Equities move higher as earnings season takes hold, writes Ian Slattery.
Equity markets continued to test all-time highs last week as the US Senate approved a $4 trillion budget measure that should help pave the way for tax reform, which is now a key focus for the administration.
Earnings season also picked up pace last week, where over 14% of the S&P 500 has now reported – with 70% beating earnings-per-share expectations. The yield on the bellwether US ten-year treasury rose over the course of the week; helped by the Senate budget agreement.
Markets were also focused on speculation as to who will replace Janet Yellen as Fed Chair
Markets were also focused on speculation as to who will replace Janet Yellen as Fed Chair, with a decision expected in the first week of November. In Europe tensions in Spain deepened as the central government took steps to impose direct rule on Catalonia, as the president of the region refused to back down on his succession demands.
The global index in euro terms was up 0.7% last week, led by the US and Japan, which was buoyed by the re-election of President Abe. Gold fell nearly 2% as a more ‘risk-on’ sentiment permeated markets. Oil was relatively flat over the course of the week and finished at $51.50.
The influential US ten-year bond yield moved to 2.38% from 2.27%. The German equivalent stood at 0.45% from 0.40% a week ago, and has been trading in a tighter trading range recently. The EUR/USD rate closed at 1.18 while EUR/GBP was at 0.89.
THE WEEK AHEAD
Tuesday 24th October
Flash eurozone manufacturing PMI data is released for October, which will give an early insight into how the key economies in the currency bloc performed last month.
Thursday 26th October
No change in policy is expected when the ECB meets for its latest interest rate decision. However, the commentary will be closely watched for details on any potential QE tapering.
Friday 27th October
Preliminary GDP data for the US goes to print with the Q3 figure forecast to come in at 2.5% (quarter-on-quarter).
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