Equities rise as investors await this week’s Fed decision

Equity markets rallied on Monday, with major US indices closing higher by over 1% after falling sharply last week. The S&P 500 outperformed the technology-heavy Nasdaq. This comes even as Treasury yields inched higher, with the US 10-year Treasury yield up by 0.05% to around 4.9%. However, oil prices and the dollar both moved lower. This decline adds support for the consumer at the gas pump, helps ease inflationary pressures, and provides some relief for equity markets broadly. Markets now brace for a heavy week of earnings and economic news, featuring a Fed meeting in the middle of the week and culminating in a potentially consequential labour market report on Friday. Meantime, European equities eased from session highs but closed with gains on Monday, bouncing slightly from the year-to-date lows from the prior session as bond yields eased and investors assessed a batch of economic data for insights on the ECB’s policy path. 

Summary for 31.10.2023 

• Most Asian equities fell on Tuesday tracking weaker-than-expected business activity readings from China, although the Nikkei reversed most early losses after the Bank of Japan struck a less hawkish tone than markets were expecting.  
• European shares are headed for a muted open after disappointing Chinese manufacturing figures while US equity futures eased this morning ahead of another busy day for earnings. Among the companies featured to release quarter results are Caterpillar, Advanced Macro Devices, Anheuser-Busch InBev, BP, Marathon Petroleum, and Pfizer. 
• Oil prices rebounded today after a 3% drop yesterday due to Middle East conflict concerns despite weak Chinese data. Meantime, the World Bank forecasts an average price of $90 per barrel in Q4 and expects it to fall to $81 next year, barring an escalation in the Middle East. However, in a worst-case scenario with regional violence disrupting supplies, prices could surge by up to 75% to $157 per barrel.  
• In October, China’s economic recovery faced challenges as both the Manufacturing PMI recorded at 49.5, and the non-manufacturing PMI, at 50.6, unexpectedly declined. These contractions highlight the need for government support, with new orders, foreign sales, employment contracting, and input and output prices falling. 
• Inflation in UK stores fell to the lowest level in more than a year another sign that the cost-of-living crisis is starting to ease. The British Retail Consortium said Tuesday that shop prices were 5.2% higher in October than a year earlier, down from 6.2% in September. It’s the fifth month in an ow that inflation in stores has fallen, with the rate at its lowest since August 2022.  
• German Consumer price inflation dropped to 3.8% in October on a year-to-year basis, down from the previous month’s 4.5% and slightly below the market consensus of 4%. This decrease, the lowest since August 2021, was driven by easing food inflation and declining energy prices, with core inflation at 4.3%. On a monthly basis, prices remained steady in October, missing the market consensus of 0.2% after a 0.3% increase in September. 
• Apple announced a new iMac, MacBook Pros and the third generation of its in-house Mac processor line, rolling out a first-of-its-kind M3 chip that boosts performance and graphics horsepower. The new chip lineup relies on advanced 3-nanometer manufacturing technology and more efficiently handles graphics processing. New MacBook Pro models, also unveiled at the half-hour event, will run the new processors. 
• McDonald’s exceeded expectations in Q3, reporting adjusted earnings of $3.19 per share (up from $2.68) and a 14% increase in revenue to $6.69 billion. Global comparable sales rose by 8.8%, with a notable 8.1% increase in the US Due to pricing strategies and digital orders.  
• AbbVie gained 2.1% yesterday after Barclays upgraded the pharmaceutical company’s shares to overweight from equal weight. Barclays said a recent sell-off had gone too far. 
• Ford Motor Co. fell 1.9% on Monday after it reached an agreement with the United Auto Workers union to end a strike. The agreement includes significant wage increases. In contrast, General Motors was up 0.5$ after reaching its own agreement with the United Autoworkers. Fellow automaker Stellantis was 0.14% lower. 
• Western Digital gained 6.2% after the data storage company announced it would split into two separate publicly traded firms after talks fell apart to merge with Kioxia Holdings. This was also complemented by the release of stronger-than expected quarterly results earlier in the day. 
• Tesla dropped another 4.7% yesterday after Berstein reiterated its “underperform” rating, citing an uncertain outlook. 
• XPO rallied 15% after the trucking company reported Monday stronger-than-expected quarterly results.