While stocks enjoyed a positive first seven months of the year, since then there has been a steady decline, with the S&P 500 and Dow Jones currently on track to end October with a third consecutive monthly loss, their worst streak since March 2020. Many of the companies that had been amongst the best performers earlier on have come under pressure as of late. A number of notable tech names reported their earnings during the week; Amazon and Microsoft saw a better reaction with results boosted by strong performance in their cloud businesses, while Alphabet and Meta Platforms disappointed.
The S&P 500 ended the week 2.5% lower, with Friday’s loss putting it down more than 10% from its recent high, pushing it into correction territory. The tech-heavy Nasdaq had entered correction territory earlier in the week and was down 2.6% overall, while the Dow Jones dropped 2.1%. At the start of the week the yield on the 10-year Treasury yield briefly breached the 5% level but ended the week lower at 4.83%. Yields were little changed after the core personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation, eased to 3.7% year-on-year in September, with the central bank expected to hold rates steady at its meeting this week.
Issues pressuring US stocks carried across to Europe, with the pan-European STOXX 600 down around 1% for the week. Regional indices mainly saw modest losses, although the UK FTSE 100 was one of the worst performers down around 1.5%. As expected, the European Central Bank went on hold after 10 consecutive rate hikes, and it reiterated that it would hold rates high until inflation was brought back down to target. Eurozone government bond yields moved slightly lower following the decision.
In Japan, the Nikkei 225 dropped 0.9%, with inflation accelerating. Tokyo’s consumer price index climbed to 3.3% in October from 2.8% in the prior month, raising questions about the Bank of Japan’s ultra loose monetary policy. The central bank is to meet this week, with attention on whether it will adjust its yield curve control policy. The yield on the 10-year Japanese government bond hit a fresh decade high of 0.87%, with the central bank conducting an unscheduled bond-buying operation. Meanwhile the yen weakened past the key 150 level against the US dollar, raising concerns of intervention.
Bucking the wider trend, Chinese markets managed to rise for the week amid hopes of China’s economy stabilising with help from stimulus measures. The Shanghai Composite added 1.2% while in a holiday-shortened week the Hang Seng was up 1.3%. In some good news, China’s industrial profits grew 11.9% in September from a year earlier, in its second consecutive increase. This helped overshadow news that Country Garden had defaulted on an offshore debt payment.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.