Shares register strongest weekly rally in a year

US equities rose on Thursday thanks to strong earnings, lower bond yields, and positive economic data.  The S&P 500 and Nasdaq reached their highest levels in over two weeks.  The broad-based rally encompassed various sectors, particularly financial, energy, and retail, with small-cap shares leading the way, exemplified by the Russell 2000 Index’s 2.5% surge.  Bond yields, especially the 10-year Treasury, dropped to below 4.7%.  Overall, third-quarter earnings have been surpassing expectations and are expected to show year-over-year growth for the first time since the first quarter of 2022.  Elsewhere, European markets continued their winning streak for a fourth session, with Frankfurt’s DAX 40 and the Euro Stoxx 50 rising significantly. 

Summary for 03.11.2023 

• Asian equity markets broadly rose this morning, with Hong Kong’s Hang Seng surging 2%, led by strong tech shares.  South Korea’s Kospi gained 1%, and Australia’s ASX 200 rose 1.1% on unexpectedly growing retail sales.  Chinese equities also advanced, despite weaker service sector data, driven by bargain buying.  Japanese markets were closed for a holiday. 
• European equity markets are poised for continued gains amid optimism about the Federal Reserve’s outlook, while US equity futures weakened due to a drop in Apple shares following a disappointing revenue outlook for the December quarter. 
• Oil prices stabilised in Asian trading, with Brent crude futures and West Texas Intermediate crude futures both rising by 0.1%.  Despite some recent strength, both major crude contracts were on track to close lower for the second consecutive week, primarily due to easing concerns over the Israel-Hamas conflict and weak economic data from China. 

• The Caixin China General Services PMI rose slightly to 50.4 in October, reflecting continued growth in services activity.  This growth was driven by foreign sales and stable employment, although new orders grew at their slowest pace of the year, while sentiment weakened on economic outlook concerns. 
• In September, Australian retail sales surged by 0.9% mom, marking the third consecutive month of growth, driven by increased sales in department stores, household goods, and food, while the third quarter saw a 0.2% expansion in retail trading following a 0.6% decline in the previous quarter. 
• The Bank of England yesterday decided to maintain its benchmark interest rate at 5.25%, citing concerns about a potential economic slowdown in the UK and persistently high inflation.  The central bank also indicated that monetary policy will likely remain restrictive for an extended period as it aims to bring inflation back to its 2% target and stand ready to implement further tightening measures if needed. 
• Third quarter nonfarm business labour productivity in the US increased by 4.7%, while hourly compensation rose by 3.9%, contributing to a 0.8% decline in unit labour costs, indicating that rising productivity outpaced wage increases and may support economic growth and lower inflation.  These trends reflect a positive balance between increased productivity and labour costs for employers.  
• After the market close yesterday, Apple reported quarterly sales and profits that exceeded Wall Street’s expectations, with a 2.8% increase in iPhone sales, offsetting declines in Mac and iPad sales, while net income rose by approximately 11%.  However, the company warned that its holiday quarter revenue will be flat compared to the previous year, disappointing investors hoping for a growth rebound.  This announcement caused Apple’s shares to drop by over 3% in extended trading. 

• Ferrari reported strong Q3 results with core profit exceeding expectations, driven by robust demand and personalised additions to its cars, while the company’s order book is full until 2025 when it plans to launch its first fully electric vehicle.  This led to an improved earnings forecast of at least €2.25 billion for the year and a jump of over 5% in its share price. 
• Qualcomm’s earnings exceeded expectations, leading to a 5.8% increase in its share price as the chip designer forecasted higher sales and profit for the first quarter, contributing to the overall positive market sentiment. 
• Starbucks exceeded Wall Street expectations in its fourth-quarter results, with a boost from fall-themed drinks like the Pumpkin Spice Latte, leading to a 9.5% increase in its share price and a positive annual profit forecast.  The company’s strong performance was driven by increased same-store sales and a loyal customer base despite inflation concerns. 
• Eli Lilly reported impressive Q3 results, with substantial revenue growth and positive developments in their R&D pipeline, leading to confidence in their future growth prospects.  The market reacted positively, reflecting a strong financial performance and the company’s strategic advancements in drug development. 
• Novo Nordisk reported record operating profit for the third quarter, with robust sales of their weight-loss drug Wegovy, and anticipates double-digit sales growth for Wegovy and Ozempic in 2024, as soaring demand outpaces supply, reflecting the significant impact of these obesity drugs on their market value and industry expectations.