Pictet Group
Weekly house view | Neither green nor red
The week in review
With the Q3 reporting season set to begin in earnest, markets were largely in ‘wait-and-see’ mode last week. A year on from Hamas’s attacks on Israel, there is still palpable unease about events in the Middle East (reflected in a rise in oil prices last week). But financial stocks received a boost when two major US banks beat Q3 earnings expectations and a big money manager announced an all-time-high for assets under management, helping push the S&P 500[i] 1.1% higher over the week (in USD). The Nasdaq[ii] made similar gains, even though news was mixed for tech stocks: the US Department of Justice said it was considering the break-up of one of the tech giants, while a product event by another ‘Magnificent Seven’ stock underwhelmed. In the absence of more precise details on Chinese fiscal stimulus (which the Ministry of Finance only partially provided on Saturday), the MSCI China[iii] declined 7.0% in USD last week. A rise in inflation expectations and reduced expectations for Fed rate cuts meant the 10-year US Treasury yield broke above 4% again, while the US dollar strengthened. Bond yields also rose in Europe and Japan. Despite the rise in yields, gold made a small gain in USD.
Quote of the week
“I would say these earnings are consistent with the soft-landing narrative — or arguably what is increasingly a no-landing narrative.”
— JPMorgan Chase Chief Financial Officer, Jeremy Barnum
Key data
Industrial production in Germany rose by 2.9% month-on-month in August, reversing a decline of the same magnitude in July, but was still almost 3% down from a year before. Separately, the German government expects economic contraction for the second consecutive year. It now expects GDP to shrink by -0.2% this year, following -0.3% in 2023. The US consumer price index (CPI) rose at an annual rate of 2.4% in September, down from 2.5% in August, while core CPI increased to 3.3% from 3.2%. The producer price index (PPI) rose at a yearly rate of 1.8% in September down from 1.9% the previous month. The University of Michigan’s consumer sentiment slipped to 68.9 this month from 70.1 in September while one-year inflation expectations rose to 2.9% from 2.7%. China’s CPI rose 0.4% year on year in September, down from 0.6% in August. The PPI fell 2.8%, accelerating from 1.8% in August.
[ii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, Nasdaq Composite (net 12-month return in USD): 2019, 36.7%; 2020, 44.9%; 2021, 22.2%; 2022, -32.5%; 2023, 44.6%.
[iii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, MSCI China (net 12-month return in USD): 2019, 23.7%; 2020, 29.7%; 2021, -21.6%; 2022, -21.8%; 2023, -11.0%.
[iv] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, Russell 2000 (net 12-month return in USD): 2019, 25.5%; 2020, 20%; 2021, 14.8%; 2022, -20.4%; 2023, 16.9%.