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The Long and Short of it, week ending 27 Oct 2023

Posted: 31 October, 2023

Topic: Telecoms , Financials , Basic Materials , Energy , Industrials , Technology

Publication Type: Market Commentaries

The Long and Short of it, week ending 27 Oct 2023

Stock markets moved lower again last week affected by rising interest rates, a slew of disappointing earnings results and, in a world where good news is bad news, stronger-than-expected GDP growth and consumer spending. Higher-rates-for-longer concerns surfaced early in the week, driving 10-year Treasury rates to the 5% level and while rates moved lower over the course of the week, the concerns remained embedded in market sentiment following a much stronger-than-expected GDP release, continued low initial jobless claims and a strong PMI Composite Index release. Alphabet’s disappointing cloud revenues/earnings (released Wednesday) added to downward market pressure, especially in the tech sector. Those losses were partially reversed Friday with Amazon earnings markedly exceeding analyst projections. Geopolitical concerns, centered in the Mid East, powered haven buying, lifting gold, Treasury rates and the U.S. dollar higher while increasing risk-off sentiment. For the week, the S&P 500 Index fell 2.6% to 4,113.05, the Nasdaq Composite Index dropped 2.9% to 12,611.58 the Dow Jones Industrial Average decreased 0.9% to 32,418.05, the 10-year U.S. Treasury rate fell 7bps to 4.84% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.4%.

European stock markets moved lower again last week as well but declined less than their U.S. counterparts. Both the FTSE 100 and the STOXX 600 Indexes moved higher through Wednesday, benefiting from better-thanexpected earnings reports and weaker-than-expected euro zone industrial activity. Soft UK unemployment data supported the FTSE 100 Index as well. Sentiment turned negative Thursday and Friday, however, influenced by recession concerns prompted by higher energy prices and a set of weaker-than-expected financial sector earnings reports with an as-expected ECB rate decision (rates unchanged) seemingly have little effect on markets. For the week, the FTSE 100 Index fell 1.5% to 7.291.28, the STOXX 600 Index decreased 1.0% to 429.58, the 10-year Gilt rate fell 10bps to 4.55%, the 10-year Bund rate decreased 6bps to 2.83% and the British pound and the euro both weakened 0.3%, both versus the U.S. dollar.