Global Markets ended lower this week weighed down by weak corporate earnings and political uncertainty in U.S. and Japanese elections. Comments by Federal Reserve officials indicated the adoption of a cautious data-driven approach to determine further lowering of rates as inflation figures continue to be monitored closely before any further decision is taken. Markets now anticipate the Fed to implement only a 25 bps rate cut, due to favorable inflation and unemployment numbers. Oil futures rose in response to the continuing tensions in the Middle East. Indian and Chinese leaders met to re-engage politically, on the sidelines of the BRICS summit in Kazan, Russia.

Global Updates
  • The MSCI All Country World Index significantly underperformed this week with the sharp fall in American markets, weighed down by underwhelming corporate earnings and rising treasury yields. European, Asian and Emerging markets were lower, while the Nikkei 225 and Topix indices also dipped due to political uncertainty regarding the upcoming elections in Japan.
  • The U.K. GfK Consumer Confidence index fell to its lowest levels for the year, in October. The potential tax hikes in the upcoming budget impacted the optimism of households and businesses. German business confidence also improved in October as manufacturing finally expanded after many consecutive months of contraction.
  • Oil Futures rose after news of a possible surplus from increased crude processing by the U.S. This was not sufficient to offset the continued expectation of a shortfall in energy demand from China.
  • Barclays’ stock rose to a nine year high after it reported a 23% jump in third quarter profits to $2 billion driven by the performance of its UK and investment divisions along with cost-cutting measures implemented this quarter. Barclays is set to completely takeover the banking division of Tesco in the next week. 
  • French jet engine manufacturer Safran has raised fuller profit guidance and lowered revenue guidance simultaneously. Safran’s revenue from aftermarket services has grown 26.2% and core propulsion grew 11.9% in the January to September period. This growth is driven by 17% higher sales in the same period. The company lowered revenue predictions due to supply bottlenecks.
  • Germany company SAP’s third quarter revenue of $9.17 billion surpassed expectations, due to a 9% quarterly growth driven by a 25% rise in sales from its cloud computing division.
  • The French Luxury company reported 11.3% growth in quarterly revenue to $3.99 billion, in line with estimates.
  • Chinese autonomous driving startup Pony.ai has filed for an IPO in the U.S.A with the Securities and Exchange Commission. The company also opened its first European R&D center in Luxembourg in a tie up with Emile Weber, to promote and deploy their autonomous technology and vehicles in Europe.
U.S. Equity
  • The S&P 500, Dow Jones index & NASDAQ indices dipped this week. Earlier in the week, markets were weighed down by the poor performance of IBM, Honeywell, Boeing and McDonald’s. Markets were buoyed up by the third quarter results of Tesla, later in the week. The earnings reports of most companies have been underwhelming for investors so far, leading to the indices declining for three consecutive days. Markets were also pressured by higher treasury yields affecting U.S. stock futures.
  • U.S. private sector activity has risen, in an auspicious start to the fourth quarter. The expansion is primarily driven by the service sector offsetting the contraction in manufacturing activity. Unemployment claims also fell to 227,000 by 15,000 claims in the previous week indicating a decline in unemployment.
  • Federal Reserve officials foresee slower rate cuts in the near future, as there is increasing chatter that the jumbo cut of 50 bps in September was possibly premature.
  • Tesla stock gained following the release of higher-than-expected earnings and close-to-expected revenues. Tesla revenue rose by 8% to $25.18 billion and net income rose to $2.17 billion. Elon Musk projected a 20%-30% vehicle growth due to lower costs and autonomous technologies.
  • Boeing stock lagged following the extension of a six-week strike by the machinist union after the rejection of the deal offered by the company.
  • IBM stock also fell due to third quarter revenue falling short of estimates due to the weak performance of its consulting business. The revenue grew only 1% to $14.97 billion.
  • Southwest airlines reported 5.3% year-to-year growth to a record $6.87 billion in operating revenue for the third quarter. The company’s higher than expected profits declined to $67 million due to high labor costs. 
  • Coca-Cola reported a 1% decrease in third quarter revenue, falling to a higher-than-expected $11.9 billion. The company projected a 10% growth in full-year revenue in line with forecasts.
  • Starbucks has suspended its 2025 outlook due to disappointing third quarter outcomes. The company’s revenue declined by 3% to $9.1 billion and adjusted earnings fell 24.5% to 80 cents per share. Starbucks’ new CEO Brian Niccol has addressed the concerns of investors and employees and mentioned implementation of a new strategy designed to turn the company around.
  • Honeywell stock declined due to a 5% dip in the sales of its Industrial Automation division weighed by the decline in demand for its products. The company lowered its full-year sales outlook despite a 6% growth in revenues to $9.73 billion. The company’s adjusted Earnings per Share of $2.58 was higher than early projections. 
  • General Motors shares surged after the company’s quarterly net income of $3.3 billion exceeded expectations by 28%. The company has also raised its full-year guidance.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dragged this week.
  • The U.S. 10-year Treasury yield rose to 4.17% and the yield on the 2-year note rose up to 4.05% over the week. Yields rose as markets digested the Federal Reserve’s comments on the trajectory of future rate cuts.
  • The U.S. Dollar Index rose to 104.04 this week.
Sources

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