Tug-of-War Between The Bears And Bulls

Mega-cap tech companies' poor financial results and indicators of a slowing economy were pulling the global equities at one end of the rope, on the flip side, there were rising expectations for a Fed pause and lower bond yields.

In the past fortnight, global equities witnessed a slight upsurge, but delivered widely divergent returns, as market participants reacted to the busy calendar of third-quarter earnings data. On stock-specific activity, energy and other industrial economy scrips handily surpassed growth companies. A drastic decline was witnessed in many mega-cap technology and internet-related companies. On Wall Street, big-techs like Microsoft, Amazon.com, Alphabet (parent of Google), and primarily Meta Platforms (parent of Facebook), lost momentum after missing earnings estimates.

Positive sentiment over the week seems to be fueled by expectations that the Federal Reserve could slow down on the agressive rate hike stance. It may even stop the rate raise agenda due to concerns that the Fed's rate increases and the ensuing sharp increase in the value of the US currency could cause instability in the global financial system.

The third quarter's initial estimate of GDP growth from the Commerce Department in the US showed the economy expanding at an annualised rate of 2.6 per cent, exceeding consensus expectations of approximately 2.4 per cent and marking the first positive result of the year. The benchmark 10-year US Treasury note yield dropped back below 4.00 per cent after a gain in Treasuries in the past week before.

On the assumption that central banks would limit the rate of interest rate hikes, shares in Europe grew sharply. The STOXX Tug-of-War Between The Bears And Bulls Mega-cap tech companies' poor financial results and indicators of a slowing economy were pulling the global equities at one end of the rope, on the flip side, there were rising expectations for a Fed pause and lower bond yields. Global Market Watch Europe 600 Index for all of Europe ended last week 3.65 per cent higher in local currency terms. In the last week of October, major stock indices rose as well. The CAC 40 Index in France increased 3.94 per cent, the DAX Index in Germany up 4.03 per cent, and the FTSE MIB Index in Italy increased 4.46 per cent. The FTSE 100 Index for the UK increased 1.12 per cent.


 

"The third quarter's initial estimate of GDP growth from the Commerce Department in the US showed the economy expanding at an annualised rate of 2.6 per cent, exceeding the expectations of approximately 2.4 per cent and marking the first positive result of the year."
 

For the second time in a row, the European Central Bank (ECB) increased its benchmark interest rates by 0.75 percentage points, and it warned that it might have to do so again to combat the still 'far-too-high' inflation. At 1.5 per cent right now, the deposit rate is at its highest level since 2009.

As fresh COVID-related lockdowns in various sections of China impacted investor optimism, the stock markets in that country declined. As the country reported three consecutive days of more than 1,000 new cases countrywide, several Chinese localities increased COVID-19 regulations. Additionally, data revealed that in September, profitability for Chinese industrial companies decreased more quickly. Shanghai Composite Index, which is capitalisation-weighted broadly, decreased by 4.05 per cent in the past fortnight. The Japanese equity market finished higher last week. The benchmark Nikkei 225 ended the week above the 27,000 level at the 27,105 mark, while the broader TOPIX index ended nearly flat at the 1,899 level.