As of Friday, approximately 11% of S&P 500 constituents have reported their Q3 2024 earnings. The blended earnings per share (EPS), which includes both reported results and estimates for those yet to announce, indicates earnings growth of about 2.8% compared to the same quarter in 2023, according to FactSet. This marks a significant slowdown from the 11.2% growth recorded in Q2. Meanwhile, sales growth for the S&P 500 is up 4.4% year-over-year.
Retail sales in the U.S. increased by 0.4% in September, slightly exceeding forecasts. Additionally, initial jobless claims for the week ending October 12 totalled 241,000, around 20,000 below expectations, signalling a more robust labour market.
The Philadelphia Fed’s manufacturing index also rose more than anticipated in October. While the index showed mixed-to-strong results, with increases in shipments and new orders, the employment component declined. The elevated jobless claims in states affected by Hurricanes Helene and Milton contributed to some volatility in the labour data.
All the major US equity indexes ended the week higher, the S&P 500 0.85%, Dow Jones 0.96%, and the tech heavy NASDAQ composite closing the week up 0.80%.
UK inflation fell to 1.7% in September, dropping below the Bank of England’s 2% target for the first time in over three years, down from 2.2% the previous month. This unexpected decline, driven by lower airfares and petrol prices, has increased expectations for faster interest-rate cuts, with markets now betting on reductions in November and December. Services inflation slowed to 4.9%, falling below the BOE’s forecast. However, concerns remain about inflation potentially rising again in the coming months.
The FTSE 100 index advanced this week, closing up 1.27%.
In the Eurozone, final inflation data for September showed headline inflation at 1.74% year-on-year, slightly down from the earlier estimate of 1.77%. Core inflation also fell to 2.67%. Services inflation remained the primary contributor to headline inflation, driven by hospitality, leisure, and miscellaneous services. A notable drag came from the transport sector, largely due to lower prices in fuels and lubricants. As expected, the European Central Bank (ECB) cut policy rates by 25 basis points. The ECB reiterated its cautious, data-driven approach, acknowledging that the disinflationary process is “well on track” amid recent economic weakness.
The Eurostoxx 50 index was the only major western market to close lower this week, down -0.35%.
Japan’s national core consumer price index (CPI), which excludes fresh food and energy, rose by 2.1% year-on-year in September, slightly accelerating from the 2.0% increase in August and surpassing market expectations. The rise was largely attributed to a sharp 45% year-on-year increase in rice prices, driven by stockpiling in response to disaster warnings in August.
On the other hand, energy inflation decelerated sharply due to the reintroduction of government price control measures on electricity and gas. This resulted in the broader core CPI (excluding fresh food) slowing to 2.4% in September, down from 2.8% in August, though still above the market forecast of 2.3%.
Japanese stocks experienced a decline over the week, with the Nikkei 225 Index down -1.58% and the broader TOPIX Index registering a -0.64% loss, easing domestic inflation led to speculation that the Bank of Japan (BoJ) may be less likely to raise interest rates again this year.
Chinese President Xi Jinping has urged government officials to intensify their efforts in the final quarter of 2024 to ensure the country meets its annual growth target of around 5%. Xi emphasized the need to “conscientiously implement” existing policies to support both economic and social development, as pressure mounts on China’s economy.
At a recent stimulus press conference, officials outlined measures aimed at boosting the economy. An adjustment to mortgage rates is expected to benefit fifty million households, saving them 150 billion yuan in total expenditure. China will expand the credit scope for the property sector to 4 trillion yuan and aims to renovate 1 million houses in urban villages. Although these actions are aimed at providing relief, they fell short of market expectations.
September’s economic activity data showed modest improvement, with Q3 GDP growth of 4.6% year-on-year, slightly above consensus. Industrial production growth also strengthened to 5.4% in September, despite weaker-than-expected exports due to the impact of Typhoon Bebinca. This suggests a slight improvement in sequential growth momentum.
Chinese equity markets ended the week mixed, with the Shanghai Composite index closing higher, up 1.36%, and Hong Kong’s benchmark Hang Seng Index closing in negative territory, down -2.25%.
Market Moves of the Week:
South Africa mourns the passing of Tito Mboweni, a key economic figure who served as the South African Reserve Bank Governor, Minister of Finance, and Minister of Labour. Mboweni, known for driving critical economic reforms, passed away on October 12, 2024, at 65 after a short illness.
In corporate news, BHP’s CEO Mike Henry met with South African government officials, sparking speculation that the company may revive its previous £39bn bid for Anglo American. Anglo American share price again responded positively to these developments, closing the week at R546.64 per share, up 3.44%.
Additionally, South African Reserve Bank (SARB) Governor Lesetja Kganyago argued for lowering the inflation target band, aiming to anchor inflation expectations at 4.5%, which could lead to permanently lower inflation and interest rates. SARB has used the 3%-6% target band since 2000, with the focus shifting to the midpoint in recent years. The JSE ALSI also ended the week higher, up 1.22%, driven by strong returns from the Resource sector, which was up 6.74% for the week. Financials also contributed to the broader market performance, closing up 0.83%. Industrials and Listed Property both detracted from performance, closing -0.72% and -1.76% respectively. The Rand closed weaker against the Dollar, ending the week at R17.59/$, depreciating 1.14%.
Chart of the Week:
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