US equity futures are higher with tech leading once again, thanks to results from Netflix which beat lofty expectations and sent its stock to all time highs. As of 8:00am, S&P futures were up 0.2% to 5,900 while Nasdaq futures gained 0.5%, with most MegaCap Tech named higher: NVDA +1.2%, AAPL +1.1%, and NFLX jumped 6% post earnings beat. Bond yields are mixed and USD is lower; 2-, 5-, 10-year yields are 0.45bp lower, 0.23bp higher, and 0.6bp higher, respectively. Commodities are mixed with oil higher, base metals lower, and precious metals higher after China macro data beat estimates but reaffirmed the downward trend of China's economy. Today, the key macro focus will be housing data (Housing Start and Building Permit), as well as AXP and PG earnings.
In premarket trading, Netflix shares rose 6.5% after the streaming company reported third-quarter results that beat expectations on key metrics, including subscriber additions. It also gave a forecast that is seen as positive. However, Phillip Securities downgraded its rating, flagging valuation concerns on the back of the recent stock rally. Apple rose as data showed China sales of its latest iPhone increased 20% in the first three weeks compared with the 2023 model. Here are some other notable premarket movers:
- Boston Scientific slips 1.2% after Needham & Co downgraded the stock to hold from buy, with the analyst seeing slowing revenue growth in 2025.
- CVS Health shares tumble 13% after the retail pharmacy chain reported third-quarter preliminary profit that fell short of Wall Street’s expectations, plus higher-than-forecast medical costs. The company also named David Joyner as its new CEO, replacing Karen Lynch.
- Intuitive Surgical shares gain 6.4% after the company reported third-quarter adjusted earnings per share that came ahead of consensus estimates. Piper Sandler said it was encouraged by another strong quarter of placements for the da Vinci 5, a surgical robot that makes it easier for surgeons to understand movement inside the body during operations.
- The US opened a federal investigation into whether Tesla’s partial-automation system known as Full Self-Driving is defective after four crashes, one of which resulted in a fatality. Tesla shares fell 0.6%.
- US-listed Chinese stocks rally in Friday’s premarket trading after President Xi Jinping vowed to support the tech sector. A slew of central bank statements also boosted optimism.
- Zeta Global shares are down 4.3% after Barclays downgraded the application software company to equal-weight from overweight.
Treasuries steadied from their heavy selling after a batch of strong data on the US economy Thursday recast expectations for interest-rate cuts. Much stronger than expected retail sales - driven entirely by record seasonal adjustments - underscored how consumer spending continues to power the American economy, lessening the urgency for the Federal Reserve to unwind restrictive rate policy. One beneficiary of the improving US economic narrative has been small-cap stocks. The Russell 2000 index is close to reclaiming a 2024 high as weakening inflation spurs bets the Fed has room to cut rates, albeit not by as much as previously thought.
Small caps are also getting a boost from the so-called Trump Trade, according to BofA strategist Michael Hartnett who echoed Stanley Druckenmiller saying there are signs investors are positioning for presidential victory by Donald Trump, moving into banks, small-cap stocks and the dollar, assets that rallied in November 2016 in the wake of his last successful run. Bitcoin, another favored Trump Trade, also closed in on a fresh record, while gold traded at a record high above $2700.
A broadening out of the stock rally beyond tech megacaps would be a development that Gene Salerno, chief investment officer at SG Kleinwort Hambros Ltd. said he’d welcome. “It’s something frankly we’ve wanted to see for some time,” he said.
In Europe, the Stoxx 600 climbs 0.3%, with mining and technology leading gains, while media and personal care, drug and grocery-store stocks lag. Here are the biggest movers Friday:
- European sectors with high exposure to China advance on Friday, as the country’s central bank moved to support markets, signaling authorities’ determination to continue their stimulus push and draw a line under the slowdown
- Comet shares jump as much as 7.5% after the Swiss supplier of radio-frequency tools to the semiconductor industry posted better-than-expected results, assuaging fears that guidance would’ve been lowered
- Brunello Cucinelli shares rise as much as 3.8% after the Italian cashmere house reported a rise in sales, in a sign that exposure to the very wealthiest of clients is helping the luxury firm weather an industry downturn
- Dowlais shares rise as much as 9.5% as BNP Paribas Exane raises its rating on the UK auto parts producer to outperform from neutral, seeing a potential sale of the Powder Metallurgy business unlocking value
- Elisa shares fall as much as 6.6% after the Finnish telecom operator’s quarterly revenue missed estimates, due to a drop in equipment sales and regulatory changes
- Raiffeisen Bank International drops as much as 4.2%, after it said it’s revising its 2Q and 1H net interest income following a change to the accounting method of the group, excluding Russia and Belarus
- Suss MicroTec shares drop as much as 12%, after being downgraded by analysts at Stifel in wake of the guidance cut from chip-making tool supplier ASML
- Future shares slump as much as 14%, hitting a five-month low, after the media company announced that CEO Jon Steinberg plans to step down
Asian equities also rose, snapping a four-day losing streak, with China's CSI 300 rallying 3.6% as a slew of PBOC statements reignited optimism over policy support as stimulus hopes had recently faded. The MSCI Asia Pacific index climbed as much as 1.3%, its best day in three weeks, with TSMC the biggest boost as it jumped to a record high after raising its sales target. Chinese stocks in mainland and Hong Kong surged following comments by President Xi Jinping on boosting technology development and the central bank reignited optimism over policy support. The People’s Bank of China launched a specialized re-lending facility for share buybacks, while data showed China’s economy slowed in the third quarter, though less than expected. The nation’s equities have struggled, entering correction territory this week, as investors await details of promised stimulus
In rates, treasuries are narrowly mixed with yields off session highs and the curve slightly steeper after limited price action during Asia session and European morning. US 10-year yields rise 2bps around 4.11% with bunds outperforming by 2bp in the sector. Front-out outperformance steepens US 2s10s spread by around 1bp on the day. Gilts fall while the pound adds 0.2% as UK retail sales topped estimates. German short-end bonds caught a bid after Reuters reported some ECB governors wanted to drop a pledge to keep policy tight at Thursday’s meeting; German 2s10s widens 2.2bp with 2-year Bunds outperform Treasuries, as a faster pace of ECB interest-rate cuts has been priced into swaps since Thursday’s policy decision; ECB OIS contract prices in around 30bp of easing for the December policy meeting, following Thursday’s 25bp rate cut. Within euro-zone, Italian bonds outperform. US session includes four Fed speakers.
In FX, the Bloomberg Dollar Spot Index falls 0.2%, down for the first day in five; gauge still set for third week higher. US data include Sept. housing starts, building permits
- GBP/USD rises 0.3% to 1.3045, adding to Thursday’s gains; UK retail sales unexpectedly rose on demand for consumer tech
- EUR/USD gains 0.2% to 1.0847, as Euro Parity Threat Is Back on Trump Tariffs Risk, ECB Cuts
- USD/JPY gained 0.2%, dragging USD/JPY back below 150 after Japan’s top currency official warned he closely watching market movements.
- AUD/USD up 0.3% to 0.6713; NZD/USD rises 0.3% to 0.6076. Australian and New Zealand dollars gain as People’s Bank of China discloses details on measures to boost capital markets
In commodities, oil prices are steady, with WTI trading near $70.70 a barrel. Spot gold adds $20, topping $2,700 for the first time amid ongoing tensions in the Middle East.
Looking at today's calendar, US economic data includes September housing starts and building permits (8:30am). Fed members scheduled to speak include Bostic (9:30am, 12:30pm), Kashkari (10:20am) and Waller (12:10pm).
Market Snapshot
- S&P 500 futures up 0.2% to 5,898.25
- STOXX Europe 600 up 0.3% to 525.51
- MXAP up 1.1% to 191.23
- MXAPJ up 1.6% to 610.97
- Nikkei up 0.2% to 38,981.75
- Topix little changed at 2,688.98
- Hang Seng Index up 3.6% to 20,804.11
- Shanghai Composite up 2.9% to 3,261.56
- Sensex up 0.4% to 81,299.62
- Australia S&P/ASX 200 down 0.9% to 8,283.23
- Kospi down 0.6% to 2,593.82
- German 10Y yield little changed at 2.21%
- Euro little changed at $1.0841
- Brent Futures up 0.2% to $74.63/bbl
- Gold spot up 0.4% to $2,703.23
- US Dollar Index down 0.16% to 103.66
Top Overnight News
- Investor Ray Dalio expressed his concerns about the orderly transition of power in the US and whether election results will be accepted by both parties.
- UK retail sales unexpectedly rose in September, driven by computer sales and other electronics, despite the wider backdrop of declining confidence ahead of tax rises expected in this month’s budget.
- The US said it would push toward a cease-fire in Gaza after Israel killed Yahya Sinwar, the leader of Hamas and the mastermind of the Oct. 7 attacks that ignited a yearlong war in the Palestinian enclave. Israel said it would keep fighting until all the hostages seized by Hamas are free.
- Current private debt returns fail to justify the growing risk, according to Pacific Investment Management Co.
- Gold topped $2,700 an ounce for the first time, as concerns over escalating conflicts in the Middle East and a tight US election race prompt investors to flock to safety.
A more detailed look at global markets courtesy of newsquawk
APAC stocks followed suit to the mixed performance stateside as the region digested further support measures from the PBoC and a slew of Chinese data including mixed Q3 GDP, better-than-expected activity data and a further decline in House Prices. ASX 200 pulled back from recent record highs with Utilities, Consumer Discretionary and Tech leading the downturn seen across nearly all sectors. Nikkei 225 was indecisive around the 39,000 level with the upside capped following firmer-than-expected inflation. Hang Seng and Shanghai Comp outperformed but with gyrations seen as participants reflected on the slew of key data from China and with the large banks reducing interest rates on deposits by 25bps. However, sentiment was eventually lifted after comments from PBoC Governor Pan who reiterated that they could cut RRR further this year and noted expectations for a 20bps-25bps reduction in the Loan Prime Rates on Monday. Furthermore, it was initially reported that Pan announced the 7-day reverse repo rates would be lowered by 20bps and the interest rate on the Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although a major newswire later corrected this headline to state that Pan actually commented that the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively.
Top Asian News
- PBoC Governor Pan reiterated that they may further lower RRR this year by 25bps-50bps based on market liquidity and the LPR is expected to drop by 20bps-25bps on Monday, while it was initially reported that Pan said the 7-day reverse repo rates will be lowered by 20bps and the interest rate on Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although this was later corrected by a major newswire to state that Pan said the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively. Furthermore, the PBoC launched its Securities, Funds and Insurance companies Swap Facility operation in which the First batch of SFISF quotas exceeded CNY 200bln.
- PBoC, NFRA and CSRC held a meeting with major financial institutions on the implementation of incremental financial policies on October 16th, while the PBoC emphasised increasing support for financing small firms and implementing the swap facility. It was also reported that large Chinese banks lowered interest rates on CNY fixed-rate deposits by 25bps.
- China's financial regulator said financial institutions will be guided to continue increasing financial supply and fully support the economic recovery, while banks will be guided to cooperate in the extension, restructuring, and replacement of hidden debts, actively supporting efforts to resolve local government debt risks. There were also comments from the CSRC chairman that China is cracking down on illegal share reductions by shareholders and the CSRC has forced them to take responsibility and buy back shares, while they will further deepen reforms in capital market investment and financing.
- China stats bureau deputy chief says September economic indicators showed positive changes and China's foreign trade situation this year is better than expected but added that the foundation for the economic recovery is not solid yet. The official stated the implementation of a basket of policy measures will be sped up and optimism about the prospects of the property sector has increased after recent policy measures.
- IMF's Georgieva said China’s stimulus measures are in the right direction, but structural reforms are needed to drive domestic consumption, while she added that China should not rely on some miracle that would allow exports to keep driving growth given its massive size. Furthermore, she said China faces trouble if it tries to stick to an export-led growth model, with more trade tensions and slower growth, as well as warned that a failure to shift the economic model toward consumption risks medium-term annual growth falling below 4%.
- Japanese top currency diplomat Mimura said closely watching FX moves with a high sense of urgency and recent yen moves are somewhat rapid and one-sided, while excess volatility in the FX market is undesirable.
- BoJ Governor Ueda says Japan's economy is recovering moderately; likely to continue growing above potential; Financial markets remain unstable. Financial systems remain stable as a whole.
- Japan's largest labour union will seek wake hikes of at least 5% in 2025.
European bourses began the session mostly lower but this quickly began more of a mixed picture, Euro Stoxx 50 +0.5%; main theme is China strength which has driven strength in Autos, Basic Resources & Luxury names. FTSE 100 -0.2% is the modest laggard following stronger-than-expected Retail Sales which prompted strength in Sterling and weighed on exporters. Stateside, futures are in the green in relatively quiet trade, ES +0.2%; NQ +0.5% outperforms given Netflix +5% in pre-market trade after their earnings which topped estimates, driven by a 35% increase in ad-tier memberships. Apple (AAPL) iPhone 16 sales reportedly up 20% compared to iPhone 15, via Bloomberg; Pro & Pro Max sales +44% Y/Y
Top European News
- BoE's Woods proposed allowing bonus vesting on a pro-rata basis after year one moving to a five-year bonus deferral period for senior bank managers, while he said proposals will support growth without undermining financial stability.
- Some large UK-based pension funds warned that being forced to invest in the UK would be ‘huge mistake’ which could reduce payouts to pensioners, according to FT.
ECB
- ECB's Vasle says there is no pre-commitment regarding the ECB's next steps, and that inflation would be back to 2% at sometime next year, according to Econostream.
- ECB's Muller says inflation will settle around the 2% mark, risks around services and wages remain. Near-term economic outlook hasn't changed significantly, growth to be more modest.
- ECB's Villeroy says "we have total optionality" for the upcoming meetings. Risk of durably undershooting on inflation is now as big as overshooting it.
- Some ECB governors at this week's meeting wanted to drop the pledge to keep policy tight, according to Reuters sources; view was based on the judgement that inflation could turn out to be lower than anticipated just a few weeks ago.- ECB SPF - Inflation: 2025 seen at 1.9% vs. prev. view of 2.0%, 2026 forecast remains at 1.9%. Growth: 2025 GDP forecast lowered to 1.2% from 1.3%, 2026 projection left at 1.4%.
- ECB Bulletin: "Main findings from the ECB’s recent contacts with non‑financial companies"; Contacts did not anticipate much change to the overall subdued growth dynamic in the short term
FX
- USD is broadly softer against peers, following the data driven gains seen on Thursday. DXY within yesterday's range and capped by that session's high which coincides with the 200-DMA at 103.78.
- EUR is marginally firmer, unreactive to a handful of ECB speakers and the latest SPF findings. Nearing the 1.0850 mark, shy of Thursday's 1.0873 best.
- GBP outperforms, following stronger retail metrics this morning. Though, the release doesn't really change the narrative of BoE cuts being more likely than not at the next few meetings. Insight potentially comes via Bailey next week. Cable hit a 1.3071 peak, but has since faded to 1.3050.
- USD/JPY briefly eclipsed 150.00 following firmer-than-expected Japanese CPI metrics overnight; currently towards the mid-point of 149.78-15028 parameters.
- Yuan firmer followed extensive PBoC commentary overnight and as it digests a raft of data with GDP and Retail numbers supporting; Antipodeans bid as such.
- PBoC set USD/CNY mid-point at 7.1274 vs exp. 7.1267 (prev. 7.1220).
Fixed Income
- EGBs are essentially unchanged; Bunds came under modest pressure alongside the complex broadly after hawkish UK retail data and as the PBoC-driven China tailwinds reverberated into Europe.
- Bunds around the 134.00 mark, resistance at 134.17 from Thursday with the WTD high thereafter at 134.25.
- Gilts gapped lower by 10 ticks at the opening following strong retail data. A move which was modest in nature though and has proved to be short lived. Down to 97.27 at worst, but back to near unchanged and the 97.45 high, a point which is still someway off yesterday’s 97.96 best.
- USTs are in-fitting with EGBs/Gilts, pivoting the unchanged mark in a slim range into data and Fed speak. Yields are mixed but with overall action modest as the curve steepens a touch.
Commodities
- Crude benchmarks have been choppy in the European morning, going into a weekend of potential geopolitical risk following the death of the Hamas leader Sinwar. Benchmarks in a narrow sub-1/bbl range with gains of around USD 0.30/bbl each.
- Precious metals are bolstered, tailwinds coming from ongoing geopolitical risk and performance of China overnight. XAU remains above the USD 2.7k/oz mark, at a USD 2714/oz peak.
- Base metals also in the green, following the mentioned China developments where the PBoC Governor flagging a further cut to RRR and reductions to the LPR.
Geopolitics: Middle East
- Israeli PM Netanyahu met with his security team at the PM office and later confirmed the death of Hamas leader Sinwar, while he added that Israel’s task is not complete and the war is not over with Israel to continue full force until its hostages are returned.
- White House said US President Biden and Israeli PM Netanyahu discussed how to exploit the Hamas leader Sinwar's death to bring hostages home and end the war, while they agreed to stay in close contact over the coming days.
- US Defense Secretary Austin said the death of Hamas head Sinwar provides an extraordinary opportunity to achieve a lasting ceasefire, while it also provides an opportunity to end the war, rush in more humanitarian assistance in Gaza, as well as bring relief and hope to Palestinians.
- US is to try and push a Gaza ceasefire proposal forward, while there have been no negotiations for a Gaza ceasefire for the past few weeks.
- US Secretary of State Blinken told Israeli President Herzog he is expected to arrive in the coming days in the region to discuss a ceasefire deal, according to Kann News.
- US sources cited by CNN noted that Washington still believes that the Israeli response to Iran may happen within days.
- Israel told mediators that it is open to ideas that could be put forward for a Gaza deal, according to Al Arabiya.
- Hezbollah said it is moving to a new and escalating phase in the confrontation with Israel.
- Speaker of the Iranian parliament told French newspaper Le Figaro that Tehran is ready to negotiate with Paris for a ceasefire in Lebanon, according to Sky News Arabia.
OTHER
- Russia is to test the combat readiness of one of its strategic nuclear missiles units, according to RIA.
- North Korean leader Kim said South Korea is an apparent hostile country, while he added that the changed nature of the South Korea-US alliance and different military manoeuvres highlight the importance of a stronger North Korean nuclear deterrent, according to KCNA.
US Event Calendar
- 08:30: Sept. Building Permits MoM, est. -0.7%, prior 4.9%, revised 4.6%
- 08:30: Sept. Housing Starts MoM, est. -0.4%, prior 9.6%
- 08:30: Sept. Building Permits, est. 1.46m, prior 1.48m, revised 1.47m
- 08:30: Sept. Housing Starts, est. 1.35m, prior 1.36m
Central Bank speakers
- 09:30: Fed’s Bostic Presents to High School Students
- 10:00: Fed’s Kashkari Moderates Panel Event
- 12:10: Fed’s Waller Speaks on Decentralized Finance
- 12:30: Fed’s Bostic Participates in Moderated Conversation
DB's Jim Reid concludes the overnight wrap
Yikes! No sooner as it was back to school, we now have 2 weeks of half-term to survive at home after today. The normal course of events is that my wife is keen to spend time with them on day one but by day two, when I get home from work, she's reached the end of her tether. Feels like time for an emergency business trip.
From back-to-school to back-to-back for the ECB yesterday for the first time this cycle. Meanwhile, markets priced out the likelihood of the Fed doing the same at every meeting over the next few months. As such, the key theme of the day was stronger US data bringing renewed pressure on bonds, with 10yr Treasury yields rising +7.8bps as real yields reached their highest level since August. This led to some loss of momentum for the S&P 500 (-0.02%), though the index had seen a new intra-day record high early in the session. The latest ECB rate cut still supported risk markets in Europe, while the Dow Jones (+0.37%) posted at a new record high of its own and US IG spreads closed at their tightest level since 2005.
The main catalyst for the day's market moves was another batch of upbeat US data, which dampened any immediate fears about a potential recession. For instance, the weekly initial jobless claims fell to 241k (vs. 259k expected) in the week ending October 12, coming off their recent high of 260k last week. The rates reaction to last week's spike was always a bit odd given we all knew about the potential impact of the recent storms. In addition, the latest retail sales data also surprised on the upside with growth of +0.4% in September (vs. +0.3% expected). So it added to the trend whereby September data has kept surprising on the upside, including the jobs report and the CPI print. As such, it feels a far cry from the recession fears of the summer, and also from the 260bps of Fed cuts priced in by the end of 2025 shortly before the September FOMC. That's now at +198bps including the 50bps we've already had. Cementing the current strong nature of the data, the latest Atlanta Fed’s GDPNow is pointing towards annualised growth of 3.4% in Q3.
In terms of near-term Fed expectations, futures are now only pricing in 84bps of cuts by the March 2025 meeting, down -4.9bps from the previous day. That’s equivalent to 3.3 cuts at the upcoming four meetings, so market pricing suggests it’s more likely than not that the Fed will pause their cuts for at least one meeting over the next six months. And with investors dialling back the likelihood of rate cuts, Treasury yields moved significantly higher, with the 10yr yield up +7.8bps on the day to 4.09%. Higher yields saw the dollar index (+0.23%) rise for the 12th time in 14 sessions, to its highest level since August 1.
Over in Europe, it was a bit of a different story, as the ECB delivered a 25bp cut in their deposit rate, taking it down to 3.25%. The move was widely expected, but it’s the first back-to-back rate cut of this cycle, as they previously moved at a quarterly pace in June and then September. Indeed, there was some fresh momentum in that direction just a few hours beforehand, as the September CPI print for the Euro Area was revised down by a tenth to +1.7%.
While the ECB lowered rates, they didn’t pre-commit to any future moves, with the statement maintaining the language that they would “keep policy rates sufficiently restrictive for as long as necessary”, and “continue to follow a data-dependent and meeting-by-meeting approach”. At the same time, President Lagarde acknowledged the recent weakening in activity and noted that there were “probably more downside risks” on inflation. Our European economists (see their reaction here) see yesterday’s meeting as signaling a pivot to an accelerated easing cycle and they continue to expect back-to-back 25bp cuts until policy rates reach the midpoint of the 2.00-2.50% neutral range. However, they highlight the significant uncertainties, which are mostly to the downside. A potential trade war, the impact of and response to weak competitiveness, the degree of labour hoarding and the path of oil prices could all play a role in determining the path of ECB policy. They see the risks tilted towards the ECB cutting faster and further than the baseline, with a 50bp cut in December a real possibility. There is a fair bit of water to flow under the bridge until then though, especially when in data-dependent mode.
By the close, overnight swaps pricing had significantly increased the likelihood of a 50bp rate cut at the ECB’s December meeting, with 2yr bund yields falling by -2.3bps. However, further out the curve yields on 10yr bunds (+2.5bps) and OATs (+2.0bps) actually moved slightly higher. And there was a notable milestone for the Italian 10yr spread over German bunds, which reached its tightest level since November 2021, at just 120bps.
When it came to equities, it was a mixed day, with the S&P 500 trading +0.6% higher at the open following the stronger data but then losing ground to close -0.02% lower on the day. The moves were pretty subdued in aggregate, with none of the 11 major S&P sector groups moving by more than 1%. Gains for financial and energy stocks lifted the Dow Jones (+0.37%) to a new all-time high, while the rate-sensitive utilities sector (-0.93%) led the declines within the S&P 500. The NASDAQ (+0.04%) and the Magnificent 7 (+0.01%) were little changed, while the small-cap Russell 2000 (-0.25%) saw a modest underperformance, coming off its strongest level since November 2021. Nvidia rose +3.31% on the back of strong results by TSMC whose own shares are up +4.83% in Asia this morning after initially jumping as much as +6.0%, and in-turn hitting a record high.
Meanwhile, Netflix was up by +5% in after-hours trading, as its Q3 results exceeded subscriber and earnings estimates. Prior to this, the equity mood was clearly positive in Europe, closing before the late US dip, with the STOXX 600 up +0.83%, alongside an outperformance for the CAC 40 (+1.22%).
Elsewhere, there were several geopolitical headlines yesterday, as Israel said that Hamas leader Yahya Sinwar was announced to have been killed in Gaza. Sinwar’s death follows last month’s strike which killed Hassan Nasrallah, the leader of Hezbollah, and it comes as Israel is still considering how to respond to Iran’s strikes earlier this month. Brent crude oil prices (+0.31%) moved slightly higher yesterday to $74.45/bbl. The signs that investors were seeking out safe havens were more visible for gold (+0.71%), with a further +0.64% move overnight, and hitting an all-time high in nominal terms of $2,709.85/oz.
Asian equity markets are mostly trading higher this morning following China’s better-than-expected GDP data. The Hang Seng (+1.10%) is leading gains with the CSI (+0.77%) and the Shanghai Composite (+0.67%) also trading in positive territory. Elsewhere, the Nikkei (+0.38%) is also seeing gains while the KOSPI (-0.54%) and the S&P/ASX 200 (-1.10%) are lower. US stock futures and Treasuries have hardly moved.
Coming back to China, the economy expanded +4.6% in the July-September quarter, its slowest pace since early 2023 but a touch above the Bloomberg consensus forecast of a +4.5% increase and less than the previous quarter’s +4.7%. On a QoQ basis, the economy expanded +0.9% in the third quarter, compared with a downwardly revised +0.5% growth in Q2, and below forecast of 1.0%. Industrial production and retail sales saw a decent beat but this data is all pre-stimulus. It perhaps suggests that economy momentum wasn't deteriorating further before this though.
Separately, Japan's core inflation slowed in September (+2.4% y/y) for the first time in five months due to the rollout of energy subsidies and compared with market expectations for a +2.3% gain and easing from +2.8% in August.
Looking at yesterday’s other data, US industrial production was broadly in line with expectations, seeing a -0.3% contraction in September (vs. -0.2% expected). Otherwise, the NAHB’s housing market index was up to 43 in October (vs. 42 expected), moving higher for a second consecutive month.
To the day ahead now, and data releases include UK retail sales for September, along with US housing starts and building permits for September. Central bank speakers include the Fed’s Bostic, Kashkari and Waller. And today’s earnings releases include Procter & Gamble and American Express.
US equity futures are higher with tech leading once again, thanks to results from Netflix which beat lofty expectations and sent its stock to all time highs. As of 8:00am, S&P futures were up 0.2% to 5,900 while Nasdaq futures gained 0.5%, with most MegaCap Tech named higher: NVDA +1.2%, AAPL +1.1%, and NFLX jumped 6% post earnings beat. Bond yields are mixed and USD is lower; 2-, 5-, 10-year yields are 0.45bp lower, 0.23bp higher, and 0.6bp higher, respectively. Commodities are mixed with oil higher, base metals lower, and precious metals higher after China macro data beat estimates but reaffirmed the downward trend of China's economy. Today, the key macro focus will be housing data (Housing Start and Building Permit), as well as AXP and PG earnings.
In premarket trading, Netflix shares rose 6.5% after the streaming company reported third-quarter results that beat expectations on key metrics, including subscriber additions. It also gave a forecast that is seen as positive. However, Phillip Securities downgraded its rating, flagging valuation concerns on the back of the recent stock rally. Apple rose as data showed China sales of its latest iPhone increased 20% in the first three weeks compared with the 2023 model. Here are some other notable premarket movers:
- Boston Scientific slips 1.2% after Needham & Co downgraded the stock to hold from buy, with the analyst seeing slowing revenue growth in 2025.
- CVS Health shares tumble 13% after the retail pharmacy chain reported third-quarter preliminary profit that fell short of Wall Street’s expectations, plus higher-than-forecast medical costs. The company also named David Joyner as its new CEO, replacing Karen Lynch.
- Intuitive Surgical shares gain 6.4% after the company reported third-quarter adjusted earnings per share that came ahead of consensus estimates. Piper Sandler said it was encouraged by another strong quarter of placements for the da Vinci 5, a surgical robot that makes it easier for surgeons to understand movement inside the body during operations.
- The US opened a federal investigation into whether Tesla’s partial-automation system known as Full Self-Driving is defective after four crashes, one of which resulted in a fatality. Tesla shares fell 0.6%.
- US-listed Chinese stocks rally in Friday’s premarket trading after President Xi Jinping vowed to support the tech sector. A slew of central bank statements also boosted optimism.
- Zeta Global shares are down 4.3% after Barclays downgraded the application software company to equal-weight from overweight.
Treasuries steadied from their heavy selling after a batch of strong data on the US economy Thursday recast expectations for interest-rate cuts. Much stronger than expected retail sales - driven entirely by record seasonal adjustments - underscored how consumer spending continues to power the American economy, lessening the urgency for the Federal Reserve to unwind restrictive rate policy. One beneficiary of the improving US economic narrative has been small-cap stocks. The Russell 2000 index is close to reclaiming a 2024 high as weakening inflation spurs bets the Fed has room to cut rates, albeit not by as much as previously thought.
Small caps are also getting a boost from the so-called Trump Trade, according to BofA strategist Michael Hartnett who echoed Stanley Druckenmiller saying there are signs investors are positioning for presidential victory by Donald Trump, moving into banks, small-cap stocks and the dollar, assets that rallied in November 2016 in the wake of his last successful run. Bitcoin, another favored Trump Trade, also closed in on a fresh record, while gold traded at a record high above $2700.
A broadening out of the stock rally beyond tech megacaps would be a development that Gene Salerno, chief investment officer at SG Kleinwort Hambros Ltd. said he’d welcome. “It’s something frankly we’ve wanted to see for some time,” he said.
In Europe, the Stoxx 600 climbs 0.3%, with mining and technology leading gains, while media and personal care, drug and grocery-store stocks lag. Here are the biggest movers Friday:
- European sectors with high exposure to China advance on Friday, as the country’s central bank moved to support markets, signaling authorities’ determination to continue their stimulus push and draw a line under the slowdown
- Comet shares jump as much as 7.5% after the Swiss supplier of radio-frequency tools to the semiconductor industry posted better-than-expected results, assuaging fears that guidance would’ve been lowered
- Brunello Cucinelli shares rise as much as 3.8% after the Italian cashmere house reported a rise in sales, in a sign that exposure to the very wealthiest of clients is helping the luxury firm weather an industry downturn
- Dowlais shares rise as much as 9.5% as BNP Paribas Exane raises its rating on the UK auto parts producer to outperform from neutral, seeing a potential sale of the Powder Metallurgy business unlocking value
- Elisa shares fall as much as 6.6% after the Finnish telecom operator’s quarterly revenue missed estimates, due to a drop in equipment sales and regulatory changes
- Raiffeisen Bank International drops as much as 4.2%, after it said it’s revising its 2Q and 1H net interest income following a change to the accounting method of the group, excluding Russia and Belarus
- Suss MicroTec shares drop as much as 12%, after being downgraded by analysts at Stifel in wake of the guidance cut from chip-making tool supplier ASML
- Future shares slump as much as 14%, hitting a five-month low, after the media company announced that CEO Jon Steinberg plans to step down
Asian equities also rose, snapping a four-day losing streak, with China's CSI 300 rallying 3.6% as a slew of PBOC statements reignited optimism over policy support as stimulus hopes had recently faded. The MSCI Asia Pacific index climbed as much as 1.3%, its best day in three weeks, with TSMC the biggest boost as it jumped to a record high after raising its sales target. Chinese stocks in mainland and Hong Kong surged following comments by President Xi Jinping on boosting technology development and the central bank reignited optimism over policy support. The People’s Bank of China launched a specialized re-lending facility for share buybacks, while data showed China’s economy slowed in the third quarter, though less than expected. The nation’s equities have struggled, entering correction territory this week, as investors await details of promised stimulus
In rates, treasuries are narrowly mixed with yields off session highs and the curve slightly steeper after limited price action during Asia session and European morning. US 10-year yields rise 2bps around 4.11% with bunds outperforming by 2bp in the sector. Front-out outperformance steepens US 2s10s spread by around 1bp on the day. Gilts fall while the pound adds 0.2% as UK retail sales topped estimates. German short-end bonds caught a bid after Reuters reported some ECB governors wanted to drop a pledge to keep policy tight at Thursday’s meeting; German 2s10s widens 2.2bp with 2-year Bunds outperform Treasuries, as a faster pace of ECB interest-rate cuts has been priced into swaps since Thursday’s policy decision; ECB OIS contract prices in around 30bp of easing for the December policy meeting, following Thursday’s 25bp rate cut. Within euro-zone, Italian bonds outperform. US session includes four Fed speakers.
In FX, the Bloomberg Dollar Spot Index falls 0.2%, down for the first day in five; gauge still set for third week higher. US data include Sept. housing starts, building permits
- GBP/USD rises 0.3% to 1.3045, adding to Thursday’s gains; UK retail sales unexpectedly rose on demand for consumer tech
- EUR/USD gains 0.2% to 1.0847, as Euro Parity Threat Is Back on Trump Tariffs Risk, ECB Cuts
- USD/JPY gained 0.2%, dragging USD/JPY back below 150 after Japan’s top currency official warned he closely watching market movements.
- AUD/USD up 0.3% to 0.6713; NZD/USD rises 0.3% to 0.6076. Australian and New Zealand dollars gain as People’s Bank of China discloses details on measures to boost capital markets
In commodities, oil prices are steady, with WTI trading near $70.70 a barrel. Spot gold adds $20, topping $2,700 for the first time amid ongoing tensions in the Middle East.
Looking at today's calendar, US economic data includes September housing starts and building permits (8:30am). Fed members scheduled to speak include Bostic (9:30am, 12:30pm), Kashkari (10:20am) and Waller (12:10pm).
Market Snapshot
- S&P 500 futures up 0.2% to 5,898.25
- STOXX Europe 600 up 0.3% to 525.51
- MXAP up 1.1% to 191.23
- MXAPJ up 1.6% to 610.97
- Nikkei up 0.2% to 38,981.75
- Topix little changed at 2,688.98
- Hang Seng Index up 3.6% to 20,804.11
- Shanghai Composite up 2.9% to 3,261.56
- Sensex up 0.4% to 81,299.62
- Australia S&P/ASX 200 down 0.9% to 8,283.23
- Kospi down 0.6% to 2,593.82
- German 10Y yield little changed at 2.21%
- Euro little changed at $1.0841
- Brent Futures up 0.2% to $74.63/bbl
- Gold spot up 0.4% to $2,703.23
- US Dollar Index down 0.16% to 103.66
Top Overnight News
- Investor Ray Dalio expressed his concerns about the orderly transition of power in the US and whether election results will be accepted by both parties.
- UK retail sales unexpectedly rose in September, driven by computer sales and other electronics, despite the wider backdrop of declining confidence ahead of tax rises expected in this month’s budget.
- The US said it would push toward a cease-fire in Gaza after Israel killed Yahya Sinwar, the leader of Hamas and the mastermind of the Oct. 7 attacks that ignited a yearlong war in the Palestinian enclave. Israel said it would keep fighting until all the hostages seized by Hamas are free.
- Current private debt returns fail to justify the growing risk, according to Pacific Investment Management Co.
- Gold topped $2,700 an ounce for the first time, as concerns over escalating conflicts in the Middle East and a tight US election race prompt investors to flock to safety.
A more detailed look at global markets courtesy of newsquawk
APAC stocks followed suit to the mixed performance stateside as the region digested further support measures from the PBoC and a slew of Chinese data including mixed Q3 GDP, better-than-expected activity data and a further decline in House Prices. ASX 200 pulled back from recent record highs with Utilities, Consumer Discretionary and Tech leading the downturn seen across nearly all sectors. Nikkei 225 was indecisive around the 39,000 level with the upside capped following firmer-than-expected inflation. Hang Seng and Shanghai Comp outperformed but with gyrations seen as participants reflected on the slew of key data from China and with the large banks reducing interest rates on deposits by 25bps. However, sentiment was eventually lifted after comments from PBoC Governor Pan who reiterated that they could cut RRR further this year and noted expectations for a 20bps-25bps reduction in the Loan Prime Rates on Monday. Furthermore, it was initially reported that Pan announced the 7-day reverse repo rates would be lowered by 20bps and the interest rate on the Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although a major newswire later corrected this headline to state that Pan actually commented that the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively.
Top Asian News
- PBoC Governor Pan reiterated that they may further lower RRR this year by 25bps-50bps based on market liquidity and the LPR is expected to drop by 20bps-25bps on Monday, while it was initially reported that Pan said the 7-day reverse repo rates will be lowered by 20bps and the interest rate on Medium-term Lending Facility could be reduced by 30bps depending on market liquidity, although this was later corrected by a major newswire to state that Pan said the 7-day reverse repo rates and medium-term lending rates had already been lowered by 20bps and 30bps, respectively. Furthermore, the PBoC launched its Securities, Funds and Insurance companies Swap Facility operation in which the First batch of SFISF quotas exceeded CNY 200bln.
- PBoC, NFRA and CSRC held a meeting with major financial institutions on the implementation of incremental financial policies on October 16th, while the PBoC emphasised increasing support for financing small firms and implementing the swap facility. It was also reported that large Chinese banks lowered interest rates on CNY fixed-rate deposits by 25bps.
- China's financial regulator said financial institutions will be guided to continue increasing financial supply and fully support the economic recovery, while banks will be guided to cooperate in the extension, restructuring, and replacement of hidden debts, actively supporting efforts to resolve local government debt risks. There were also comments from the CSRC chairman that China is cracking down on illegal share reductions by shareholders and the CSRC has forced them to take responsibility and buy back shares, while they will further deepen reforms in capital market investment and financing.
- China stats bureau deputy chief says September economic indicators showed positive changes and China's foreign trade situation this year is better than expected but added that the foundation for the economic recovery is not solid yet. The official stated the implementation of a basket of policy measures will be sped up and optimism about the prospects of the property sector has increased after recent policy measures.
- IMF's Georgieva said China’s stimulus measures are in the right direction, but structural reforms are needed to drive domestic consumption, while she added that China should not rely on some miracle that would allow exports to keep driving growth given its massive size. Furthermore, she said China faces trouble if it tries to stick to an export-led growth model, with more trade tensions and slower growth, as well as warned that a failure to shift the economic model toward consumption risks medium-term annual growth falling below 4%.
- Japanese top currency diplomat Mimura said closely watching FX moves with a high sense of urgency and recent yen moves are somewhat rapid and one-sided, while excess volatility in the FX market is undesirable.
- BoJ Governor Ueda says Japan's economy is recovering moderately; likely to continue growing above potential; Financial markets remain unstable. Financial systems remain stable as a whole.
- Japan's largest labour union will seek wake hikes of at least 5% in 2025.
European bourses began the session mostly lower but this quickly began more of a mixed picture, Euro Stoxx 50 +0.5%; main theme is China strength which has driven strength in Autos, Basic Resources & Luxury names. FTSE 100 -0.2% is the modest laggard following stronger-than-expected Retail Sales which prompted strength in Sterling and weighed on exporters. Stateside, futures are in the green in relatively quiet trade, ES +0.2%; NQ +0.5% outperforms given Netflix +5% in pre-market trade after their earnings which topped estimates, driven by a 35% increase in ad-tier memberships. Apple (AAPL) iPhone 16 sales reportedly up 20% compared to iPhone 15, via Bloomberg; Pro & Pro Max sales +44% Y/Y
Top European News
- BoE's Woods proposed allowing bonus vesting on a pro-rata basis after year one moving to a five-year bonus deferral period for senior bank managers, while he said proposals will support growth without undermining financial stability.
- Some large UK-based pension funds warned that being forced to invest in the UK would be ‘huge mistake’ which could reduce payouts to pensioners, according to FT.
ECB
- ECB's Vasle says there is no pre-commitment regarding the ECB's next steps, and that inflation would be back to 2% at sometime next year, according to Econostream.
- ECB's Muller says inflation will settle around the 2% mark, risks around services and wages remain. Near-term economic outlook hasn't changed significantly, growth to be more modest.
- ECB's Villeroy says "we have total optionality" for the upcoming meetings. Risk of durably undershooting on inflation is now as big as overshooting it.
- Some ECB governors at this week's meeting wanted to drop the pledge to keep policy tight, according to Reuters sources; view was based on the judgement that inflation could turn out to be lower than anticipated just a few weeks ago.- ECB SPF - Inflation: 2025 seen at 1.9% vs. prev. view of 2.0%, 2026 forecast remains at 1.9%. Growth: 2025 GDP forecast lowered to 1.2% from 1.3%, 2026 projection left at 1.4%.
- ECB Bulletin: "Main findings from the ECB’s recent contacts with non‑financial companies"; Contacts did not anticipate much change to the overall subdued growth dynamic in the short term
FX
- USD is broadly softer against peers, following the data driven gains seen on Thursday. DXY within yesterday's range and capped by that session's high which coincides with the 200-DMA at 103.78.
- EUR is marginally firmer, unreactive to a handful of ECB speakers and the latest SPF findings. Nearing the 1.0850 mark, shy of Thursday's 1.0873 best.
- GBP outperforms, following stronger retail metrics this morning. Though, the release doesn't really change the narrative of BoE cuts being more likely than not at the next few meetings. Insight potentially comes via Bailey next week. Cable hit a 1.3071 peak, but has since faded to 1.3050.
- USD/JPY briefly eclipsed 150.00 following firmer-than-expected Japanese CPI metrics overnight; currently towards the mid-point of 149.78-15028 parameters.
- Yuan firmer followed extensive PBoC commentary overnight and as it digests a raft of data with GDP and Retail numbers supporting; Antipodeans bid as such.
- PBoC set USD/CNY mid-point at 7.1274 vs exp. 7.1267 (prev. 7.1220).
Fixed Income
- EGBs are essentially unchanged; Bunds came under modest pressure alongside the complex broadly after hawkish UK retail data and as the PBoC-driven China tailwinds reverberated into Europe.
- Bunds around the 134.00 mark, resistance at 134.17 from Thursday with the WTD high thereafter at 134.25.
- Gilts gapped lower by 10 ticks at the opening following strong retail data. A move which was modest in nature though and has proved to be short lived. Down to 97.27 at worst, but back to near unchanged and the 97.45 high, a point which is still someway off yesterday’s 97.96 best.
- USTs are in-fitting with EGBs/Gilts, pivoting the unchanged mark in a slim range into data and Fed speak. Yields are mixed but with overall action modest as the curve steepens a touch.
Commodities
- Crude benchmarks have been choppy in the European morning, going into a weekend of potential geopolitical risk following the death of the Hamas leader Sinwar. Benchmarks in a narrow sub-1/bbl range with gains of around USD 0.30/bbl each.
- Precious metals are bolstered, tailwinds coming from ongoing geopolitical risk and performance of China overnight. XAU remains above the USD 2.7k/oz mark, at a USD 2714/oz peak.
- Base metals also in the green, following the mentioned China developments where the PBoC Governor flagging a further cut to RRR and reductions to the LPR.
Geopolitics: Middle East
- Israeli PM Netanyahu met with his security team at the PM office and later confirmed the death of Hamas leader Sinwar, while he added that Israel’s task is not complete and the war is not over with Israel to continue full force until its hostages are returned.
- White House said US President Biden and Israeli PM Netanyahu discussed how to exploit the Hamas leader Sinwar's death to bring hostages home and end the war, while they agreed to stay in close contact over the coming days.
- US Defense Secretary Austin said the death of Hamas head Sinwar provides an extraordinary opportunity to achieve a lasting ceasefire, while it also provides an opportunity to end the war, rush in more humanitarian assistance in Gaza, as well as bring relief and hope to Palestinians.
- US is to try and push a Gaza ceasefire proposal forward, while there have been no negotiations for a Gaza ceasefire for the past few weeks.
- US Secretary of State Blinken told Israeli President Herzog he is expected to arrive in the coming days in the region to discuss a ceasefire deal, according to Kann News.
- US sources cited by CNN noted that Washington still believes that the Israeli response to Iran may happen within days.
- Israel told mediators that it is open to ideas that could be put forward for a Gaza deal, according to Al Arabiya.
- Hezbollah said it is moving to a new and escalating phase in the confrontation with Israel.
- Speaker of the Iranian parliament told French newspaper Le Figaro that Tehran is ready to negotiate with Paris for a ceasefire in Lebanon, according to Sky News Arabia.
OTHER
- Russia is to test the combat readiness of one of its strategic nuclear missiles units, according to RIA.
- North Korean leader Kim said South Korea is an apparent hostile country, while he added that the changed nature of the South Korea-US alliance and different military manoeuvres highlight the importance of a stronger North Korean nuclear deterrent, according to KCNA.
US Event Calendar
- 08:30: Sept. Building Permits MoM, est. -0.7%, prior 4.9%, revised 4.6%
- 08:30: Sept. Housing Starts MoM, est. -0.4%, prior 9.6%
- 08:30: Sept. Building Permits, est. 1.46m, prior 1.48m, revised 1.47m
- 08:30: Sept. Housing Starts, est. 1.35m, prior 1.36m
Central Bank speakers
- 09:30: Fed’s Bostic Presents to High School Students
- 10:00: Fed’s Kashkari Moderates Panel Event
- 12:10: Fed’s Waller Speaks on Decentralized Finance
- 12:30: Fed’s Bostic Participates in Moderated Conversation
DB's Jim Reid concludes the overnight wrap
Yikes! No sooner as it was back to school, we now have 2 weeks of half-term to survive at home after today. The normal course of events is that my wife is keen to spend time with them on day one but by day two, when I get home from work, she's reached the end of her tether. Feels like time for an emergency business trip.
From back-to-school to back-to-back for the ECB yesterday for the first time this cycle. Meanwhile, markets priced out the likelihood of the Fed doing the same at every meeting over the next few months. As such, the key theme of the day was stronger US data bringing renewed pressure on bonds, with 10yr Treasury yields rising +7.8bps as real yields reached their highest level since August. This led to some loss of momentum for the S&P 500 (-0.02%), though the index had seen a new intra-day record high early in the session. The latest ECB rate cut still supported risk markets in Europe, while the Dow Jones (+0.37%) posted at a new record high of its own and US IG spreads closed at their tightest level since 2005.
The main catalyst for the day's market moves was another batch of upbeat US data, which dampened any immediate fears about a potential recession. For instance, the weekly initial jobless claims fell to 241k (vs. 259k expected) in the week ending October 12, coming off their recent high of 260k last week. The rates reaction to last week's spike was always a bit odd given we all knew about the potential impact of the recent storms. In addition, the latest retail sales data also surprised on the upside with growth of +0.4% in September (vs. +0.3% expected). So it added to the trend whereby September data has kept surprising on the upside, including the jobs report and the CPI print. As such, it feels a far cry from the recession fears of the summer, and also from the 260bps of Fed cuts priced in by the end of 2025 shortly before the September FOMC. That's now at +198bps including the 50bps we've already had. Cementing the current strong nature of the data, the latest Atlanta Fed’s GDPNow is pointing towards annualised growth of 3.4% in Q3.
In terms of near-term Fed expectations, futures are now only pricing in 84bps of cuts by the March 2025 meeting, down -4.9bps from the previous day. That’s equivalent to 3.3 cuts at the upcoming four meetings, so market pricing suggests it’s more likely than not that the Fed will pause their cuts for at least one meeting over the next six months. And with investors dialling back the likelihood of rate cuts, Treasury yields moved significantly higher, with the 10yr yield up +7.8bps on the day to 4.09%. Higher yields saw the dollar index (+0.23%) rise for the 12th time in 14 sessions, to its highest level since August 1.
Over in Europe, it was a bit of a different story, as the ECB delivered a 25bp cut in their deposit rate, taking it down to 3.25%. The move was widely expected, but it’s the first back-to-back rate cut of this cycle, as they previously moved at a quarterly pace in June and then September. Indeed, there was some fresh momentum in that direction just a few hours beforehand, as the September CPI print for the Euro Area was revised down by a tenth to +1.7%.
While the ECB lowered rates, they didn’t pre-commit to any future moves, with the statement maintaining the language that they would “keep policy rates sufficiently restrictive for as long as necessary”, and “continue to follow a data-dependent and meeting-by-meeting approach”. At the same time, President Lagarde acknowledged the recent weakening in activity and noted that there were “probably more downside risks” on inflation. Our European economists (see their reaction here) see yesterday’s meeting as signaling a pivot to an accelerated easing cycle and they continue to expect back-to-back 25bp cuts until policy rates reach the midpoint of the 2.00-2.50% neutral range. However, they highlight the significant uncertainties, which are mostly to the downside. A potential trade war, the impact of and response to weak competitiveness, the degree of labour hoarding and the path of oil prices could all play a role in determining the path of ECB policy. They see the risks tilted towards the ECB cutting faster and further than the baseline, with a 50bp cut in December a real possibility. There is a fair bit of water to flow under the bridge until then though, especially when in data-dependent mode.
By the close, overnight swaps pricing had significantly increased the likelihood of a 50bp rate cut at the ECB’s December meeting, with 2yr bund yields falling by -2.3bps. However, further out the curve yields on 10yr bunds (+2.5bps) and OATs (+2.0bps) actually moved slightly higher. And there was a notable milestone for the Italian 10yr spread over German bunds, which reached its tightest level since November 2021, at just 120bps.
When it came to equities, it was a mixed day, with the S&P 500 trading +0.6% higher at the open following the stronger data but then losing ground to close -0.02% lower on the day. The moves were pretty subdued in aggregate, with none of the 11 major S&P sector groups moving by more than 1%. Gains for financial and energy stocks lifted the Dow Jones (+0.37%) to a new all-time high, while the rate-sensitive utilities sector (-0.93%) led the declines within the S&P 500. The NASDAQ (+0.04%) and the Magnificent 7 (+0.01%) were little changed, while the small-cap Russell 2000 (-0.25%) saw a modest underperformance, coming off its strongest level since November 2021. Nvidia rose +3.31% on the back of strong results by TSMC whose own shares are up +4.83% in Asia this morning after initially jumping as much as +6.0%, and in-turn hitting a record high.
Meanwhile, Netflix was up by +5% in after-hours trading, as its Q3 results exceeded subscriber and earnings estimates. Prior to this, the equity mood was clearly positive in Europe, closing before the late US dip, with the STOXX 600 up +0.83%, alongside an outperformance for the CAC 40 (+1.22%).
Elsewhere, there were several geopolitical headlines yesterday, as Israel said that Hamas leader Yahya Sinwar was announced to have been killed in Gaza. Sinwar’s death follows last month’s strike which killed Hassan Nasrallah, the leader of Hezbollah, and it comes as Israel is still considering how to respond to Iran’s strikes earlier this month. Brent crude oil prices (+0.31%) moved slightly higher yesterday to $74.45/bbl. The signs that investors were seeking out safe havens were more visible for gold (+0.71%), with a further +0.64% move overnight, and hitting an all-time high in nominal terms of $2,709.85/oz.
Asian equity markets are mostly trading higher this morning following China’s better-than-expected GDP data. The Hang Seng (+1.10%) is leading gains with the CSI (+0.77%) and the Shanghai Composite (+0.67%) also trading in positive territory. Elsewhere, the Nikkei (+0.38%) is also seeing gains while the KOSPI (-0.54%) and the S&P/ASX 200 (-1.10%) are lower. US stock futures and Treasuries have hardly moved.
Coming back to China, the economy expanded +4.6% in the July-September quarter, its slowest pace since early 2023 but a touch above the Bloomberg consensus forecast of a +4.5% increase and less than the previous quarter’s +4.7%. On a QoQ basis, the economy expanded +0.9% in the third quarter, compared with a downwardly revised +0.5% growth in Q2, and below forecast of 1.0%. Industrial production and retail sales saw a decent beat but this data is all pre-stimulus. It perhaps suggests that economy momentum wasn't deteriorating further before this though.
Separately, Japan's core inflation slowed in September (+2.4% y/y) for the first time in five months due to the rollout of energy subsidies and compared with market expectations for a +2.3% gain and easing from +2.8% in August.
Looking at yesterday’s other data, US industrial production was broadly in line with expectations, seeing a -0.3% contraction in September (vs. -0.2% expected). Otherwise, the NAHB’s housing market index was up to 43 in October (vs. 42 expected), moving higher for a second consecutive month.
To the day ahead now, and data releases include UK retail sales for September, along with US housing starts and building permits for September. Central bank speakers include the Fed’s Bostic, Kashkari and Waller. And today’s earnings releases include Procter & Gamble and American Express.