Markets fly on soft US data

On Tuesday, US equities surged as the latest inflation report revealed softer-than-expected numbers, easing concerns about aggressive Federal Reserve tightening. The S&P 500 gained nearly 2%, reaching a two-month high, with all eleven sectors finishing higher, particularly the real estate sector, which rose over 5%. Bond yields retreated sharply, and market sentiment shifted towards speculation of a potential Fed rate cut in 2024, contributing to a broad-based rally across major indices. Meantime, European equity markets extended gains, with the Stoxx 50 reaching an eight-week high, as the lower inflation reading in the US reinforced expectations of a stable interest rate environment, and positive corporate results from companies like RWE and Adidas contributed to the positive sentiment. 

Summary for 15.11.2023 

• Asian equity markets surged this morning, propelled by strong gains in US equities following weaker-than-expected US inflation data. Hopes of no further interest rate hikes were boosted, particularly in the tech sector, as China’s central bank injected the equivalent of $82.7 billion into the system, while positive economic data from China, despite some weaknesses, also contributed to the rally.  
• European equities are poised to take a breather after Tuesday’s US CPI-fuelled rally while US equity futures inched higher as the House of Representatives passed a bill to avert a government shutdown late Tuesday and amid hopes for a stable interest rate environment. 
• Oil prices rose on Wednesday as China’s better-than-expected economic data, with improved industrial output and retails sales, boosted market sentiment. Additionally, the International Energy Agency (IEA) raised its oil demand growth forecast for this year, supporting expectations of healthy oil demand amid global economic recovery. 
• The Chinese data published today indicated a mixed economic picture. On the positive side, industrial production and retail sales in China grew more than expected in October. This suggests some resilience in the Chinese economy, reflecting improved manufacturing and consumer spending. However, there are still areas of concerns as fixed asset investment slowed and property sales continue to decline.  
• October’s US inflation data revealed a decrease in both headline and core Consumer Price Index (CPI), with headline CPI rising by 3.2% year-over-year, down from 3.7% in September. The moderation in core CPI to 4% markets the lowest reading since September 2021, potentially influencing a cautious Federal Reserve on interest rate hikes. 
• Japan’s GDP contracted more than expected in Q3, shrinking by 0.5% from the previous quarter, signalling a potential slowdown in consumption-driven growth amid sticky inflation and a weak yen. Private demand, including household spending and retail consumption, saw a sharp deterioration, prompting concerns about the sustainability of Japan’s economic recovery. 
• Warren Buffett’s Berkshire Hathaway made portfolio adjustments in Q3, adding a new small position in Atlanta Braves Holdings while liquidating stakes in General Motors and Procter & Gamble. The absence of Activision Blizzard stake suggests a pre-deal sale before Microsoft’s acquisition. Berkshire’s largest positions include Apple, Bank of America, American Express, and Coca-Cola, with the overall equity portfolio decreasing from $348.19 billion in June to $313.3 billion by the end of September. 
• OpenAI has temporarily halted new subscriptions for its ChatGPT Plus program due to capacity issues following a surge in users after a recent developers’ conference. The decision comes after ChatGPT experienced outages attributed to increased usage and alleged cyber-attacks, with most new features introduced during the DevDay conference available only to ChatGPT Plus subscribers. 
• Home Depot’s shares surged 6.1% yesterday as the company reported Q3 results exceeding analysts’ expectations for revenue, same-store sales, and EPS, despite macro pressures and challenges in certain big-ticket categories.  
• Renault is working to persuade investors to list its electric vehicle unit, Ampere, despite challenges like lower demand for electric cars and tough competition from China. CEO Luca de Meo aims for a valuation of 8-10 billion euros for Ampere’s equity market debut in spring 2024.