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London Quick Take – 20 Oct - Japan jumps, banks recover, trade fears ease again
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Key Points
- Japanese equities surge as LDP strikes coalition agreement
- European bank stocks bounce after Friday's sell-off
- Trade war fears ease a bit
- Earnings season on Wall Street and inflation data ahead
Japanese stocks surged on news the ruling LDP and Ishin parties are to sign a coalition agreement today, setting up ‘fiscal dove’ Sanae Takaichi to become the country’s first female prime minister. The Nikkei 225 rallied almost 3.5% in Tokyo overnight to a record high above 49,000. We can probably say this is a government that wants to boost supply-side investment and is therefore good for equities, yields higher, yen weaker.
US stocks ended a volatile week on a positive note with the three major indices all rallying about 0.5% on Friday as investors seemed to set aside fears about bad loans popping up in the regional banking sector. The SPDR S&P Regional Banking ETF (KRE) rallied after Thursday’s sharp sell-off as for the time being no one seems to think this is systemic. But small caps couldn't catch the breaks and the Russell 2k fell again.
Trade fears have eased a bit. The old playbook can be relied upon: President Trump said threatened additional tariffs on China were ‘not sustainable’. China removed its top trade negotiator from post at the WTO and UN, which looks like a bit of an olive branch. Meanwhile Chinese data was mixed overnight - Q3 GDP up 4.8% YoY in line with expectations while property investment continued its decline, down 13.9%.
European stock markets have these tailwinds behind them this morning; a sprightlier mood on trade, a bit more of a sanguine approach around US regional banks and a big lift in Japan overnight. The FTSE 100 climbed around 0.4% in early trading to take a look at the 9,400 level, while the CAC rose similarly and the DAX jumped 1%. Banking stocks rallied after Friday’s silly season, while defence names are lining up among the advancers as Trump reportedly told Zelensky to bow to Putin's demands or be destroyed by Russia. Fresnillo led the decliners on the FTSE 100 as gold prices pulled back sharply on Friday.
S&P downgraded France one notch in an unscheduled update as the country grapples once more with a budget that MPs cannot agree on. Second-time-around PM Lecornu survived a confidence vote – just – last week and now hopes to get a fiscal bill through by dropping Macron’s vaunted pension reforms. The budget will be debated in the National Assembly starting on Friday, with a decision required by December 23rd.
Economic data from the US is quite sparse this week as the government remains shuttered. However, we will get a delayed September CPI inflation report, which has been specially put together despite the shutdown in order to provide the Federal Reserve with data ahead of its 28-29 October meeting. UK inflation on Wednesday could shot a 4% print. Read the full week ahead here.
Companies
US earnings season hits full pace this week as market giants Tesla and Netflix report Q3 updates. They headline a busy week on Wall Street as investors grapple with earnings against a backdrop of worries about bad loans at regional banks in the US as well as sky-high valuations and trade war grumblings. Also reporting are Intel, Coca-Cola and 3M.
In London we hear Q3 numbers from Barclays, Natwest and Lloyds after Friday’s US regional bank-inspired sell-off. Bank stocks – Lloyds, Natwest, Standard Chartered, HSBC - are firmer this morning following the sell-off on Friday amid those US regional bank fears.
B&M slumped 15% after admitting an accounting error which has seen it cut its profit outlook.
Apple – iPhone 17 sales are reportedly 14% higher in the US and China compared to the previous model.
Oracle tumbled 7% as analysts voiced some concerns about its huge AI capex plans.
AST SpaceMobile fell 6.5% as Barclays cut the stock to underweight, noting that valuation had run ahead of fundamentals.
US stocks ended a volatile week on a positive note with the three major indices all rallying about 0.5% on Friday as investors seemed to set aside fears about bad loans popping up in the regional banking sector. The SPDR S&P Regional Banking ETF (KRE) rallied after Thursday’s sharp sell-off as for the time being no one seems to think this is systemic. But small caps couldn't catch the breaks and the Russell 2k fell again.
Trade fears have eased a bit. The old playbook can be relied upon: President Trump said threatened additional tariffs on China were ‘not sustainable’. China removed its top trade negotiator from post at the WTO and UN, which looks like a bit of an olive branch. Meanwhile Chinese data was mixed overnight - Q3 GDP up 4.8% YoY in line with expectations while property investment continued its decline, down 13.9%.
European stock markets have these tailwinds behind them this morning; a sprightlier mood on trade, a bit more of a sanguine approach around US regional banks and a big lift in Japan overnight. The FTSE 100 climbed around 0.4% in early trading to take a look at the 9,400 level, while the CAC rose similarly and the DAX jumped 1%. Banking stocks rallied after Friday’s silly season, while defence names are lining up among the advancers as Trump reportedly told Zelensky to bow to Putin's demands or be destroyed by Russia. Fresnillo led the decliners on the FTSE 100 as gold prices pulled back sharply on Friday.
S&P downgraded France one notch in an unscheduled update as the country grapples once more with a budget that MPs cannot agree on. Second-time-around PM Lecornu survived a confidence vote – just – last week and now hopes to get a fiscal bill through by dropping Macron’s vaunted pension reforms. The budget will be debated in the National Assembly starting on Friday, with a decision required by December 23rd.
Economic data from the US is quite sparse this week as the government remains shuttered. However, we will get a delayed September CPI inflation report, which has been specially put together despite the shutdown in order to provide the Federal Reserve with data ahead of its 28-29 October meeting. UK inflation on Wednesday could shot a 4% print. Read the full week ahead here.
Companies
US earnings season hits full pace this week as market giants Tesla and Netflix report Q3 updates. They headline a busy week on Wall Street as investors grapple with earnings against a backdrop of worries about bad loans at regional banks in the US as well as sky-high valuations and trade war grumblings. Also reporting are Intel, Coca-Cola and 3M.
In London we hear Q3 numbers from Barclays, Natwest and Lloyds after Friday’s US regional bank-inspired sell-off. Bank stocks – Lloyds, Natwest, Standard Chartered, HSBC - are firmer this morning following the sell-off on Friday amid those US regional bank fears.
B&M slumped 15% after admitting an accounting error which has seen it cut its profit outlook.
Apple – iPhone 17 sales are reportedly 14% higher in the US and China compared to the previous model.
Oracle tumbled 7% as analysts voiced some concerns about its huge AI capex plans.
AST SpaceMobile fell 6.5% as Barclays cut the stock to underweight, noting that valuation had run ahead of fundamentals.
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