Markets balancing earnings and diplomacy

Equities were broadly higher Monday, as investors shrugged off another uptick in Treasury yields to focus on a string of strong earnings reports and growing confidence that the Federal Reserve is about done raising interest rates.  The Dow closed 314 points higher, while the S&P 500 and the Nasdaq gained 1% and 1.2%, respectively.  Among sectors, consumer discretionary, utilities, and energy performed the best.  European equity markets also rose yesterday, with the German DAX and the Euro Stoxx 50 up 0.3% led by retail shares, partially driven by diplomatic efforts aimed at preventing the Israel-Hamas conflict from escalating into a wider regional crisis. 

Summary for 17.10.2023 

• Asian equity markets carried on Wall Street’s overnight rally, recovering a measure of recent losses, with investors choosing to focus on corporate earnings prospects and the resilience of the US economy ahead of tensions in the Middle East.  Investors also assessed the latest RBA meeting minutes which detailed the central bank’s decision to hold rates steady at 4.1%.  Shares in Australia, Japan and Hong Kong advanced, while those in mainland China struggled. 
• US and European equity futures were flat his morning as investors digest ongoing Middle East diplomatic efforts and further reporting by US banks. 
• Oil prices fell in Asian trade this morning, extending recent losses after reports suggested that the SU could potentially relax its sanction on Venezuela’s oil industry.  A lack of immediate escalation in the Israel-Hamas was also spurred bets that the conflict will not spill over into the broader Middle East region, as US officials said that Israel had agreed to provide aid to Gaza.  President Joe Biden is also set to visit Israel on Wednesday, Secretary of State Antony Blinken said. 

• President Joe Biden will travel to Israel Wednesday, in a visit designed to signal US solidarity with its closest Middle East ally and help prevent the conflict from engulfing the region.  Secretary of State Antony Blinken said Israel had agreed to develop a plan alongside the US “that will enable humanitarian aid from donor nations and multilateral organisations to reach civilians in Gaza” as soon as possible. 
• During its October meeting, the Reserve Bank of Australia, under the new leadership of Michele Bullock, contemplated raising rates due to concerns about sluggish progress in reducing service price inflation and significant inflationary risks.  However, they chose to keep rates unchanged for the 4th consecutive month while emphasising a low tolerance for a delayed return of inflation to the target range, hinting at the possibility of future tightening contingent on incoming data and evolving economic conditions.  
• The clock is ticking for Country Garden to avert its first-ever public dollar bond default, as the distressed Chinese developer faces an interest-payment deadline this week.  The builder, which has become a symbol of Chinas broader property debt crisis, must pay $15.4 million coupon by the end of a 30-day grace period end Oct. 17-18 before a default can be called. 
• Lululemon rallied 10% yesterday following reports the athletic apparel company will be added to the S&P 500 on Wednesday.  Lululemon will replace Activision Blizzard following Activision’s takeover by Microsoft. 
• Pfizer shares were up 3.6% on Monday despite lowering its full-year revenue forecast due to slower demand for its Covid treatment and vaccine.  In the meantime, Jefferies upgraded the shares to Buy from Hold. 

• Shares of Manchester United plc fell over 10% yesterday on reports British billionaire Jim Ratcliffe was in talks to acquire a minority stake that would value the football club at more than $3.3 billion, according to The Wall Street Journal.