Market Monitor – 13 October 2023

Market Monitor – 13 October 2023

Global stock markets had a positive week despite the escalating conflict in the Middle East and recent data highlighting sticky inflation in the United States

Last weekend’s attacks in Israel caused falls in share prices at the start of the week as oil prices surged again and investors worried about the impact of yet another geopolitical crisis. However, concerns about the potential repercussions for financial markets ebbed as the week progressed. There was welcome news on Tuesday as US Federal Reserve officials said that recent rises in bond yields – and their consequent dampening of economic activity – may mean there is less of a need for policymakers to increase interest rates in the months ahead. But the news on Thursday that US inflation remained unchanged in September at an annualised rate of 3.7% led to further nervousness.

United States

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.7% up for the week so far, with the S&P 500 advancing 1%. Latest research showed a fresh fall in small business confidence, while data indicated that factory gate prices had risen in September. Despite the Fed’s dovish comments earlier in the week, bond yields rose on Thursday following an unsuccessful auction of US Treasury bills, which suggested American financial markets are still expecting further rate hikes in the near term.

UK

In the UK, the FTSE 100 closed on Thursday 2% up for the week so far, with the rise in oil prices providing a boost to major energy firms. Mining stocks also gained on speculation that the Chinese government may be planning further stimulus measures. Official data indicated that the British economy had expanded fractionally in August, but many analysts nonetheless expect the country to fall into recession in the months ahead. Updated forecasts from the International Monetary Fund predicted the UK would be the weakest of the G7 economies in 2024.

Europe

In Frankfurt, the DAX index ended Thursday’s session up 1.3% for the week, while France’s CAC 40 gained 0.6%. Sentiment was boosted by rising hopes that the European Central Bank was on the verge of bringing its programme of monetary tightening to an end. However, luxury goods stocks slipped back in the wake of a downbeat trading statement from one of the sector’s biggest names. Gas prices across Europe surged following news of the Hamas attacks in Israel as well as reports that damage to a major supply pipeline in the Baltic Sea may have been a result of sabotage.

Asia

In Asia, the Hang Seng index in Hong Kong surged 4.3% as speculation grew that Chinese authorities were planning another multi-billion dollar injection of stimulus cash to kick-start the country’s economy. Investors appeared to have already priced in the news that a major property developer was set to default on a significant chunk of its debt. Meanwhile, Japan’s Nikkei 225 index of leading shares advanced 4.8%, buoyed by hopes of rate cuts in the US and signs that domestic inflationary pressures are easing. Semiconductor stocks led the way with strong gains following the news that a major Taiwanese microchip manufacturer plans to expand production facilities in Japan.

6 October
12 October
Change (%)
FTSE 100
7494.6
7644.8
2.0
FTSE 250
17732.3
17835.7
0.6
S&P 500
4308.5
4349.6
1.0
Dow Jones
33407.6
33631.1
0.7
DAX
15229.8
15425.0
1.3
CAC 40
7060.2
7104.5
0.6
ACWI
654.0
663.3
1.4
Hong Kong Hang Seng
17486.0
18238.2
4.3
Nikkei 225
30994.7
32494.7
4.8

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 12 October 2023.

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13 October 2023
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