This week’s headlines were dominated by the continuation of earnings season in the US as investors digested disappointing reports from large-cap technology names. Nearly $1 trillion was wiped off the value of the largest technology companies who all cited a slowing global economy and increasing cost pressures. Google parent Alphabet fell 9.1% on Wednesday after the company announced worse-than-expected growth in its core advertising business and Facebook owner Meta dropped 5.6% on the same day as it reported a decline in third-quarter revenue. Amazon on Thursday reported a weak revenue forecast for the rest of the year, whilst Microsoft was also punished by the market as the company provided downbeat forecasts despite resilient revenue growth on the back of growing cloud services demand.
Although the US technology sector finished lower for the week at -0.62% as of 12pm London time, the broader US index still posted a positive gain of 1.45%. It was also a mixed picture for the rest of the equity markets. Europe and the UK posted stronger gains with their main indices up 3.06% and 1.52% respectively. However, in Asia, Chinese stocks sold off in the wake of President Xi Jinping securing a third term as party leader. Investors fear continuing strict policy that could hamper the growth of tech giants with very few people who can challenge Xi’s policies. The Hong Kong index finished 8.32% lower whilst the Shanghai Composite fell 4.05%.
With much of the year also focused on monetary policy and inflation, the European Central Bank (ECB) raised rates by 0.75%, pushing its deposit rate to 1.5%, the highest level since 2009, in a bid to tackle inflation. Inflation for the eurozone hit 9.9% in September. Meanwhile, a flash reading of the composite purchasing managers’ index, a gauge of manufacturing and services activity, showed a decline to 47.1 from 48.1 for September. Readings below 50 indicate a decline in activity, and this was the biggest contraction for almost two years, raising fears that the Eurozone is likely entering a recession.
Gilt yields (which move inversely to their bond price) continued to fall as Rishi Sunak was confirmed as the UK’s prime minister on Tuesday. Gilt yields returned to levels last seen before September’s ill-received “mini” Budget announced by former Prime Minister Liz Truss. Investors were reassured by what they perceive as a more fiscally prudent Prime Minister, who also retained chancellor Jeremy Hunt who has already scrapped the majority of Truss’s earlier proposed tax cuts. As of 12pm London time, the 30-year Gilt yield fell to 3.51%, whilst the 10-year gilt yield fell 65 basis points to 3.46%. Elsewhere major government bonds also rallied, with the 10-year German bund trading lower at 2.1% whilst the US 10-year Treasury yield fell 20 basis points to 4.01%.
The benchmark Dutch 1-month gas futures price dropped as low as €93.35/MWh on Monday, before finishing the week at €112 as of 12pm London time thanks to oversupply of natural gas and milder weather in Europe more recently. This marks an approximate 70% fall from its record price in August. Short-term Dutch gas spot prices for delivery within an hour, which reflect real-time European market conditions, also briefly dipped below €0 on Monday because of oversupply. With Russia cutting off their pipeline, Europe is attempting to secure as much fuel ahead of winter. However, storage facilities are close to full and tankers carrying liquefied natural gas are lining up at ports unable to unload their cargoes, sending prices lower.
Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here
In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Financial Services Contracts Regime, which allows EEA-based firms to operate in the UK for a limited period to carry on activities which are necessary for the performance of pre-existing contracts, are available on the Financial Conduct Authority’s website.
Copyright 2020 Lawsons Equity Ltd | Designed by Echo
Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Lawsons Equity Limited has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Lawsons Equity Limited does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Lawsons Equity Limited.