MFS Week in Review
A review of the week's top global economic and capital markets news.
A review of the week's top global economic and capital markets news.
For the week ending 18 October 2024
As of midday Friday, global equities were modestly firmer on the week, holding at near record levels. The yield on the U.S. 10-year Treasury note dipped 3 basis points from a week ago to 4.07% while the price of a barrel of West Texas Intermediate crude oil declined $6 to $69.35 as fears of Israeli attacks on Iran’s oil infrastructure ebbed. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), fell to 18.7 from 19.5 a week ago.
MACRO NEWS
ECB speeds up rate-cut pace
Having lowered rates at its June and September meetings, the European Central Bank accelerated its pace, cutting its deposit rate 0.25% to 3.25% on Thursday. ECB President Christine Lagarde said downside risks to inflation are larger than upside ones and that growth is somewhat weaker than expected, fueling expectations of at least another 0.25% cut at the December meeting. Lagarde expects the eurozone to avoid recession but said that potential U.S. trade restrictions are a downside risk.
China’s rally runs out of steam
Chinese equities continued to lose ground this week as officials made clear that the government’s efforts to boost the economy will be concentrated on restoring the finances of local governments and on shoring up the property market while steering clear of large-scale efforts aimed at boosting consumption. Since peaking on 8 October, the Shanghai-Shenzhen Index has declined about 8.5% as of Friday’s close but is still up 23% over the past month. A series of press briefings from China’s housing and finance ministries this week provided incremental details on the government’s plans, but these did not satisfy market hopes for more sweeping reforms. A key government priority is to provide about $560 billion in funding to property developers to finish homes that have been sold but left unfinished. The package of reforms is seen bolstering growth moderately. For example, Goldman Sachs forecasts stimulus will add 0.4% to the country’s growth next year and raised its 2025 GDP forecast to 4.7%. Data released Friday showed that growth was slightly firmer than expected in Q3, rising 4.6% year over year amid firmer industrial production and retail sales. However, residential property sales plunged 24% from year-ago levels. On Friday, China’s central bank pledged to ease monetary policy further and to swiftly implement expansive financial policies.
Israel says it won’t attack Iran’s oil, nuclear facilities
The Washington Post reported that Israeli Prime Minister Benjamin Netanyahu told the Biden administration that Israel is willing to strike military rather than oil or nuclear facilities in Iran, according to two officials familiar with the matter, suggesting a more limited counterstrike, thus helping to prevent a full-scale war. Israeli Defense Minister Yoav Gallant vowed Tuesday that Israel would respond to the Iranian attack, saying its response would be “precise, painful and surprising,” but, he added, “we are not interested in opening additional fronts or new conflicts.” Oil prices fell on the report. On Thursday, Israel announced the killing of Hamas leader Yahya Sinwar in southern Gaza, further degrading its military capabilities. U.S. President Joe Biden said Sinwar’s death removes an obstacle to peace.
QUICK HITS
EARNINGS NEWS
With about 11% of the constituents of the S&P 500 Index having reported for Q3 2024, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings rose around 2.8% compared with the same quarter a year ago, according to data from FactSet. This was slower than the 11.2% pace set in Q2. Sales growth is up 4.4% year over year.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
This commentary was first published in the United States by MFS and is distributed in Canada by SLGI Asset Management Inc., with permission.
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