Oil prices were lower for the second straight day this morning as diplomatic efforts to keep the Israel-Hamas war from exploding into a wider conflict in the Middle East eased some concerns about supply disruptions in the oil-rich region.  Aid convoys also started to arrive at the Gaza Strip from Egypt over the weekend, while Israel agreed to hold off its attack on Hamas amid pressure from the US.  Elsewhere, the US broadly suspended sanctions on OPEC member Venezuela after leaders there agreed to hold fair elections next year. 
  • Bitcoin touched the $30,000 mark last Friday, the highest in three months, supported by the growing likelihood of the introduction of a spot Bitcoin ETF in the US.  Multiple ETF providers amended their filings for approval of the funds, adding to pressure for the SEC to approve the long-awaited launch of such assets.  The cryptocurrency rallied over 10% since the start of October despite lower risk sentiment. 
  • Chinese authorities are again shaking the confidence of foreign companies in the country with a series of arrests and an investigation into Foxconn Technology Gorup, Apple Inc.’s most important partner and one of the largest employers in China.  Over the weekend, state media said that regulators are conducting tax audits and reviewing land use by Foxconn, the Taiwanese company that makes the vast majority of Apple iPhones at factories in China. 
  • Moody’s credit rating agency has dropped its negative outlook on the UK, citing the restoration of “policy predictability” after the mini-budget implemented last year and “more conciliatory” approach to EU trade.  Moody’s credit rating for the UK was last set at Aa3 with a stable outlook. 
  • Producer prices in Germany tumbled by 14.7% year-over-year in September, compared with market forecasts of a 14.2% fall and after a 12.6% decline in August.  It was the third straight month of decline and the steepest pace since data collection began in 1949, largely due to a base effect.  Excluding energy, producer prices grew 0.8%.  On a monthly basis, producer prices unexpectedly fell by 0.2%, missing market expectations of a 0.4% rise and swinging from a 0.3% gain in August. 
  • Retail sales in the UK declined 0.9% month-over-month in September, reversing a 0.4% increase in August and worse than market forecasts of a 0.2% fall.  Year-over-year, retail sales decline 1%, the smallest decline since sales started falling in August 2022, but much worse than forecasts of a 0.1% drop. 
  • Philips this morning raised its full-year outlook as it beat analyst expectations with a more than doubling of third-quarter core profit to €457 million.  The company expects 6% to 7% comparable sales growth over 2023, with a profit margin of 10%-11%. 
  • American Express led Dow decliners on Friday with a 5.4% drop, as broader weakness across the financial sector overshadowed the credit card issuer’s better-than expected earnings. 
  • Schlumberger was down 2.9% Friday after the oilfield services company’s third-quarter revenue came out shy of forecasts. 
  • L’Oreal shares dropped 1.5% on Friday, after a larger-than-expected hit to its travel retail business in Asia and disappointing sales of its luxury division as inflation and a choppy economic environment curb high-end spending. 
  • In the week ahead, attention in the US will be focused on the Q3 GDP growth rate, the PCE Price index, and personal income and spending, followed by key metrics such as durable goods orders and PMI readings from S&P Global.  Housing market health will also be assessed through pending and new home sales.  Elsewhere, central bank interest rate decisions will be key, with announcements from the ECB and the Bank of Canada. Flash services and manufacturing PMIs will be released in Australia, Japan, France, Germany, the Euro Area, and the UK.  Australia’s inflation rate, Germany’s Ifo Business Climate, and GFK consumer confidence, as well as GDP growth rates in South Korea and Spain, and the UK’s unemployment rate, will also be closely watched.