Market Briefing: 28th October

Rory McPherson

It has been a strong year to date however we saw some nervousness creep into markets over the last week. Weakness was felt across both equities and bonds, with Japan worst hit, down 4%. Political uncertainty has been somewhat to blame, with a snap election called in Japan, an approaching UK Autumn Budget and US Elections. Oil did well, up nearly 4% (USD), and Gold gained 1.5% (GBP). Q3 earnings season is now very-much in full swing, with 5 of the ‘Magnificent 7’ reporting this week.

 

Last week

  • Global stock markets fell by around 0.8%.
  • Japan called a snap election which prompted weakness in Japanese markets. Over the weekend we saw that this had not gone as planned for the coalition government.
  • Earnings season continued, with the UK banks generally positive. Tesla revenue came in lower than analyst expectations, but a beat on earnings and improvements elsewhere prompted a 12% share price jump in after-hours trading on Wednesday.

This week

  • Q3 corporate earnings will continue to be a key focus this week.
  • In the US, we have Ford reporting today, with 5 of the ‘Magnificent 7’ reporting later in the week. In the UK, we will hear from the oil majors (Shell & BP), and the remaining banks (HSBC & Standard Chartered).
  • On Wednesday lunchtime, we will be listening in to the UK Chancellor to understand the changes planned in the Autumn Budget. This is expected to deliver meaningful changes to tax and spending.
  • As the week concludes, we expect market focus to be on US elections, set for 5 November.

Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.

 

More detail:

  • Global stock markets fell by 0.8% last week. Markets headed lower on Japanese weakness, down 4%. Japan surprised markets with a snap election, intended to strengthen the ruling coalition’s position. However, this has backfired and raises concern for the political stability of the country.
  • Q3 earnings season ramped up with major companies, including the likes of Tesla & Boeing reporting. While Tesla delivered revenue below analyst estimates, it beat on earnings per share, and was able to continue to lower its cost of production. Boeing, on the other hand, announced a need to raise $15bn in capital to improve liquidity – it plans to do this with convertible debt. Boeing is also struggling due to strikes, which look set to continue, as workers reject latest contract proposals.
  • Globally, Q3 earnings will remain in focus this week, kicked off by Ford in the US, which is due to announce their Q3 update today. Later in the week we will have 5 of the ‘Magnificent 7’ reporting, including the likes of Microsoft and Alphabet. These businesses are considered global giants – their earnings will receive substantial attention, with a high bar set to impress investors.
  • In the UK, oil majors (Shell & BP) and the rest of the banks (HSBC & Standard Chartered) are due to report. Global banks have been reporting well so far this season and each of these businesses receive substantial global revenues.
  • Mid-week, all eyes will be on Rachel Reeves, the UK Chancellor, who will announce Labour’s first Autumn Budget since returning to power. There has been substantial speculation around this budget and the impact it may have on individuals as well as businesses, including capital gains tax and employer national insurance.

 

The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.

The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.

Rory McPherson
About the Author

Rory is CIO of Magnus, Wren Sterling Group's discretionary fund management business and Wren Sterling's Chief Market Strategist. He joined the business in September 2022, having previously worked at Punter Southall Wealth where he was Head of Investment Strategy; responsible for asset allocation and fund selection. Prior to that he worked for Russell Investments, running multi-asset funds for both retail and institutional clients. Rory has 20 years’ experience of working in financial services and is a CFA Charterholder.