Week ending 18th October 2024.

Overall, it’s been a mixed week for markets with plenty of Q3 earnings and economic reports for investors to digest.

In Europe, stocks rallied on Thursday following the European Central Bank’s (ECB) decision to cut interest rates for the third time this year. Policymakers reduced the deposit facility rate by 0.25%, bringing it to 3.25%, in response to inflation dipping below the 2% target in September. ECB President, Christine Lagarde, expressed cautious optimism, stating that current data suggests the economy is on a soft-landing trajectory and not heading into recession.

However, Lagarde highlighted that risks to economic growth remain skewed to the downside, citing lower confidence, which is slowing the recovery of consumption and investment, as well as geopolitical tensions and reduced demand for exports due to a weak global economy. While the ECB had not anticipated the 1.7% inflation reading in September, Lagarde noted that they still expect inflation to rise in the coming months, partly due to the fading impact of earlier sharp declines in energy prices. She expressed increased confidence in reaching the 2% inflation target sustainably but emphasized that there is no predetermined path, and policymakers will remain ‘data-dependent,’ not just ‘datapoint-dependent.’

In the US stocks closed the week higher as investors digested Q3 earnings. It was a choppy week for tech stocks which led the market both lower, following ASML’s quarterly report, and then higher as TSMC’s optimistic outlook alleviated concerns regarding AI chip demand. The third-quarter reporting period has started on a solid note, with approximately 50 S&P 500 companies having released earnings, 79% of which have beaten expectations. Morgan Stanley shares rose 6.5% after exceeding Wall Street expectations for Q3 earnings and revenue. Strong quarterly results from Netflix also boosted investor sentiment, as the streaming giant beat expectations, lifting the tech sector.

Economic data wise, US retail sales increased by 0.4% month-over-month in September, exceeding August’s 0.1% gain and surpassing the market’s expectation. A positive indication that consumer spending remains robust with miscellaneous retailers clothing and health stores reported the largest gains.

The ‘my wealth invest’ app will be available to clients who hold investments with my wealth, which is a trading name of Wealth at Work Limited, part of the Wealth at Work group.

In Q3 2024, China’s GDP grew by 4.6% year-over-year, slightly above the 4.5% forecast. However, despite this growth, it was the slowest pace since Q1 2023, weighed down by ongoing property market weaknesses, fragile domestic demand, and deflation risks. Other data showed that industrial production and retail sales exceeded expectations for September. While the rise in retail sales appears promising, it was mainly driven by increased sales in the food and energy sectors. With the government maintaining a full-year growth target of 5%, additional stimulus measures are expected in the coming months to meet this goal.

On Friday, China’s central bank introduced 800 billion yuan ($112B) in stock market liquidity measures, to support equity purchases. Additionally, the People’s Bank of China (PBOC) hinted at possible interest rate cuts later this year, depending on the economic outlook, in a bid to stimulate consumer spending. Despite Beijing’s recent stimulus, market participants remain cautious. Indices closed the week in the red, as uncertainty lingers over the effectiveness of these measures, which will take time to materialise.

In the UK retail sales surprised markets rising by 0.3% in September, contrasting expectations of a decline. This positive performance was largely driven by a significant boost in the telecoms and computer sectors, which saw non-food sales surge by nearly 35% during the month. The strong demand in these sectors helped offset broader concerns about consumer spending, and marks a positive turn for UK retailers, who have been navigating the impact of higher interest rates on consumer behaviour.

Coming up next week, the PBOC will decide on key lending rates on Monday. Eurozone consumer confidence as well as PMI data from across the block, UK and US. UK consumer confidence and US durable goods orders.

Kate Mimnagh, Portfolio Economist