US markets
US equities continued their upward trend on Thursday as Treasury yields declined further. Investors grew more certain that the Federal Reserve (Fed) had reached the end of its rate-hiking cycle. Meanwhile, a slew of upbeat quarterly reports boosted sentiment further. The bellwether S&P 500 jumped 1.9 percent, the tech-heavy NASDAQ climbed 1.8 percent, and the blue-chip Dow Jones Industrial Average gained 1.7 percent.
All the S&P sectors ended in positive territory, with energy, real estate, financials, and consumer discretionary posting the biggest gains. Among individual stocks, coffeehouse Starbucks surged 9.5 percent on better-than-expected results. Chip designer Qualcomm advanced 5.8 percent after forecasting strong sales and profit. Payments giant PayPal climbed 6.6 percent as the firm raised its annual earnings guidance. Conversely, Moderna tumbled 6.5 percent after lowering its 2023 COVID-19 vaccine sales forecast.
On the economic data front, the number of initial claims for unemployment benefits rose more than expected last week, and unit labor costs in the nonfarm business sector unexpectedly declined in the third quarter. Both readings pointed to a softening labor market in the US. Separately, new orders for manufactured goods advanced the most since January 2021 in September, driven by manufactured durable goods.
These price data reflect observations at market close: WTI spot crude oil rose by US$2.02 to US$83.06, while spot gold lost US$1.30 to US$1,983.85. The US dollar fell vs. major currencies. The US Treasury 30-year bond yield dropped by 15 basis points to 4.82 percent while the 10-year note yield dropped by 12 basis points to 4.67 percent.
European markets
European equities extended their gains and closed sharply higher on Thursday. Sentiment improved amid rising hopes of an end to the current monetary tightening cycle after central banks in the US, UK, and Norway unanimously kept interest rates unchanged this week. The Europe-wide STOXX index jumped 1.6 percent, the German DAX advanced 1.5 percent, the French CAC 40 climbed 1.8 percent, and the UK FTSE 100 gained 1.4 percent.
The Bank of England (BoE) maintained its benchmark interest rate at a 15-year high of 5.25 percent for the second consecutive time during its November meeting, as policymakers evaluated recent signs of an economic slowdown in the UK. Still, the central bank emphasized that monetary policy is likely to remain restrictive for an extended period in order to steer inflation back towards the 2.0 percent target. Meanwhile, the Norges Bank kept is key policy rate unchanged at 4.25 percent as expected. However, the central bank of Norway said the interest rate will likely be raised in December, as core inflation remains elevated.
All the Europe-wide STOXX sectors participated in the rally, with real estate, consumer discretionary, information technology, energy and industrials leading the gains. Rate-sensitive real estate and technology shares were among top performers amid expectations that their financing cost pressure will be relieved. Luxury giants such as LVMH, Kering and Hermes International added between 2.6 percent and 3.8 percent. Among individual stocks, drugmaker Novo Nordisk climbed 3.2 percent as it expected another year of double-digit sales growth for its two most popular drugs, even after warning that shortages of its Wegovy weight-loss injection would continue in the short to medium term. Shell advanced 3.8 percent after the oil major reported earnings that matched estimates for the third quarter and announced a share buyback plan.
On the economic data front, the eurozone manufacturing purchasing managers’ index (PMI) was confirmed remaining in contractionary territory in October. This marked the sixteenth consecutive month of slowdown in factory activity and the sharpest decline in three months. New orders, purchasing activity, and backlogs all shrank significantly, leading to a notable decline in factory production. Additionally, the German unemployment rate rose to a two-year high of 5.8 percent in October, indicating some cracks in the resiliency of the labour market in recent months.
Asia Pacific markets
Asian equities rebounded broadly on Thursday. Sentiment improved after the US Fed held interest rates steady as expected on Wednesday while longer-dated US Treasury yields tumbled.
Mainland China’s equities initially gained but later closed lower, with both the CSI 300 index and the Shanghai index down 0.5 percent. Caution grew ahead of the release of the Caixin services PMI data for October on Friday. Recent data showed China’s factory activity unexpectedly contracted in October. Liquor makers pulled back from a rally, driven by price hikes from industry leader Kweichow Moutai. Conversely, media and online games advanced amid the growing interest domestically in ‘interactive video games’. Hong Kong equities tracked global markets higher, with the Hang Seng index rising 0.8 percent.
Japanese stocks continued their upward trend for a third consecutive session, driven by rising hopes of an end to the US Fed’s rate-hiking cycle. The Nikkei index jumped 1.1 percent, and the broader TOPIX added 0.5 percent. Rate-sensitive technology stocks followed their US counterparts higher, anticipating lower borrowing costs. Chip-related equipment makers Advantest and Tokyo Electron saw gains of 10.0 percent and 3.3 percent, respectively. Kikkoman, a sauce maker, also rose by 8.0 percent after announcing share buyback plans.
Taiwan’s TAIEX rallied 2.2 percent, while South Korea’s KOSPI jumped 1.8 percent. Indian equities snapped a two-session losing streak, with the BSE Sensex up 0.8 percent, supported by solid domestic corporate results and the US Fed’s less hawkish stance on monetary policy.
Australian shares gained for a third consecutive session, with the All Ordinaries index up 1.0 percent. Market sentiment was lifted as the US Fed paused rate hikes for a second time, and investors took a less hawkish view from Fed Chair Jerome Powell’s comments. Technology stocks led the gains, with sector major Megaport up 3.0 percent. Financial stocks also rose, with the country’s four largest banks seeing gains between 1.5 percent and 2.1 percent. Property and mining shares ended higher, while energy and gold stocks fell. Investors in Australia are also keeping an eye on the Reserve Bank of Australia’s policy meeting next week.