Weekly recap: Uncertainty moves markets into retreat from highs
Global markets are set to finish the week lower due to uncertainties surrounding the economic and political landscape ahead of the US presidential election and the Japanese general election. Risk-off sentiment shaped market trends as precious metal prices surged.
Both European and US markets retreated from all-time highs and are likely to end the week lower as the rally lost momentum. Risk aversion seems to be driving the selloffs amid economic concerns and the upcoming US Presidential Election.
Safe-haven assets such as the US dollar, gold, and silver climbed further, while the euro and other currencies, as well as crude oil and copper prices, declined due to soured sentiment.
US government bond yields rose to a three-month high as markets expect the Federal Reserve to slow the pace of rate cuts for the rest of the year.
Europe
European benchmarks are all in the red for the week, with the Euro Stoxx 600 falling by 0.86%, Germany’s DAX down by 1.09%, France’s CAC 40 losing 1.44%, and the British FTSE 100 declining by 1.06% over the past five trading days.
At the sector level, most sectors experienced negative weekly performance due to downbeat sentiment, with mining and energy stocks being the biggest laggards.
Major miners and oil producers, such as Rio Tinto, BHP, BP, and Shell, continued to decline amid falling industrial metal and crude oil prices.
The IMF downgraded the eurozone’s economic outlook, citing particular weakness in manufacturing activity in Germany and Italy.
Among large-cap stocks, performances were mixed. Novo Nordisk fell 2.4%, while LVMH and ASML rebounded nearly 4% over the week, recovering from recent drops.
However, both stocks are still down by 15% and 3% year-to-date due to disappointing quarterly results. China’s economic slowdown remains a primary challenge for these major European companies.
On the earnings front, SAP reported strong quarterly earnings, driving its shares to an all-time high. The German tech giant’s cloud revenue rose by 25%, with its artificial intelligence-backed business accelerating in growth due to restructuring efforts and a strategic shift.
In the UK, Barclays unveiled solid quarterly results, with its investment bank’s revenue increasing by 6% year-on-year. Its shares soared to a nine-month high in pre-market hours, with the positive outcome attributed to a strategic overhaul focused on cost-cutting, announced earlier this year.
The euro weakened further against the US dollar over the week despite a rebound on Thursday. The weakeness in the euro is due to rising US government bond yields, contrasting with declining yields in major European counterparts.
Economic data has also increased the likelihood of the ECB accelerating its rate cuts. According to Eurostat, eurozone manufacturing activity remained in contraction in October, especially in France.
Despite a slight improvement in Germany, the figures remained weak, suggesting ongoing challenges for economic growth in the region.
Wall Street
US stock markets also ended the week on a negative note as rising government bond yields pressured equity valuations.
ADVERTISEMENTThe bond selloff echoed trends from 1995, with traders expecting a soft landing for the US economy following better-than-expected October data.
However, S&P Global estimates indicate that US manufacturing activity may remain in contraction for the fourth consecutive month in October.
Over the past five trading days, the Dow Jones Industrial Average decreased by 2.08%, the S&P 500 declined by 0.93%, and the Nasdaq Composite lost 0.4%.
Within the S&P 500, eight out of eleven sectors posted weekly declines, with industrial and materials leading losses, down by 2.15% and 2.73%, respectively. Utilities, real estate, and consumer discretionary were the only sectors to post slight gains.
ADVERTISEMENTTesla reported better-than-expected third-quarter earnings, sending its shares soaring 22% on Thursday and erasing most of its October losses.
The company’s automotive revenue returned to growth after declining for the past two quarters, and the Cybertruck achieved profitability for the first time since its deliveries began late last year.
Asia-Pacific
Stock markets in the Asia-Pacific region were mostly lower for the week, reflecting global trends. Japan’s benchmark Nikkei 225 fell more than 3% ahead of the country’s general election this weekend.
The Bank of Japan’s rate decision will be closely watched next week.
ADVERTISEMENTAustralia’s ASX 200 also dropped by less than 1%, largely due to the underperformance of the mining sector.
However, Chinese markets stabilised as investors reassessed the impact of the government’s stimulus measures
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