Highlights
U.S. equities ended the week higher after recovering from the prior Friday’s steep decline—the S&P 500’s worst day since April. The week began on a positive note, helped by signs that U.S.-China trade tensions were easing, dovish remarks from Federal Reserve officials, and several AI-related deal announcements. The start of earnings season added support, with major banks including JPMorgan Chase, Citigroup, and Wells Fargo all surpassing profit expectations. By Friday, roughly 12% of S&P 500 firms had reported, and 86% had beaten forecasts, boosting investor confidence. However, sentiment weakened midweek after two regional banks revealed loan issues tied to alleged fraud, reviving fears about credit risks and the health of smaller lenders. The CBOE Volatility Index rose to its highest level since April as a result. Meanwhile, Fed Chair Jerome Powell reiterated that the central bank may continue easing policy this year, emphasizing that downside employment risks are growing even as inflation remains above target. Other officials, including Christopher Waller and Stephen Miran, echoed support for further cuts. Across the Atlantic, European stocks edged higher, with the pan-European STOXX 600 gaining 0.86%, supported by Powell’s dovish stance and easing trade tensions. Easing political turbulence in France also added to the investor optimism after French PM Sébastien Lecornu’s government survived no-confidence motions following the suspension of a contentious pension reform to avoid a potential snap election. However, cracks remained in the Euro area industrial output front, with industrial production falling 1.2% in August, led by declines in capital and durable goods. Data from the U.K. mirrored the trend somewhat, with UK GDP rising just 0.1% in August following a similar decline in July while Q3 output was up 0.3%. Unemployment rose to 4.8% whereas wage growth excluding bonuses slowed slightly to 4.7% year over year. Over in Asia, Japanese stocks retreated, with the Nikkei 225 down 1.05% and TOPIX off 0.85% as a stronger yen, political instability, and global trade worries dampened sentiment. The 10-year JGB yield fell to 1.62% as markets reduced expectations for near-term Bank of Japan tightening. Governor Kazuo Ueda reiterated a cautious approach, emphasizing data-dependent decisions on whether to raise rates at the end of October. Meanwhile, Mainland Chinese equities fell as trade tensions with the U.S. deepened. The CSI 300 dropped 2.22% and the Shanghai Composite lost 1.47%. Persistent deflation and a weak property market continued to weigh on domestic demand as shown by producer prices declining 2.3% year over year in September—the 36th straight monthly drop—while consumer prices fell 0.3%. Attention turned to the upcoming Communist Party plenum (October 20–23), where officials are expected to finalize the next five-year economic plan. Markets will watch for measures to stimulate consumption as China faces slowing growth and higher U.S. tariffs.
Data Highlights
The U.K. unemployment rate edged higher to 4.8%, slightly above both the forecast and the previous 4.7%. China’s inflation rate remained in negative territory at -0.3% year-on-year, a decline from the previous-0.4% but still below the -0.1% forecast. In Australia, the unemployment rate rose to 4.5%, higher than analysts’ expectation of 4.3%.
Week Ahead
China GDP Growth YoY- Monday | Canada Inflation Rate YoY – Tuesday | U.K Inflation Rate YoY– Wednesday | Canada Retail Sales YoY – Thursday | Japan Inflation Rate YoY, U.K Retail Sales YoY- Friday
