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Stocks markets continue strong rally with end of rate hikes in sight

Global stocks were headed towards their strongest weekly rally on Friday in a year. Statements made by Federal Reserve (Fed) chairman Jerome Powell alongside recent decisions by the world’s major central banks to keep rates unchanged are supporting speculation that central banks may be coming to and end of their most aggressive tightening cycles in decades. Stock markets in the US, Europe and Asia saw strong gains while yields on US government debt continued to retreat.

Shane Strowmatt, LGT
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In New York, Wall Street rallied ahead of labour market data due out Friday that will help investors to gauge whether the labour market that could likely handle another rate hike. The Dow Jones Industrial closed Thursday 1.7% higher and the S&P 500 gained 1.9%. The Nasdaq-100 jumped 1.7%. Earnings season continued with tech heavyweight Apple reporting quarterly figures that beat market estimates late on Thursday. However, comments about revenue not growing during the current quarter uneased traders and the firm’s stock fell 3.4% in after-hour trading.

In the Asia-Pacific region, stock markets continued with the positive sentiment from Wall Street. The services sector in China accelerated its expansion slightly in October with the Caixin Services Purchasing Managers’ Index Coming in at 50.4, a bit higher than last month’s 50.2 reading. Hong Kong's Hang Seng Index shot up 2.6%, while the Shanghai Composite was trading 0.7% higher. In South Korea, the Kospi gained 1.1%. Australia’s S&P/ASX 200 finished the day up 1.1% as well after retail sales in the country rose for the first time in a year during the third quarter. Japanese markets were closed for a public holiday.

In Europe, the sentiment also remained strong towards the end of the week. The Euro Stoxx 50 finished Thursday’s session 1.9% higher.

Following the Federal Reserve (Fed) the day before, the Bank of England (BOE) kept interest rates unchanged on Thursday. Its benchmark rate remains at 5.25%, a 15-year high. Like the other major central banks, officials at the BOE reiterated that high rates would be necessary for quite some time to lower inflation. Prices are still growing at more than three times the pace of the BOE’s target rate of 2% but have come down considerably from a peak of more than 11%. European markets rallied with the Euro Stoxx shooting up nearly 2%.

Elsewhere in Europe, Germany’s unemployment rate increased to 5.8%. That’s the highest level in more than two years in Europe’s biggest economy.

In Switzerland, consumer prices increased 0.1% on the month in October or 1.7% when compared to the same month of the previous year. The Core Consumer Price Index, which ignores volatile food and energy prices, came in at 1.5%, a slightly faster pace that the 1.3% of the previous month. Inflation in Switzerland has been below the Swiss National Bank’s 2% target for several months in a row. As a result of the relatively low inflation rate, the SNB kept rates unchanged at its last policy meeting.

Corporate news in focus: Quarterly figures from Société Générale, Swiss Re, Raiffeisen International, BMW, A.P. Moller-Maersk.

Economic data in focus: Swiss SECO labour market data (07:45 CET), German trade balance (08:00), French industrial production (08:45), Swiss foreign currency reserves (09:00), euro area unemployment rate (11:00), US labour market report (13:30), US ISM Services PMI (15:00).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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