US equities break 3-day losing streak

General market commentary

Equity markets finished higher on Friday, supported by the Federal Reserve’s core personal consumption expenditure (PCE) inflation measure holding steady in August, in line with expectations. The S&P 500 rose 0.6%, the Dow Jones gained 0.4%, and the Nasdaq climbed 0.7%, led by utility and consumer discretionary shares, while consumer staples lagged. Notable movers included technology and industrial companies, which contributed strongly to the upside. Bond yields rose, with the 10-year U.S. Treasury yield reaching 4.18%, above earlier lows. In other markets, Asian equities were mostly lower, particularly pharmaceutical shares, following President Trump’s announcement of 100% tariffs on branded drugs, although companies could avoid tariffs by building U.S. manufacturing capacity. The U.S. dollar weakened against major currencies, while WTI oil traded higher on Russian fuel-export cuts following attacks on its energy infrastructure.

Over the week, U.S. economic data pointed to continued momentum, with personal income and spending rising faster than expected and GDP growth revised higher to 3.8% annualised. Despite this, major U.S. shares indices experienced slight declines. The S&P 500 closed at 6,604.72, down 0.9%, the Dow ended at 45,947.32, down 0.8%, and the Nasdaq finished at 22,384.70, down 1.1% from the previous Friday. Inflation remained above the Fed’s 2% target, with core PCE steady at 2.9%, and the labour market showed signs of cooling but stayed relatively strong. Equities were supported by solid fundamentals, though investors remained cautious amid seasonal volatility and the potential U.S. government shutdown.

Latest market and economic update

Most Asian equities rose on Monday, led by rebounds in technology shares, with South Korea and Hong Kong outperforming. Australian markets gained ahead of the RBA meeting, while Chinese and Singaporean shares also edged higher. Japan lagged as a stronger yen weighed on exporters, and India remained cautious after last week’s steep losses.

U.S. equity futures edged higher overnight as investors monitored bipartisan talks to avoid a government shutdown. Friday’s Wall Street gains followed in-line PCE inflation data, supporting bets on further Fed rate cuts. Despite Friday’s rises, the S&P 500, Nasdaq, and Dow all ended the week lower amid tech equities losses.

European equities closed sharply higher on Friday, rebounding from earlier losses, with the STOXX 50 up 0.9% to 5,495 and the STOXX 600 rising 0.7% to 554. Banks led gains, while ArcelorMittal rose 3% on Chinese steel tariffs. Pharma and Daimler underperformed following US tariff announcements. For the week, the STOXX 50 gained 0.7%, STOXX 600 was flat.

The dollar weakened on Monday ahead of U.S. economic data and rising government shutdown concerns. Against the euro, it slipped 0.15% to $1.1717, giving up last week’s gains. Investors focused on the Fed’s rate path and key upcoming releases, including payrolls, job openings, and manufacturing indicators.

Oil prices fell sharply in Asian trade as OPEC+ plans another production increase in November and Kurdish oil exports to Turkey resume, raising fears of a global supply glut. Brent fell to $69.58 and WTI to $65.16 per barrel, reversing last week’s gains driven by Russian supply concerns.

Spain received upgrades from Moody’s and Fitch, following S&P Global, reflecting stronger economic performance and a resilient labour market. Moody’s raised its rating to A3, Fitch to A, citing balanced growth, low unemployment, productivity gains, moderate wages, and competitive external finances, while both agencies maintained stable outlooks for the country.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

The Trump administration is weighing tariffs on electronic devices based on chip content to boost U.S. manufacturing, Reuters reported. The plan follows earlier proposals for steep semiconductor tariffs and production mandates. While concerns remain over higher costs and feasibility, firms like TSMC, Apple and Microsoft have pledged major U.S. investments.

Sony Financial shares surged up to 40% on their Tokyo debut after being spun off from Sony Group. The financial services arm, covering insurance and banking, was listed via direct listing, with over 80% of shares distributed to existing investors. Parent Sony’s shares remained largely steady despite the strong debut.

Electronic Arts is in advanced talks to go private in a $50 billion deal involving Silver Lake, Saudi Arabia’s PIF, and Jared Kushner’s Affinity Partners, potentially marking the largest leveraged buyout ever. The move targets EA’s popular franchises like "Battlefield 6" and "FC 26," amid industry consolidation and Saudi investment in gaming.

Deutsche Lufthansa plans to cut 20% of its administrative workforce as part of a cost-cutting drive, leaving operational staff unaffected. The move aims to control expenses amid profit and margin declines, delayed aircraft deliveries, and rising costs, marking a shift from post-pandemic hiring when the airline added over 30,000 employees.

Defiance ETFs launched the JEDI ETF, focusing on companies developing drones, AI-driven warfare, cybersecurity, and space systems, while excluding traditional defence contractors. Early holdings include Palantir, AeroVironment, Kratos, RTX, and L3Harris. The fund aligns with U.S. policy prioritising agile, domestically produced drones and modern warfare technologies.

Morgan Stanley named Microsoft its Top Pick in large-cap software, raising the price target to $625. Analysts cited strong AI and cloud growth, robust Azure and Office 365 performance, and disciplined capital allocation. Despite prior investor concerns around OpenAI and competition, Microsoft’s diversified revenue and margin expansion support further upside potential.

Upcoming data and events

This week’s economic data include the US employment report, covering payrolls, unemployment, and wage growth, alongside ADP jobs, JOLTS, and Challenger job cuts. Eurozone inflation figures and PMI updates from the US, China, Italy, Canada, and other major economies will also be monitored, while rate decisions are due in Australia and India.

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