The Week That Was

Equity markets moved modestly higher last week, buoyed by positive trade developments and solid earnings, which more than offset a slightly hawkish tone from global central banks. The S&P 500 posted its sixth month of gains and closed out the week 0.7% higher as President Trump and Xi struck a trade truce on rare earths. The Magnificent 7 climbed 1.2%, led by Amazon, which moved 10% higher as its cloud business posted its strongest quarter in three years on robust AI-related demand.

European markets notched up their fourth month of gains, however ended 0.7% lower on the week, with the Real Estate and Chemicals sectors the biggest laggards. Global bond markets experienced a modest sell-off as the ECB held rates steady and Fed Chair Powell, whilst announcing the end of quantitative tightening, also cast doubt on a December rate cut. Global commodities moved higher as strength in the oil markets offset weakness in precious metals.

The Week Ahead

Easing global trade tensions continued to buoy Asian equities, which started the week on the front foot. This came even though data released from China provided further evidence that the pace of activity in its manufacturing sector has been decelerating. With Japan closed for a public holiday, data was otherwise light, however an OPEC+ agreement over the weekend to pause output increases saw oil prices continue their march higher.

Third quarter earnings releases should continue to be the dominant driver of market sentiment for the week ahead. In the US, investors will look to upcoming results from Uber, where focus will be on the growth in monthly active users and autonomous vehicle trip adoption, whilst for McDonald’s, attention will centre on the strength of the low-end consumer. Thus far, 80% of the S&P 500 by market cap have reported, with close to 80% beating earnings expectations, led by Financials and Information Technology. In Europe, the picture is less impressive, with the rate of earnings beats running at just over 40%, led by the Banking, Pharma and Luxury sectors, with two-thirds of companies by market cap having reported.

From an Irish perspective, it’s a busy week, with Ryanair having reported better-than-expected numbers this morning, buoyed by an increase in fares and good cost control. Markets will focus on trends in net interest income and loan growth when AIB report, whilst for CRH, continued margin improvements are expected on stable organic growth, with both volumes and price increases.

On the macro front, data released this morning confirmed Irish manufacturing activity expanded for the month of October, but at a slower pace than the prior month. Elsewhere today, US manufacturing activity for October is expected to have continued to rebound from its summer slump, whilst services activity is also expected to move higher when it’s released on Wednesday. German industrial production is set to post a sharp rebound year-on-year for September when it’s released on Thursday, whilst Eurozone retail sales are expected to have held steady. With inflation remaining elevated, the BOE is likely to hold rates steady, breaking a recent trend of cuts.

In the US, ADP employment data is expected to post a rebound in October following two consecutive monthly declines and will be in sharp focus given the absence of Non-Farm Payrolls due to the government shutdown. From a political standpoint, focus will centre on negotiations to end that shutdown, whilst the Supreme Court will begin to hear arguments on the legality of the majority of the administration’s tariffs.

Key Market-Moving Events This Week

• Macro: US employment, German industrial production, UK rates
• Corporate updates: CRH, AIB, Uber, Novo Nordisk
• Political developments: US government shutdown negotiations, Supreme Court hearings on tariff legality

This is an extract from the Weekly Markets Report by Cantor Fitzgerald Ireland. For more detail on individual securities, or to discuss how we can support your investment needs, please get in touch.

Written by John Mullane, CIO, Cantor Fitzgerald Ireland