Weekly market update - 18th of October 2023
Written and accurate as at: Oct 18, 2023 Current Stats & Facts
The Volatile Equation of Geopolitics and Global Markets: A Week in Review
Hamas attacks on Israeli soil ignited a week in the world markets that can only be described as turbulent. The geopolitical tensions reached a boiling point, forcing investors around the globe to recalibrate their strategies. While some market segments saw mixed responses, others faced a sweeping transformation.
Market Overview
The S&P ASX 200, an Australian stock market index, returned a positive 1.4%. Despite this, not all sectors showed the same level of growth. Industrials lagged, posting a 0.8% growth, while Resource stocks led the charge with a 2.9% uptick. Within the Resource sector, Energy stood out with a 3.8% growth, fueled by a 5.9% rise in the USD oil price. However, the drama wasn't confined to Australia.
The S&P 500 managed to eke out its second consecutive positive week in the United States, posting a 0.5% gain. Conversely, the Nasdaq retreated, showing a 0.2% decrease. The market’s reaction to the initial conflict was muted, but oil prices surged on Friday after the International Energy Agency cautioned that the market conditions were uncertain.
The Macro Backdrop
Global fixed-income markets appeared disoriented. While bond yields had moved upward in the previous week, they lacked a clear direction this week. The ongoing tensions and a high U.S. Consumer Price Index (CPI) of 3.7% further complicated matters. This CPI rise, driven by increased shelter and transport costs, created a complex landscape. Add to this a weak consumer sentiment and the possibility of significant Israeli retaliation, and you have a case for economists adopting the emerging 'peak Fed' thesis.
Global Economic Pulse
The U.S. inflation rate held steady at 3.7%, contrary to the market's expectation of a 0.1% decline. In Australia, consumer sentiment rose 2.9% to 82.0 in October, a welcome reversal from its previous sluggishness. Meanwhile, the UK’s GDP expanded by 0.2% in August, offsetting the 0.6% drop from July, although its manufacturing output struggled.
Company-Specific Moves
Positive Trajectory:
Nickel Industries: +12.7% due to a favourable final investment decision for its Excelsior Nickel Cobalt Project.
Bega Cheese: +12.5%, following a broker’s upgraded recommendation.
Pexa Group: +12.1%, announced the acquisition of UK tech provider Smoove plc.
Negative Trajectory:
Resmed Inc: -5.8%, despite optimism from several brokers and fund managers.
Fisher & Paykel Healthcare: -6.5%, due to news surrounding GLP-1 drugs and shareholder activity.
Liontown Resources: -6.7%; uncertainty around its acquisition bid raised concerns.
Steady Performers:
IDP Education: +5.8%, student placements into Australia remain strong.
James Hardie Industries: +4.7%, US repair & remodel market holds firm.
Corporate Travel: +4.6%, recovering from recent devaluation.
The Road Ahead
This week will be intense for data flow in the U.S., with Retail Sales, Housing Starts, and Jobless Claims reports on the horizon. Federal Reserve Chair Powell is also scheduled to appear, potentially providing more insights into the uncertain climate.
While global markets closed the week with mixed outcomes, investors braced for more unpredictability. JPMorgan CEO Jamie Dimon perhaps said it best when he described the current landscape as "the most dangerous time the world has seen in decades."
Ultimately, the intersection of geopolitics and market dynamics has rendered a landscape fraught with instability. Investors would do well to remain vigilant, keeping an eye on emerging data and geopolitical shifts as they navigate these choppy waters.