US markets
US equities rebounded strongly on Monday amid the prospect of a rosier upcoming earnings season. The bellwether S&P 500 jumped 1.1 percent, the tech-heavy NASDAQ climbed 1.2 percent, and the blue-chip Dow Jones Industrial Average gained 0.9 percent. Still, investors remained vigilant of an escalation of the military conflict in the Middle East.
All the S&P sectors ended in positive territory, led by gains from consumer discretionary, communication services, industrials and utilities. Mega-cap growth stocks such as Microsoft, Meta Platforms, Alphabet and Tesla rose between 1.1 percent and 2.1 percent. On the earnings front, brokerage Charles Schwab rallied 4.7 percent after posting a less-than-feared decline in quarterly profit. Pharmaceutical company Pfizer climbed 3.6 percent on a stock rating upgrade to “buy” from “hold” by financial services firm Jefferies. Sports apparel maker Lululemon Athletica surged 10.3 percent as the company was set to join the S&P 500 index this week. Focus this week will also be on quarterly results from large banks, including Goldman Sachs, Bank of America and Morgan Stanley, pharmaceutical giant Johnson & Johnson, electric vehicle maker Tesla and video streaming company Netflix.
These price data reflect observations at market close: WTI spot crude oil dropped by US$1.00 to US$86.66, while spot gold gained by US$1.60 to US$1,920.90. The US dollar fell vs. most major currencies. The US Treasury 30-year bond yield rose by 9 basis points to 4.87 percent while the 10-year note yield rose by 8 basis points to 4.71 percent.
European markets
European markets regained ground on Monday, bolstered by gains in mining and financial stocks. The Europe-wide STOXX edged up 0.2 percent, the UK FTSE 100 added 0.4 percent, while the German DAX and the French CAC each firmed 0.3 percent. Nevertheless, worries over a wider war the Middle East put a lid on further gains.
Among the Europe-wide STOXX sectors, materials, financials and consumer discretionary led the gains, while health care, industrials and utilities closed lower. Mining stocks rose along with a rebound in base metal prices amid renewed hopes of stronger demand from China. Sector majors Rio Tinto, Anglo American and Glencore rose between 1.4 percent and 2.8 percent. Steel company SSAB gained 2.4 percent after JP Morgan raised its stock rating to ‘overweight’ from ‘neutral’ as an upturn in spot price could boost short-term earnings momentum. Financial stocks ended higher, with UBS Group jumping 1.9 percent after RBC upgraded the bank to ‘outperform.’ Among other stocks, BioNTech sank 7.2 percent after cutting its annual sales guidance on lower sales of its COVID-19 vaccine and treatment.
Economic data released on Monday brought some encouraging news on the inflation front. German wholesale prices fell for the sixth consecutive month by 4.1 percent year-on-year in September. It marked the biggest drop since May 2020, mainly due to a base effect of a sharp price rise in 2022 following the war in Ukraine. This data pointed to lower inflation expectations, as wholesalers are the link between manufacturers and consumers and price reductions usually reach consumers with a delay. Elsewhere, the annual inflation rate in Italy was confirmed easing to 5.3 percent in September, in line with the preliminary estimates and marking the softest reading since January of 2022.
Asia Pacific markets
Asian equities remained under pressure on Monday. A risk-averse sentiment still dominated markets amid growing fears over global economic uncertainty and the heightened tensions between Israel and Hamas in the Middle East.
Mainland China’s equities extended losses after data released on Friday showed lingering deflationary pressures despite some stabilising signs in economic recovery. A risk-off sentiment across global markets, as the Middle East conflict intensified, also kept investors on edge. China’s CSI 300 slid 1.0 percent, and the Shanghai index dropped 0.5 percent. The People’s Bank of China ramped up liquidity support by adding a net 289 billion yuan (US$39.6 billion) into the financial system via the medium-term lending facility (MLF), the largest monthly injection since December 2020. However, the central bank kept its one-year MLF rate at 2.5 percent at its October fixing, as widely expected. Semiconductor stocks tumbled after the US tightened curbs on China’s access to advanced chip technology from American chipmakers. Conversely, shipping stocks rebounded strongly as the Baltic Dry Index (BDI) climbed to a one-year high last week. Gold stocks advanced on firmer bullion prices as investors rushed to safe-haven assets amid concerns over a wider war in the Middle East. Weight-loss drugs continued their upward trend after Danish drugmaker Novo Nordisk raised its forecasts for sales and profit for the third time this year as demand soars for its obesity drug Wegovy and diabetes treatment Ozempic. Hong Kong’s equities fell into negative territory in afternoon trading, with the Hang Seng index closing down 1.0 percent.
Japanese stocks fell for a second session amid concerns over the impact of geopolitical tensions in the Middle East on global economy. The Nikkei index shed 2.0 percent, and the broader TOPIX slid 1.5 percent. Air transportation stocks led the losses amid fears of higher fuel costs, as oil prices surged over the weekend against the backdrop of the ongoing clashes in the Middle East. ANA Holdings sank 2.3 percent, and Japan Airlines tanked 3.0 percent. Semiconductor-related shares were among the biggest drags, with Tokyo Electron off 3.8 percent and Advantest off 4.8 percent. However, energy stocks bucked the downward trend amid firm oil prices, with the Inpex up 2.7 percent. On the corporate earnings front, Lawson and Ryohin Keikaku, the operator of Muji, surged 2.3 percent and 8.9 percent, respectively, after posting encouraging annual profits.
Taiwan’s TAIEX dropped 0.8 percent. South Korea’s KOSPI slipped 0.8 percent. Indian equities extended losses for a third straight session in choppy trading, with the BSE Sensex ending another 0.2 percent lower, as rising oil prices put pressure on the importing country of the commodity.
Australian shares slid for a second session, with the All Ordinaries index down 0.4 percent, ahead of the minutes of the Reserve Bank of Australia’s latest policy meeting due on Tuesday. Investors also cautiously awaited the unemployment report which will provide more clues on the central bank’s rate decision. Technology stocks tracked their US peers lower, with Computershare off 0.9 percent and Xero down 3.4 percent. Financials stocks pulled back, with the country’s four largest banks sliding between 0.4 percent and 0.7 percent. Conversely, mining stocks gained on the back of stronger iron ore prices, with major miners BHP Group, Rio Tinto and Fortescue Metals Group rising between 0.4 percent and 0.9 percent. Energy shares also gained on solid oil prices.