US markets
US equities recouped early losses to end higher on Tuesday. Investors digested another round of corporate results while looking ahead to the Federal Reserve (Fed)’s interest rate decision on Wednesday. The bellwether S&P 500 gained 0.6 percent, the tech-heavy NASDAQ added 0.5 percent, and the blue-chip Dow Jones Industrial Average firmed 0.4 percent.
The Fed’s two-day policy meeting started on Tuesday. While it is widely expected that interest rates will be held steady, all eyes will be on Fed Chair Jerome Powell’s comments for further clues on what the central bank plans to do in December and in the future.
On the economic data front, a report showed that US labor costs increased slightly higher than expected in the third quarter, fueling fears of inflationary pressures from employment. According to the Conference Board, consumer confidence continued to sour in October amid a slew of headwinds including elevated prices, high interest rates, and geopolitical tensions.
All the S&P sectors ended in positive territory, with real estate, financials, and utilities posting the biggest gains. Among individual stocks, NVIDIA lost 0.9 percent following reports that the latest US restrictions could force the chip designer to cancel billions of dollars of orders to China. Image-sharing platform Pinterest shares surged 19.0 percent after its third-quarter revenue and profit topped market expectations. Conversely, heavy-machinery maker Caterpillar tanked 6.7 percent amid signs of weakening demand. Drugmaker Amgen sank 2.9 percent as third-quarter sales of some high-profile medicines fell short of estimates.
These price data reflect observations at market close: WTI spot crude oil fell by US$1.29 to US$81.62 while spot gold lost US$1.90 to US$1,995.90. The US dollar strengthened against most major currencies. The US Treasury 30-year bond yield fell by 1 basis point to 5.02 percent, while the 10-year note yield was little changed at 4.88 percent.
European markets
European equities extended gains on Tuesday as investors celebrated a series of positive corporate earnings reports. Preliminary data revealed an unexpected slowdown in the eurozone’s third-quarter gross domestic product (GDP) growth and cooler-than-expected inflation in the currency bloc, reinforcing the case for the European Central Bank (ECB) to pause its monetary tightening cycle. The Europe-wide STOXX and the German DAX both rose 0.6 percent, the French CAC 40 gained 0.9 percent, while the UK FTSE 100 edged down 0.1 percent.
Nearly all sectors of the Europe-wide STOXX participated in the rally, with real estate, information technology, industrials, and consumer staples leading the gains, while energy was the only sector that declined. Real estate stocks stood out with healthcare real estate investment firm Aedifica jumping 5.0 percent after raising its annual earnings guidance. Conversely, energy stocks were dragged down by a 4.6 percent fall in BP after the energy giant reported disappointing third-quarter earnings. Peers Shell and Neste Oil also slid 1.4 percent each. Among other stocks, BASF climbed 4.5 percent as the chemicals maker implemented more cost cuts and investors viewed its full-year guidance as better than expected. Marine technology group Wartsila surged 15.4 percent on a third-quarter results beat and a surprisingly positive outlook.
On the economic data front, preliminary data showed that the eurozone economy contracted by 0.1 percent quarter-on-quarter and expanded modestly by 0.1 percent year-on-year in the third quarter of 2023, both worse than market expectations. Tighter financing conditions and elevated inflationary pressures continued to weigh on domestic demand, while overseas demand remained subdued. The annual inflation rate in the euro area fell more than expected to 2.9 percent in October, while the core rate, which excludes volatile food and energy prices, also slowed to 4.2 percent.
Asia Pacific markets
Asian markets closed mixed on Tuesday. Investors digested weaker-than-expected purchasing managers’ index (PMI) data in China and the Bank of Japan (BoJ)’s further tweaks to its yield curve control policy while they looked ahead to the upcoming US Fed’s monetary policy decision on Wednesday.
Mainland China’s equities snapped a fifth-rising streak to finish lower after sentiment was hurt by weak PMI readings. The CSI 300 index dropped 0.3 percent, and the Shanghai index edged down 0.1 percent. Official data showed that Chinese manufacturing activity unexpectedly shrank in October, while the service sector grew at the slowest pace in ten months. Automobiles and photovoltaic companies led the losses, while banking stocks outperformed. The China finance ministry issued a notice on Monday to guide insurance funds for long-term investment in order to better utilize the stabilizing effect of long-term funds on the market. Hong Kong equities lagged behind regional peers, with the Hang Seng index closing 1.7 percent lower.
Japanese equities rebounded after the BoJ added more flexibility to its yield curve control framework but kept the stimulative policy in place. The Nikkei index added 0.5 percent, while the broader TOPIX jumped 1.0 percent. The central bank allowed more flexibility in its yield curve control policy, maintaining the target level of the 10-year bond yields at around 0 percent but using the upper bound of 1.0 percent as a reference. Financial stocks outperformed as higher long-term yields and a steeper yield curve improved the outlook for returns from lending and investing. Conversely, technology stocks came under pressure, with semiconductor-related shares tracking a decline in US peers overnight and Panasonic Holdings tumbling 8.9 percent on disappointing earnings.
Taiwan’s TAIEX slid 0.9 percent. South Korea’s KOSPI sank 1.4 percent. Indian equities closed lower, with the BSE Sensex dipping 0.4 percent. Elevated interest rates in the US triggered persistent sales by foreign investors, while a rise in oil prices due to the Middle East conflict added to the selling pressure.
Australian shares rebounded with modest gains, with the All Ordinaries index up 0.1 percent. Financials and real estate stocks outperformed, while gold and mining stocks fell. An unexpected contraction in factory activity in China, Australia’s largest trade partner, raised worries about weak demand from the country.