Market Commentary with Chris Twort: 27th - 31st October

Weekly Recap: 27th - 31st

Japan:

Japan’s ruling Liberal Democratic Party finalised its coalition with the Japan Innovation Party, formally establishing Sanae Takaichi as Prime Minister. Known for her pro-stimulus policies and criticism of the Bank of Japan’s tightening stance, her leadership has supported risk sentiment — the Nikkei 225 rallied 3%, and the JPY strengthened to 150.70.
Markets expect fiscal spending and tax cuts to continue, though long-term JGB yields hit record highs, reflecting concerns over fiscal sustainability.

US & China:

Optimism around a U.S.–China trade breakthrough lifted global sentiment early in the week. Negotiators met in Malaysia and reportedly resolved key issues on tariffs, shipping fees, and export controls ahead of the November truce deadline.
President Donald Trump also signed a rare-earth supply deal with Australia, reinforcing U.S. efforts to reduce dependence on China for critical minerals. The yuan reached its strongest level in nearly a year, and sentiment improved further following Trump’s prediction of a “really good trade deal” with Beijing.
By Thursday, Trump and President Xi Jinping met in South Korea, agreeing to halve fentanyl-related tariffs and ease restrictions on rare-earth magnets, while Beijing resumed soybean purchases.
Today’s updates confirmed the summit yielded a one-year tariff truce, a rollback of export controls, and reduced trade barriers, with Treasury Secretary Scott Bessent signalling renewed negotiations within a year.

Europe:

The European Central Bank held rates at 2.15%, as expected, while France’s economy grew at its fastest pace since 2023, easing political concerns following last week’s credit rating downgrade by S&P.
Investors continue to monitor Europe’s fiscal trajectory ahead of Moody’s next review. The ECB reaffirmed its cautious tone on inflation and growth dynamics.

Markets & Commodities:

Global equities rallied to record highs early in the week, supported by improving trade sentiment and expectations for a 25-basis-point Fed rate cut.
By Friday, U.S. equity-index futures strengthened, with S&P 500 futures up 0.6% and Nasdaq 100 futures gaining 1.1%, boosted by strong Amazon and Apple earnings.
Amazon surged 13% in after-hours trading after reporting its fastest cloud growth in nearly three years, while Apple climbed after beating revenue estimates and offering an upbeat holiday outlook.
Meta Platforms saw record demand for its $30 billion bond sale, underscoring investor confidence in AI-driven growth, which has added $17 trillion in market value since April.
In Asia, Japan’s Nikkei 225 jumped 2.1% to a new peak, while mainland China and Hong Kong fell over 1%. European stock futures pointed lower, gold slipped 0.4%, and the yen strengthened on rising Tokyo inflation and government currency vigilance.
Brent crude held near $64.40, while copper hovered at record highs amid optimism on industrial demand.

Data & Earnings:

The Federal Reserve delivered its second consecutive rate cut, citing a softening labour market but signalling caution on further easing this year. Chair Jerome Powell offered limited guidance, reflecting divisions within the FOMC.
The ongoing U.S. government shutdown continues to delay several key releases, including September CPI, now expected today.
Earnings season remained in focus, with standout results from Netflix, GE, Coca-Cola, Tesla, IBM, Barclays, Apple, and Amazon. Investors now turn to Intel, Blackstone, and Lloyds, while Canada’s GDP is anticipated to be the day’s most impactful release.

Chris’ Comments

Despite it being Halloween, the markets have not been spooked by the Fed lowering rates by 25 basis points to a 3.75–4.00% range. However, there is some concern following Jerome Powell’s comment that another cut in December is “far from assured.”

In the background, equity markets continue to thrive — the Nasdaq is up over 4% month-to-date, and earnings remain strong, with 84% of S&P 500 firms beating estimates. The highlight of the month was Nvidia becoming the first company to reach a $5 trillion market valuation.

In our world, gold remains the focus, and while prices stay above the $4,000 level, this recent trend doesn’t yet appear exhausted.

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