Please see below, Brooks Macdonald’s ‘Weekly Market Commentary’ which provides a brief update on global investment markets. Received yesterday afternoon – 09/10/2023
Over the weekend, a coordinated attack by Hamas militants led to more than 700 Israeli civilian and troop fatalities. The Israeli government has declared war on Hamas with its military targeting over 1,000 sites in Gaza last night. Alongside the fatalities from the attack, the UN estimates that 123,000 people have been displaced from Gaza as of Saturday. The humanitarian implications of a further escalation could be deeply troubling. For markets, the impact is being shown within the Israeli stock market which was down -6.5% yesterday and within the oil price which is seeing a move higher today after last week’s sell-off.
This week sees the start of the US earnings season with JPMorgan, Citi, BlackRock and Wells Fargo all reporting on Friday. With the market weakness of the last month, equity valuations are relatively undemanding which could lead to a rally if earnings prove to be as robust as economists predict. Whether investors ‘look through’ positive near term numbers and focus on stagflation or recessionary risks will be influenced by the evolving economic backdrop as the season develops as well as corporate forward guidance.
On Wednesday the latest producer price inflation index will be released from the US. Headline Producer Price Index (PPI) is expected to slow from 0.7% in August to 0.3% in September while the core reading is expected to stay unchanged at a 0.2% month-on-month gain. Attention will then shift to Thursday’s Consumer Price Index (CPI) report with headline CPI expected to retreat to a 0.3% monthly gain versus 0.6% the month prior. Core CPI is expected to be unchanged at 0.3% month-on-month. Gas prices were up in September versus August so higher energy prices continue to weigh on the headline CPI figures.
Last Friday the market needed to contend with a blockbuster beat in the US employment report which saw almost double the number of jobs created versus expectations. The non-farm payroll report echoes the labour market strength seen in the initial jobless claims and caused markets to forget the weaker data within last week’s Automatic Data Processing (ADP) release. Bond markets reacted sharply with the US 10-year Treasury closing at 4.8%, a fresh high. With the labour market strength showing no signs of abating, the question is whether inflation can fall despite this, making this week’s CPI report critical for bond markets.
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Alex Kitteringham
10th October 2023