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Jersey-based investment managers TEAM plc present their weekly summary of global market activity

THE start of third-quarter corporate earnings season provided a platform for global stocks to post their best weekly gains since late June, led by Japan’s Nikkei and the blue-chip S&P 500 Index, which gained 3.7% and 2.9% respectively. The FTSE 100 was a laggard, returning 1.0%, weighed down by the stronger pound.

In the first week of quarterly earnings reports, more than four out of five S&P 500 companies beat consensus analyst forecasts, and the index is on track to report third-quarter earnings growth of 30%, the fastest rate since 2010. Wall Street banks including Citigroup, Goldman Sachs and JPMorgan Chase headlined the earnings beats, boosted by receiving record fees from surging mergers and acquisitions activity and other dealmaking.

The optimism over earnings more than offset growing angst over stubbornly high, and rising, inflation. It was revealed that consumer prices in the US rose 5.4% in September from a year earlier, the highest in more than 13 years.

Empty supermarket shelves closer to home shine a spotlight on the extent of disrupted supply chains and, over the weekend, Bank of England governor Andrew Bailey acknowledged that higher food and energy costs would last well into next year. He added that the BoE ‘will have to act’ to curb inflationary pressures, and futures markets reacted by pricing in the probability of an interest hike in November at 85%, up from 33% on Friday. The interest rate outlook boosted Sterling which gained against most currencies, including the US dollar (+1.4) and euro (+0.4%).

Short-dated government bond yields also climbed as the prospect of an interest-rate hiking cycle became more real but longer-dated bonds were more resilient – ten-year UK gilt yields fell two basis points to 1.13%. The flattening yield curve phenomenon suggests bond markets are bracing for a period of lower economic growth, or stagflation.

Energy markets extended their winning streak and Brent Crude hit a new three-year high of nearly USD85 a barrel, as more power generators shifted away from more expensive gas and coal. Limits on natural gas exports from Russia into Europe and the UK ahead of winter gives the Kremlin a strong hand as it waits on Germany to approve the controversial Nord Stream 2 pipeline.

Bitcoin ascended back above USD60,000 with the US Securities and Exchange Commission due to approve the first two US-listed bitcoin exchange traded funds this week.

The US is seeking to catch up with other jurisdictions, including Jersey, which have already permitted crypto exchange traded products.

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