Inflationary pressures are rising sharply in Australia. Corporate earnings keep indices from falling

October 25, 2023

As of Tuesday’s stock market close, the Dow Jones Index (US30) was up by 0.54%, while the S&P 500 (US500) increased by 0.73%. The NASDAQ Technology Index (US100) closed positive by 0.93% yesterday. Stocks rose moderately on Tuesday on the back of better-than-expected corporate earnings results. A negative factor for stocks was Tuesday’s stronger-than-expected US manufacturing activity data, which was hawkish for Fed policy. The S&P US manufacturing PMI for October unexpectedly rose to a 6-month high of 50.0, which was stronger than expectations of a decline to 49.5.

General Electric (GE) closed higher by more than 6% after reporting third-quarter adjusted EPS of 82 cents, well above the consensus of 56 cents, and raising its 2023 adjusted EPS guidance. Verizon Communications (VZ) shares are up more than 9%, leading gains in the S&P 500 (US500) and Dow Jones Industrials (US30), after the company reported third-quarter adjusted earnings per share of $1.22, which was better than the consensus estimate of $1.18. Coca-Cola Co (KO) closed higher by more than 3% after reporting 11% organic revenue growth in the third quarter, well above the consensus of 6.91%. Shares of Google Alphabet (GOOG) Inc. are down more than 5% after weaker-than-expected revenue growth from its cloud computing operations. Microsoft (MSFT) reported fiscal first-quarter results on Tuesday that beat Wall Street forecasts, as the tech giant’s investments in artificial intelligence fueled growth in its Azure cloud business. The stock price rose more than 4% after the report was published.

In the Middle East, French President Macron met with Prime Minister Netanyahu in Israel on Tuesday before calling for an international coalition to fight Hamas and warning other Iranian-backed militant groups against opening new fronts in the war between Israel and Hamas.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.54%, France’s CAC 40 (FR40) gained 0.63% on Tuesday, Spain’s IBEX 35 (ES35) fell by 0.28%, and the UK’s FTSE 100 (UK100) closed positive 0.20%.

The Eurozone manufacturing PMI for October unexpectedly fell by 0.4 to 43.0, weaker than expectations of a rise to 43.7. The German GfK consumer confidence index for November fell by 1.4 to a 7-month low of 28.1, weaker than expectations of 27.0. In her speech yesterday, ECB President Lagarde told the Presidents of the European Commission, European Council, and Eurogroup that stagnation and downside risks await the Eurozone economy in the next few quarters, although inflation risks have become more balanced.

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Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) increased by 0.20%, China’s FTSE China A50 (CHA50) added 0.03%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.05%, and Australia’s ASX 200 (AU200) ended Tuesday positive 0.19%. Chinese stocks continued their recovery rally on Wednesday after the government announced plans for a massive bond issue. Beijing announced plans to issue 1 trillion yuan ($1=7.3088 yuan) worth of government bonds to support the economy. Nevertheless, Chinese stocks remain near 2023 lows, having suffered significant losses on fears of slowing economic growth and a collapse in the real estate market. Despite Wednesday’s optimism, the factors that drove domestic markets lower are still in place.

Japan’s business activity index for the manufacturing sector for October was unchanged at 48.5. The services PMI for October fell by 2.7 to 51.1, the lowest reading in 10 months.

In Australia, the consumer price index unexpectedly rose. In annual terms, the inflation rate rose from 5.2% to 5.6%. In quarterly terms, the index rose from 0.8% to 1.2%. Such data gives grounds for further interest rate increase by the Reserve Bank of Australia next week.

S&P 500 (F)(US500) 4,247.68 +30.64 (+0.73%)

Dow Jones (US30) 33,141.38 +204.97 (+0.62%)

DAX (DE40) 14,879.94 +79.22 (+0.54%)

FTSE 100 (UK100) 7,389.70 +14.87 +(0.20%)

USD Index 106.26 +0.73 (+0.69%)

News feed for 2023.10.25:

– Australia Consumer Price Index (m/m) at 03:30 (GMT+3);
– German Ifo Business Climate (m/m) at 11:00 (GMT+3);
– US Building Permits (m/m) at 15:00 (GMT+3);
– US New Home Sales (m/m) at 17:00 (GMT+3);
– Canada BoC Monetary Policy Report at 17:00 (GMT+3);
– Canada BoC Interest Rate Decision at 17:00 (GMT+3);
– US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
– Canada BoC Press Conference at 18:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 20:00 (GMT+3);
– US Fed Chair Powell Speaks at 23:35 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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Inflationary pressures are rising sharply in Australia. Corporate earnings keep indices from falling