US stocks rebounded and bonds sold off amid growing evidence that the US economy was heading for a soft landing.
UK
The FTSE 100 rose 0.9% over the two weeks.
The UK economy grew 0.2% in August following two months of stagnation, helped by broad-based expansions in services, manufacturing and construction.
UK inflation fell more than expected in September, declining to a three-year low of 1.7%.
UK retail sales grew 0.3% in September, marking the third consecutive month of growth.
US
The S&P 500 jumped 2.3% over the two weeks to reach new record high.
Minutes from the FOMC’s September meeting showed policymakers were divided over whether to cut rates by 50 basis points (bps).
US inflation fell to an annual rate of 2.4% in September, from 2.5% in August.
Banks did well, with JPMorgan Chase and Wells Fargo comfortably beating profit expectations.
Europe
The Eurofirst 300 gained 1.3% over the two weeks.
The European Central Bank (ECB) cut rates by 25 bps, its third cut of this year, amid mounting confidence that Eurozone inflation is finally weakening and increasing concerns about lacklustre economic growth. Although the ECB reiterated that it would not pre-commit to a particular rate path, financial markets appeared to expect the ECB to reduce rates in December to support the economy.
Eurozone inflation was revised down to an annual rate of 1.7% in September, from an initial estimate of 1.8%.
Germany downgraded its forecast for GDP growth this year, saying it now expected the economy to shrink by 0.2%. This would mark two consecutive years of recession.
The French government, led by new PM Michel Barnier, has proposed a budget for next year with some €60bn worth of spending cuts and tax increases on companies and the wealthy, as it seeks to narrow its widening deficit.
Luxury group bellwether LVMH reported a bigger than expected fall in quarterly sales due to weak consumer demand in China.
ASML cut its outlook for next year after reporting orders that were only half as much as investors had expected for the third quarter.
Japan
The Nikkei 225 rose 0.9% over the two weeks.
Japanese inflation slowed to an annual rate of 2.5% in September, the lowest reading since April. Meanwhile, the core inflation rate hit a five-month low of 2.4%, down from August’s 2.8%.
Pacific Basin ex Japan
Chinese stocks initially weakened on the lack of detail on promised new stimulus measures but Beijing later said it planned to recapitalise local governments and state banks and buy unsold property as part of its stimulus plans. The government also indicated it would issue more debt to boost the property market, recapitalise banks and help cash-strapped local governments.
China’s consumer prices index rose 0.4% year on year in September, down from 0.6% in August. The producer prices index fell 2.8%, with the decline accelerating from the 1.8% fall in August and the steepest decline in six months.
The Chinese economy expanded 4.6% year on year in the third quarter of 2024, compared with market forecasts of 4.5%. It marked the slowest annual growth rate since the first quarter of 2023, amid persistent property weakness, shaky domestic demand, deflation risks, and trade frictions with the West.
Thailand’s central bank unexpectedly cut its key interest rate by 25 bps, marking its first rate cut since May 2020.
TSMC, the world’s largest chipmaker, reported a 54% leap in third-quarter profits.
Emerging Markets
The MSCI EM Index fell 3.2% in USD terms over the two weeks.
Bonds
Treasury yields climbed as investors pared back bets on interest rate cuts. Yields on two-year Treasuries rose 8 bps to 3.97% while those on 10-year bonds gained 11 bps to 4.07%.
Credit spreads on US investment-grade corporate bonds have fallen to 82 bps, the lowest level since March 2005. For high-yield bonds, the spreads is now 289 bps, the lowest since mid-2007. The narrowing reflects the growing belief that the US economy can achieve a soft landing.
The yield on the 10-year German Bund closed the two weeks down 3 bps at 2.18%.
Commodities
Oil prices fell back to $73 a barrel as fears that Israel would attack Iranian oil or nuclear facilities receded and OPEC predicted that global oil demand would fall next year.
Gold climbed past $2,700 per ounce, reaching a new record high, driven by global demand for safe-haven assets and expectations of further interest rate cuts from major central banks.
