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Oscar Le Seelleur of Team Asset Management offers a round-up of global markets
Global indices spent much of last week on the back foot, to the frustration of investors. September once again proved to be a month to forget and positionally challenging, as all sectors faced headwinds.
The broader S&P 500 index fell 1.1% during the week, extending its decline for September to 4.8%.
The technology-focused Nasdaq had a better week, gaining 0.3% and reduced its loss for the month to 5.8%.
Amidst a quiet week for macroeconomic data, the focus for investors remained runaway US government bond yields. The sustained rise in yields, and subsequently lower bond prices, is a prominent cause for concern for both the wider economy and stocks as the higher cost of borrowing weighs on asset valuations.
The benchmark ten-year Treasury yield reached its highest level in over 15 years on concerns that persistent inflation would require restrictive monetary policy for longer. Upcoming data points, particularly this week’s nonfarm payrolls report, will be a key focus as market participants hope for signs that the economy is softening, which should reverse the Federal Reserve’s recent hawkishness.
Growth-orientated stocks have felt the pain through this ordeal, despite the correlation with long-duration bonds continuing to diverge as their valuations become more expensive with higher financing costs and a greater discount rate. Notably weak performers included Apple and Nvidia, which fell 9% and 12% respectively in September.
Markets were also jittery over a potential US government shutdown, which was resolved in a last-minute, short-term funding deal over the weekend. The rating agency Moody’s warned that a shutdown could have negatively impacted the US’s credit rating and put downwards pressure on the US Dollar due to reduced demand from international investors.
In corporate news, sports retailer Nike reported earnings which were positively received by investors.
While sales fell short of expectations, it beat on earnings and gross margin estimates, which sent its share price up over 10% in early trading on Friday. Sales fell 2% in North America, Nike’s largest market, impacted by the resumption of student loan repayments.
Nike investors were particularly interested by progress in China. CEO John Donahoe said: “we feel good about the market there and our position” and mentioned he had visited twice in the last four months to oversee operations and to gauge current market conditions.
Non-interest-bearing precious gold and silver faced significant pressure after the more hawkish comments from the Federal Reserve suggested interest rates would remain at an elevated level for longer.
The precious metals fell 4.6% and 9.1% last week, leaving them at levels not seen since March.
Brent crude briefly climbed above $97 a barrel on Thursday after it was reported that crude inventories in Cushing, Oklahoma, fell to their lowest level since July 2022. However, there was a reversal over the past few days as the US Dollar strengthened and investors weighed the impact of higher interest rates on demand.
