US markets
US equities ended sharply higher on Monday ahead of a busy week of corporate results, economic data, and the Federal Reserve (Fed)’s two-day monetary policy meeting. The bellwether S&P 500 and the tech-heavy NASDAQ both jumped 1.2 percent, and the blue-chip Dow Jones Industrial Average rose 1.6 percent.
All sectors of the S&P ended in positive territory, with communication services leading the gains. Rate-sensitive mega-caps such as Alphabet, Meta Platforms, Microsoft, and Amazon.com rose between 1.2 percent and 3.9 percent, providing significant support. However, Tesla saw a decline of 4.8 percent on news that supplier Panasonic had reduced battery cell production in Japan. On the earnings front, McDonald’s gained 1.7 percent after reporting better-than-expected quarterly results, driven by demand for its more affordable food agaisnt the backdrop of ongoing inflationary pressures. Western Digital also had a strong performance, surging 7.3 percent as its results beat estimates and it announced plans to separate into two publicly listed companies. Conversely, chipmaker ON Semiconductor tumbled 21.8 percent after forecasting weak fourth-quarter revenue due to slowing demand for electric vehicles. Realty Income experienced a decline of 5.7 percent following its announcement to purchase Spirit Realty Capital in an all-stock deal, while the latter advanced 7.9 percent.
Looking ahead, investors will be focusing on a slew of earnings reports from key companies such as Caterpillar, Apple, Pfizer, and Starbucks. The Fed is expected to announce its interest rate decision at the conclusion of its two-day monetary policy meeting on Tuesday. Additionally, the US Labor Department’s October employment report, scheduled to be released on Friday, will be closely watched.
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These price data reflect observations at market close: WTI spot crude oil fell by US$3.23 to US$82.91, while spot gold gained US$15.90 to US$1,997.80. The US dollar fell against major currencies. The US Treasury 30-year bond yield rose by 1 basis point to 5.04 percent while the 10-year note yield rose by 3 basis points to 4.88 percent.
European markets
European equities bounced back on Monday, supported by a decline in sovereign bond yields as softer-than-expected inflation readings in Germany and Spain raised hopes that the European Central Bank will refrain from further interest rate hikes. The Europe-wide STOXX and the French CAC each rose 0.4 percent, while the German DAX firmed 0.2 percent, and the UK FTSE 100 added 0.5 percent.
Nearly all sectors of the Europe-wide STOXX participated in the rally, with healthcare, consumer staples, financials, and materials leading the gains, while information technology and energy declined the most. Healthcare was among the top sectoral gainers, aided by a 2.7 percent jump in Novo Nordisk. It was announced that the European Medicines Agency had found no evidence that two of Novo Nordisk’s most popular drugs increase the risk of cancer. Among individual stocks, Siemens Energy surged 12.7 percent as discussions with Berlin continued regarding 15 billion euros in project-related guarantees over the weekend. Software maker Dassault Systemes climbed 2.3 percent on a rating upgrade to ‘overweight’ from ‘underweight’ by JP Morgan. Conversely, ArcelorMittal slid 3.9 percent after the company agreed to transfer ownership of its operations in Kazakhstan to the government following a serious fatal accident at one of its mines over the weekend.
On the economic data front, the economic sentiment indicator in the euro area edged lower in October, reaching the lowest level since November 2020, clouded by persistent inflationary pressures within the currency bloc and the European Central Bank’s unprecedented monetary policy tightening. Elsewhere, preliminary data showed the annual inflation rate in Germany dropped sharply to 3.8 percent in October, marking the lowest reading since August 2021. Meanwhile, Germany’s economy shrank slightly by 0.3 percent year-on-year in the third quarter, pressured by weak purchasing power and higher interest rates.
Asia Pacific markets
Asian equities extended their gains on Monday, despite concerns about an escalation in the Middle East conflict and caution ahead of monetary policy decisions from major central banks, including the US Fed, the Bank of England, and the Bank of Japan (BoJ).
Mainland China’s equities rose for the fifth consecutive session, driven by growing optimism that fresh support policies could boost China’s economy. The CSI 300 index gained 0.6 percent, while the Shanghai index edged up 0.1 percent. Semiconductor shares rebounded strongly, supported by upbeat corporate results in the third quarter. Airline stocks also rose, as flights between the US and China are set to increase gradually as the two largest economies lift limits on services imposed during the COVID-19 pandemic. However, banking stocks declined due to margin pressure, and real estate stocks fell as heavily indebted property developer China Evergrande Group moved closer to possible liquidation. Hong Kong equities remained largely flat, with the Hang Seng index closing without significant movement.
Japanese stocks lost ground, with the Nikkei index and the broader TOPIX both ending 1.0 percent lower. The decline was driven by downbeat earnings forecasts and uncertainty surrounding the BoJ’s monetary policy and the Middle East conflict, which kept investors on edge. Export-oriented automobile shares led the decline as the yen strengthened against the US dollar following reports that the central bank may adjust its yield curve control policy. Toyota Motor saw a decline of 2.4 percent, while Honda Motor dropped 4.2 percent. Hino Motors slumped 18.7 percent after lowering its full-year guidance due to slowing overseas sales and a penalty linked to an engine data falsification scandal.
Taiwan’s TAIEX edged up 0.1 percent, while South Korea’s KOSPI added 0.3 percent. Indian equities continued to gain, with the BSE Sensex rising another 0.5 percent, driven by strong domestic corporate results that boosted market sentiment.
Australian shares fell, with the All Ordinaries index off 0.8 percent. Retail sales data showed accelerated growth to an eight-month peak in September, increasing the likelihood of another rate hike at the Reserve Bank of Australia’s policy meeting next week. Gold stocks rose on firmer bullion prices, with gold producer Northern Star Resources up 0.4 percent. Financial stocks ended higher, with the country’s largest four banks rising between 1.0 percent and 1.8 percent. However, energy stocks followed oil prices lower as investors weighed the economic and monetary policy outlook, as well as the tensions in the Middle East.