Bassanese Bites: China jeer – October 14 2024
Global markets
Global equities edged higher again last week reflecting the continued prospect of US monetary easing and a good start to the Q3 US earnings reporting season. The lift in stocks came despite a higher-than-expected US inflation report and disappointment on further Chinese policy stimulus.
The key global highlight last week was the higher-than-expected US CPI inflation report, with core consumer prices lifting 0.3% (market 0.2%). Despite the slight miss, the market took it quite well – helped by generally still reassuring commentary from Fed officials on the prospect of further policy easing. Also helping was a rise in weekly jobless claims (bad news is good news!), likely reflecting hurricane-related disruptions.
Annual headline inflation still managed to ease to 2.4% – the lowest level since February 2021. With some disruptions caused by recent hurricane activity, it’s too early to fear the US disinflationary trend has already ended.
Other discomforting news came from China, with officials at two press conferences failing to live up to the – perhaps unrealistic – lofty expectations markets had developed with regard to further policy stimulus. While officials pledged to pursue this year’s 5% growth target, no new bazookas were fired – causing a correction in Chinese equities and commodity prices.
On the brighter side, the US Q3 earnings reporting season began well, with JP Morgan and Wells Fargo producing market pleasing results last Friday. Israel also has yet to retaliate for Iran’s recent missile strikes. In New Zealand, the RBNZ met market expectations and cut rates by an aggressive 0.5% – my call earlier this year for 1% of NZ rate cuts this year now looks conservative.
Global week ahead
While investors will keep a watchful eye on Middle East developments, a key focus otherwise this week is likely to be the US earnings reporting season – with major companies such as Netflix, Bank of America and Citigroup stepping up to the plate. US retail sales on Thursday will also provide an update on the (likely still good) health of the US consumer.
