Market snapshot: huge week ahead for global stock markets 

A we get ready to wave goodbye to October, some common themes continue to dictate direction of share prices. Our head of markets rounds up the latest news from around the world.

It may be too early to hang out the bunting, but the traditionally difficult month of October appears to be ending on a positive trajectory.

Despite some notable earnings misses over the last week from the likes of Amazon.com Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT) and Meta Platforms Inc Class A (NASDAQ:META), solid updates from Apple Inc (NASDAQ:AAPL), Chevron Corp (NYSE:CVX) and Exxon Mobil Corp (NYSE:XOM) reversed the damage.

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Some weakness in the tech sector as a whole has been taken as a possibility that the aggressive Federal Reserve hiking policy is beginning to have an impact, and has been accompanied by certain pockets of weakness in some recent economic readings. This in turn has led investors to ponder whether the backdrop could slowly be changing to one which is rather more accommodative for equity markets.

Friday’s PCE inflation print was largely in line with expectations, while personal income and spending rose by more than expected in September, giving a potential double bonus of flattening inflation but also a resilient consumer. This comes even against the possibility of an enforced recession, which will continue to give the Fed food for thought.

For markets, the acid tests continue in a week which will contain both the Fed’s latest interest rate decision as well as the non-farm payroll figures on Friday. For the former, there seems little argument against a further 0.75% hike, with the December meeting hopefully signalling a lesser increase. The consensus for the non-farms is that the market will have added 220,000 jobs, in comparison to the previous month’s reading of 263,000 in an ongoing sign of a tight labour market.

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While the month looks set to have avoided the usual October wobbles, the cumulative performance still has a considerable way to go towards recovery for the main indices. In the year to date, the Dow Jones is down by 10%, the S&P500 by 18% and the Nasdaq by 29%.

Asian markets were flat to negative following some further local issues as well as the impending threat of a global economic recession. China’s factory activity fell unexpectedly in October to suggest contraction, with the ongoing zero-tolerance policy towards Covid-19 continuing to hamper any thoughts of recovery. At the same time, an embattled consumer and a faltering property sector have given little cause for immediate optimism in the region.

In economic terms, the Bank of England interest rate decision on Thursday is likely to take centre stage. Muddied by some emergency measures which were brought on by the ill-conceived government announcements of the “fiscal event”, the Bank needs to return to its knitting with measures designed to contain inflationary pressures. This could even result in an aggressive hike of 0.75%, despite a clearly lagging economy which could already be in recessionary territory.

Such action could be mildly supportive for the pound, but will leave limited scope for a rally for equities.

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In early exchanges, the FTSE100 index was unable to make any positive inroads, although a number of broker upgrades lent some support to bank shares, despite the mixed results emanating from last week’s third quarter numbers. This was largely offset by some further weakness in the housebuilders, while a drop in energy shares pulled the rug from any immediate progress.

In the year to date, the FTSE100 is now down by 4.6%, with the more domestically focussed FTSE250 echoing the sombre UK outlook and down by 24%.