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Earnings season kicked off, with the big banks beginning to release their third quarter numbers on Friday. Both JP Morgan and Wells Fargo shares rose over 4% for the session, as profits came in ahead of expectations. The S&P 500 financials sector added 2% in the session and secured a record closing high. Not faring as well was Tesla, which was down over 12% for the week as its robotaxi event failed to impress investors. Alphabet was also under pressure on news that the Department of Justice was exploring a possible break-up of Google.

For the week, the S&P 500 added 1.1%, ending at an all-time high. Also securing a fresh record was the Dow Jones Industrial Average, up 1.2%. The tech-heavy Nasdaq Composite also neared its previous peak, adding 1.1%. Economic data for the week was mixed, with weekly jobless claims unexpectedly rising to 258,000, and the University of Michigan’s consumer sentiment index dropping to 68.9 in October, from 70.1 previously. Perhaps the most attention was on the release of the consumer price index, which increased 0.2% last month, slightly ahead of expectations. This fuelled expectations that the Federal Reserve will cut rates by 25 basis points at its November meeting, with just a 12% chance of it remaining on hold, according to CME’s FedWatch. For the week, Treasury yields rose, with the 10-year note ending at 4.08%.

European markets managed to see weekly gains, with the STOXX 600 adding 0.7%. Comments from some European Central Bank officials seemed to indicate that the central bank could quicken its pace of policy easing. The ECB meets this week and markets are expecting a 25bps rate cute, as well as another move at its December meeting. Most regional indices logged gains, however the UK FTSE 100 ended 0.3% lower. This was even as UK GDP grew 0.2% in August, having flatlined in the prior two months.

Japan’s Nikkei 225 rose 2.5% for the week, while the broader Topix only managed to see a 0.5% rise. The markets were supported by yen weakness. After the strong gains seen in the previous couple of weeks, Chinese equities saw a pullback as optimism around the stimulus measures faded. Markets were however expectant of further details around stimulus plans being unveiled over the weekend. In a holiday shortened week, the Shanghai Composite fell 3.6%. Losses in Hong Kong were even worse with the Hang Seng down 6.5%.

Weekly macro highlights

US CPI inflation eases in September

US consumer price index (CPI) inflation rose 2.4% year-on-year (YoY) in September, below the 2.5% registered in August but above market expectations for a decline to 2.3%. Food prices rose 2.3% YoY in September, reflecting 1.3% and 3.9% increases in prices for food at home and away from home respectively. This partially offset a 6.8% YoY decline in energy prices. Core CPI inflation, which excludes food and energy prices, rose 3.3% YoY, above the 3.2% YoY increase in August which markets had expected to be repeated. The increase in core inflation was driven by 4.9% and 8.5% YoY rises in shelter and transportation services prices respectively. While core inflation was stronger than expected in YoY terms, when annualised over six months it was 2.6%, down from 4.0% in April. On this measure, which strips out older information and is more reflective of the current inflation environment, core inflation has declined every month since April.

UK GDP growth rises in August

UK GDP rose 0.2% month-on-month in August. The data was in line with market expectations and marked a return to growth for the UK economy following two months of no growth in June and July. The increase in GDP in August reflected positive contributions from all three sectors, with services, production and construction output rising 0.1%, 0.5% and 0.4% respectively over the month. The increase in services output followed a move of the same magnitude in July and was driven by growth in four of the fourteen subsectors, with seven subsectors contributing negatively to the month and three making no contribution. The rise in production output in August represented a rebound from a 0.7% decline in July, with the largest driver of August’s growth being a 1.1% rise in manufacturing output. Construction output rose in August due to a 1.6% increase in new work, offsetting a 1.0% decline in repair and maintenance.

RBI leaves rates unchanged in October

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) voted 5-1 to keep the policy repo rate unchanged at 6.5% at its meeting on 09 October, with one member preferring to reduce interest rates by 25 basis points. The MPC noted the domestic growth outlook remains resilient, supported by private consumption and investment, providing headroom for monetary policy to focus on the goal of attaining a durable alignment of inflation with the 2-6% target. The RBI expects inflation, which was 3.7 % year-on-year in August, to rise temporarily in the coming months before moderating later in the financial year. Taking into account the expected growth and inflation dynamics, the MPC decided to change the monetary policy stance from “withdrawal of accommodation” to “neutral” in a unanimous vote. The Committee also noted it will “remain vigilant of the evolving inflation outlook”.