Global eq­ui­ties per­form well

NBK MONTHLY GLOBAL MAR­KET RE­PORT

Kuwait Times - - BUSINESS -

KUWAIT: Most global eq­ui­ties per­formed well in Oc­to­ber, ex­cept for US eq­ui­ties, down 1.8% as mea­sured by the S&P 500, partly due to the un­cer­tainty around the up­com­ing pres­i­den­tial elec­tion. De­vel­oped stocks were the win­ners of the month, with UK, Euro­pean and Ja­panese stocks all gain­ing. Com­modi­ties fin­ished lower for the month dragged by de­clines in Brent oil, fall­ing 4.2% after gain­ing over 3% dur­ing the month. Gold also fin­ished the month lower, de­clin­ing 2.9%. US third quar­ter GDP rose 2.9% beat­ing ex­pec­ta­tions of 2.5%after av­er­ag­ing just 1.1% over the first half of the year.

The US econ­omy grew at its fastest pace in two years in the third quar­ter due to a surge in ex­ports and a re­bound in in­ven­tory in­vest­ment. This stronger than ex­pected eco­nomic growth could smooth the path for the US Fed­eral Re­serve to raise in­ter­est rates in De­cem­ber. The US ISM man­u­fac­tur­ing and non­man­u­fac­tur­ing in­dexes for Septem­ber re­leased in Oc­to­ber re­versed weak Au­gust read­ings; the ISM Man­u­fac­tur­ing In­dex came in higher than ex­pected at 51.5, point­ing to growth in US man­u­fac­tur­ing. The ISM non-man­u­fac­tur­ing in­dex jumped by 5.7 points to 57.1, hit­ting an 11-month high.

The Septem­ber Non­farm Pay­roll came in be­low es­ti­mates with 156,000 new jobs added to the US econ­omy in Septem­ber. US un­em­ploy­ment ticked up to 5%, slightly higher than an­tic­i­pated. US re­tail sales in Septem­ber were up 0.6% month on month, on the back of stronger auto sales. Con­sumer con­fi­dence slipped in Oc­to­ber, fall­ing by more than ex­pected to 98.6. Durable goods or­ders fell 0.1% in Septem­ber, while Au­gust or­ders were re­vised higher.

Durable goods or­ders data sug­gested some slight im­prove­ment in the fourth quar­ter for equip­ment spend­ing after four con­sec­u­tive quar­ters of de­clines. US hous­ing data looked more promis­ing as both pend­ing and new home sales picked up in Septem­ber fol­low­ing dis­ap­point­ing Au­gust num­bers. The UK Man­u­fac­tur­ing Pur­chas­ing Man­agers In­dex (PMI) for Septem­ber con­tin­ues to im­prove reach­ing 55.4 up from 53.3 in Au­gust. UK in­fla­tion in­creased to 1% year on year, the high­est rate of change in prices since 2014, which may well soon be above the Bank of Eng­land’s 2% in­fla­tion tar­get.

The Bri­tish econ­omy de­cel­er­ated slightly to 0.5% in the third quar­ter when com­pared to the 0.7% in the se­cond quar­ter. De­spite the slow­down, the fig­ures are stronger than the 0.3%, ex­pected by econ­o­mists. UK eq­ui­ties con­tin­ued their gains in Oc­to­ber ris­ing by around 1% as mea­sured by FTSE 100. The gain in UK stocks was mainly driven by in­vestors’ be­lief that a weaker cur­rency could help UK ex­porters in­crease their rev­enue from abroad. The Bri­tish pound fell to a 31-year low against the dol­lar dur­ing the month of Oc­to­ber after UK Prime Min­is­ter, Theresa May set a date to be­gin ex­it­ing the EU.

The Euro­pean Cen­tral Bank left all its mon­e­tary pol­icy tools un­changed and men­tioned that it in­tended to run the as­set pur­chase pro­grams un­til the end of March 2017. The Eu­ro­zone con­tin­ued to demon­strate growth in the man­u­fac­tur­ing sec­tor in Oc­to­ber; the pre­lim­i­nary man­u­fac­tur­ing PMI num­ber for the month came in at 53.3 com­pared to 52.6 in Septem­ber. The ser­vice sec­tor PMI fur­ther adds to this growth reach­ing 53.5 com­pared to 52.2.

Euro­pean eq­ui­ties in Oc­to­ber gained 1.8% on in­creased eco­nomic ac­tiv­ity in the euro area. Ja­pan posted a trade sur­plus of 498 bil­lion yen in Septem­ber, com­pared with a deficit of 18.7 bil­lion yen in Au­gust. Ex­ports fell 6.9% from a year ear­lier, but were bet­ter than the fore­casted de­cline of 10.4%. Mean­while, a pre­lim­i­nary sur­vey of fac­tory man­agers showed a fifth straight month of im­prove­ment in man­u­fac­tur­ing sen­ti­ment and the mea­sure for out­put rose for the first time since Jan­uary. Ja­pan’s con­sumer prices fell for the sev­enth straight month and house­hold spend­ing slumped again in Septem­ber. The un­em­ploy­ment rate dropped to 3% in Septem­ber, equal to the low­est since 1995.

Ja­panese stocks per­formed sig­nif­i­cantly well, as mea­sured by the Nikkei 225, gain­ing 5.9%. Chi­nese ex­ports dropped 5.6% in Septem­ber on a year on year ba­sis in lo­cal cur­rency terms ver­sus ex­pec­ta­tions of a 2.5% growth; Chi­nese im­ports, on the other hand, in­creased by 2.2% on a year on year ba­sis in lo­cal cur­rency terms. China ap­pears to be demon­strat­ing sta­ble growth with real GDP grow­ing at 6.7% on a year on year ba­sis in the third quar­ter, un­changed from Q2. The Chi­nese mar­ket was up 3.2% for the month, out­per­form­ing most emerg­ing mar­ket eq­ui­ties.

The GCC eq­uity mar­ket in­dex re­bounded from last month’s de­cline with gains of around 3%, driven by the Saudi eq­uity mar­kets, which in­creased by 6.9%, while Dubai and Abu Dhabi stocks ended the month down by 4.1% and 3.9% re­spec­tively. The slide in UAE eq­ui­ties could be at­trib­uted to weaker than ex­pected earn­ings. Saudi stocks gained on­in­creased in­vestor op­ti­mism as Saudi Ara­bia sold$17.5 bil­lion in in­ter­na­tional sov­er­eign bonds, the largest in emerg­ing mar­ket his­tory, adding liq­uid­ity to the lo­cal mar­ke­tand boost­ing pay­ments to con­trac­tors.

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