The NASDAQ index finished the third week in a row in the red, however, Wall Street itself managed to break a three-week losing streak. The FTSE 100 likewise making some modest gains in the past few days. The Vix index fell on the week, having hit the highs of earlier in the year. The Russell 2000 of smaller cap stocks continues to underperform the larger S&P 500, not such an encouraging sign. The price of Brent crude fell on the week. The US treasury market showed little reaction to the release of the minutes of the last Fed meeting. We are now deep into third-quarter earnings season, according to Factset, admittedly after only a relatively modest sample size, 83% of companies that have reported have beaten analyst expectations. As much as earnings season always influences investor sentiment there remains enough macro event risk to focus investor minds into the coming weeks.
The rating agencies are apparently coming closer to cutting Italian debt to junk status, according to an article in the Financial Times. We have the UK budget in the coming weeks, despite recent figures that government borrowing has fallen to its lowest level since 2002, it would appear the chancellor will continue to increase the burden of tax on the British population. The fallout from the death of Jamal Kashoggi’s continues to create tensions around the globe. On Friday, the Chinese government released its estimate of third-quarter growth. The Chinese economy grew at 6.5% on an annualised basis, slightly below expectations, but compared to the rest of the world that remains healthy. Over the weekend Donald Trump announced he is willing to pull out of the nuclear weapons pact with Russia. There is no shortage of news headlines.
Looking to the week ahead, the ECB meeting on Thursday is likely to impact investor sentiment as the ECB deals with economic growth concerns and Italian budgets. It is unlikely the ECB will review its decision to curtail the end of the bond-buying program. There are several pieces of economic news that could reinforce the strength of the US economy, new homes sales on Wednesday for September, Durable goods orders on Thursday and on Friday the first estimate for third-quarter growth overall for the US economy.
Brexit and the fate of Theresa May, post last week’s Brussels conference will continue to dominate the headlines of the British press. Press report suggests that Theresa May’s suggestion to delay Brexit for another year has not gone down well with any members of her party. Even if this is the best road to take, announcing it in Brussels can only weaken her bargaining position with the rest of the EU.