The main headline last week came from the Middle East, where Israel and Hamas have agreed to a ceasefire. Upon this news, the price of oil eased modestly reflecting investor sentiment that supply disruption risks remain unresolved.
The price of gold surged past $4,000 last week, a historic milestone for the precious metal. Widely regarded as a safe-haven asset, the price of gold is up over 50% this year amid concerns over stubborn inflation, rising levels of US debt, and falling interest rates. Other precious metals have also attracted investor attention this year; the price of silver and platinum have risen over 73% and 85% respectively since 1st January.
France’s political instability returned to the spotlight again last Monday with Prime Minister Sébastien Lecornu’s shock resignation less than a month into the role. His departure further complicates efforts to pass a budget and stabilise France’s political situation; markets sold off in reaction, with the French CAC 40 index falling 1.4% and the 10-year bond yield rising by 0.06%.
US Equity Market:
In an interview last week, the CEO of JPMorgan Chase, Jamie Dimon, shared his concerns about a US stock market correction. Some of these concerns are driven by what he considers to be speculative over-investments in AI, despite the clear long-term value he believed the technology represents. Alongside this, he cited the current geopolitical climate, fiscal status of large economies, and the observed remilitarisation of economies around the world as key drivers of current market uncertainty which also contribute to his concerns.
These concerns arose in the same week that both major US indices hit record highs again. The upward trend of both indices has been consistent over the year, with the S&P 500 index and the Nasdaq index rising 12.54% and 15.93% respectively year-to-date (to last Friday’s close – in US dollar terms). This impressive performance has been delivered despite the volatility and drawdowns experienced in April.
There are concerns in the US that the decision to amend the H-1B visa scheme will push top foreign talent away from the US and towards other economies. The amendment will make it more difficult for skilled foreign workers to enter the US. Economists predict that other large economies will be able to benefit from this as workers will look elsewhere for opportunities.
The S&P 500 and Nasdaq indices were down 2.41% and 2.27%, respectively across the week, following a poor session on Friday.
UK Equity Market:
Last Thursday morning HSBC, the UK’s largest bank, submitted a bid to take its Hong Kong subsidiary Hang Seng Bank private. The $13.6bn offer would see HSBC gain control of the remaining 37% of the bank it does not currently own and represents a 30% premium to the closing share price last Wednesday. HSBC’s shares fell 7.3% in early trading last Thursday as investors reacted negatively to the size of the premium and an announced suspension of share buybacks which will help fund the acquisition.
Prime Minister Kier Starmer has met with Indian Prime Minister Narendra Modi on his first visit to the country. The trip has been organised to expand business and trade ties between the two countries after a landmark trade deal was signed in July. Alongside economic discussions, the leaders addressed geopolitical issues, with India’s continued imports of Russian energy in the spotlight amid the ongoing war in Ukraine.
Conservative party leader Kemi Badenoch wrapped up her party’s annual conference with a pledge to remove stamp duty on primary residences. It is estimated that the move would cost the government £9bn in 2029 but would be partially funded through cuts to welfare, foreign aid and the civil service which she claimed could save £47bn a year. She also outlined a ‘golden rule’ which would see half of the cuts to public spending used to pay down Britain’s growing national debt.
Over the week, the FTSE 100 index was down marginally as at Friday close.
Inflation, Interest Rates and Bond Markets:
The most significant event on the horizon for UK Investors is the highly anticipated autumn budget on 26th November which investors hope will provide more clarity on the direction of travel for the UK economy. 30-year UK gilt yields remained relatively flat over the past week, reflecting the cautious approach from UK investors ahead of the budget.
What’s on the horizon:
In the US, the Consumer Price Index (CPI) and Producer Price Index prints for September are due to be released on Wednesday and Thursday respectively, however, it is expected that the ongoing government shutdown will disrupt this. Germany and China are set to release their September inflation figures on Tuesday and Wednesday respectively.
It’s a busy time ahead for corporate earnings; this week kicks off with major financial institutions JPMorgan Chase, Goldman Sachs, Wells Fargo, BlackRock, and Citi all reporting on Tuesday, followed by Bank of America and Morgan Stanley on Wednesday. In the closely watched semiconductor sector, ASML, the Netherland’s largest company, reports on Tuesday, while Taiwan-based TSMC report on Wednesday. Pharmaceutical giants Johnson & Johnson and Abbott Laboratories are also scheduled torelease results this week. As some of the largest companies in the world, surprises in earnings can have large impacts in markets both domestically and globally.