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Andrew Gillham, of Team Asset Management, offers this week’s market review
Investors spent much of the week on edge, concerned over the escalation of the conflicts in the Middle East. However, a blow-out jobs report on Friday helped to revive risk appetites and US markets posted their best day in more than a fortnight, offsetting some of their earlier losses. The blue-chip S&P 500 and technology-focused Nasdaq indices declined 1.1% and 1.5% respectively over the week.
Three consecutive lacklustre monthly non-farm payrolls reports over the summer had fuelled concerns that the US economy is slowing down, and heading towards a recession, but the report for September suggested otherwise after it revealed that 254,000 jobs were added during the month, far ahead of the 150,000 consensus forecast.
The strength of the jobs market was also reflected by an increase in average hourly earnings, up 4.0% from a year ago. The hospitality sector, including restaurants and bars, created the most jobs, followed the government, social assistance and construction.
Stocks on the move during the week included Tesla which fell more than 3% on back-to-back days after its third-quarter vehicle deliveries fell short of analysts’ forecasts. Tesla delivered 462,890 vehicles globally, an increase of 6.4% versus the same period last year, but weaker demand in Europe led to some disappointment.
Tesla, the world’s largest electric vehicle manufacturer, is also dealing with fiercer competition from China, including BYD and Geely. The falling share price will have dented the wealth of Elon Musk, the world’s richest person and Tesla’s largest shareholder with a stake of almost 13%.
Looking over his shoulder, Mark Zuckerberg last week surpassed Amazon’s Jeff Bezos to become the world’s second richest person, trailing Musk by around $50 billion. Zuckerberg’s wealth has risen by almost $80 billion this year on the back of the 65% rise in the share price of Meta Platforms, the parent company of Facebook which he co-founded in 2004. Meta shares hit a new record high $595 on Friday, reflecting investors’ enthusiasm for its artificial intelligence technologies and the performance of its online advertising platform. Management of the social media giant has also been rewarded for implementing major cost cutting measures in 2022 and 2023 which shrank its workforce by a quarter.
Closer to home, shares in Tesco gained 3% on Thursday after it upgraded its profits forecast for the year to £2.9 billion. The UK’s largest supermarket, with a 28% share of the grocery market, asserted that consumer sentiment remains in “reasonably good shape” and there is a “willingness to spend a little bit more to treat themselves” as inflation slows and the employment market remains strong.
Another FTSE 100 listed company, Rio Tinto, enjoyed a good week (+11%) on the back of expectations that the stimulus measures in China will drive a rebound in demand for industrial metals. It was also in the news on Monday after it announced that it is in negotiations to acquire Aracdium Lithium.
Rio, and other miners, are seeking to increase their exposure to the critical minerals, including lithium, that are needed for the green energy transition. Lithium is a key ingredient in electric vehicle batteries and Arcadium Lithium is a major player in the sector, projected to be the world’s third largest producer by 2027. Its operations span Argentina, Australia and Canada.
Elsewhere in commodity markets, oil prices jumped on speculation that Israel will target Iranian oil facilities in retaliation for Iran firing more than 180 ballistic missiles at the country last week. Iran exports 1.7 million barrels of oil a day, and the loss of a significant part of its production capacity would push the market into a supply deficit.
There is potential for further disruptions to supply from Hurricane Milton, a category-five storm moving across the Gulf of Mexico towards the west coast of Florida, and the price of Brent Crude moved back above $80 a barrel for the first time in six weeks.
