Weekly Market Wrap 28/10/2022

As we close another month, we have another new prime minister in the UK. Markets widely welcomed the back of Trussonomics and the relative stability of policy under the Government led by Sunak and Gove. 

It was a tough month for big tech with nearly $800bn wiped off valuations. Elon Musk has finally taken over Twitter, firing top executives and thus far given little clarity over ambitions outlined for the platform. 

Not such a tough time for global oil giants which posted huge profits in the third quarter, benefiting from elevated and rapidly rising energy costs that have supercharged inflation and hit consumers hard. 

UK Market   

The UK market ended the week higher. A new new era under the Conservatives begins as Sunak warns of tough times ahead. The prime minister has kept the option of a UK windfall tax on banks and energy on the table as his predecessor’s policies are quickly reversed. The PM and chancellor are facing “sober” decisions on potential spending cuts and tax rises, as they are told that growth will be significantly lower than the last independent forecast, leaving a greater hole to fill in the public finances. The formal announcement on plans has been pushed back more than two weeks until the 17th November; Spending cuts and tax rises to come. 

US Markets 

The S&P 500 is currently ending the week up 1.91% at 3,836 and the NASDAQ is down 0.30% at 11,276.  

Data released on Friday showed US consumer spending beating expectations in September (+0.6% vs. +0.4%e) with inflation still rising. The US economy continues to perform well despite rising prices with unemployment remaining near record lows. 

European Markets   

The Euro Stoxx 50 is currently up 3.68% to 3,605, the DAX is up 3.781at 13,208 whilst the CAC 40 gained 3.76%, reaching 6,262.  

European Central Bank policymakers stood firmly behind plans to keep raising interest rates even at a cost to economic growth as they raised rates by 0.75%. Markets took the ECB president’s acknowledgment in a post-council meeting press conference that the eurozone was likely to be heading for recession to mean that the region’s rate-setters would ease the extent of rate rises. 

Germany posted surprising growth data of 0.3% for the third quarter, boosting the regions chances of staving off a recession as France and Spain slow. 

Fixed Income  

Yields on the US 10-Year fell to 3.99%, the GB 10-Year to 3.45% and the German 10-Year to 2.12%. Global developed market yields fell as markets believe that rates will peak at lower levels than previously thought; there was a particularly profound effect in the UK as markets welcomed the back of Trussonomics and the relative stability of policy under the Government led by Sunak and Gove. 

Commodities 

Brent Crude gained 2.89% this week to $96.20 per barrel, as oil markets continue to weigh up the potential drivers of demand. 

Global oil-and-gas giants including Exxon Mobil, Chevron and Equinor posted huge profits in the third quarter, benefiting from elevated and rapidly rising energy costs that have caused inflation and hit consumers hard. 

The Week Ahead   

Monday – China PMI, German Retail Sales, EU GBP & Inflation 

Tuesday – US Manufacturing PMI 

Wednesday – Fed Interest Rate Decision, Monetary Policy Statement 

Thursday – Bank of England Interest Rate Decision, Asset Purchase Update, US Services PMI 

Friday – US Nonfarm payroll 

*Price changes as of last week’s close unless stated otherwise.