GLOBAL MARKET SNAPSHOT
Chinese shares led on Friday as the government took steps to prop up the market. The Shanghai Composite fell -1.5% in early trading following a weaker than expected GDP print, but shares rallied as much as 4.2% off those lows in response to a medley of stimulus measures. Global markets were otherwise mixed on the session. In the U.S., S&P 500 finished marginally lower after trading up as much as 1.0%. As reflected by the DJIA, large cap value outperformed, while high momentum and volatile small caps lagged. Sector performance reflected this defensive shift with consumer staples 2.3% and utilities 1.6% leading, while health care -1.0% and consumer discretionary -0.9% lagged. According to FactSet, with 17% of S&P 500 companies having reported Q3 earnings, 80% have beat EPS estimates, but the magnitude of beats (0.5%) has so far been below average. Nearly one-third of S&P 500 and DJIA constituents will be reporting next week with the market looking for hints that EPS growth rates may have peaked in Q2.
Italian debt rallied, reversing early losses, as the E.U. softened its stance on the Italian budget situation. After the close, Moody’s downgraded the country’s debt by one notch to Baa3 while upgrading its outlook to stable from negative. The advance in Italy did little to support its neighbors as Spain and France saw its yields continue to rise, particularly in the short-end.
The U.S. dollar weakened -0.3% on Friday. New Zealand dollar 0.8% paced the G10 as the China stimulus chatter supported Asia-Pac currencies more broadly. Canadian dollar -0.1% lagged other commodity currencies on a weaker than expected CPI print. Mexican peso -0.7% finished off its worst week in five months as the U.S. threatens to shut the boarder to deter migrants from Central America.
The Bloomberg Commodity Index gained 0.2% on higher energy prices. Crude oil and natural gas each gained about 1.0% on Friday.
Chinese economic growth slowed to 6.5% year-over-year during the third quarter, down from 6.7% in the second quarter and falling shy of expectations of a 6.6% rate. While the slowing pace of growth in China isn’t news, it adds to data from earlier in the week that showed credit growth weakening to its lowest level since 2005.
Existing home sales in the U.S. declined in September, down -3.4% month-over-month, according to a report from the National Association of Realtors. Expectations were for a -0.7% decline. This is the sixth consecutive month of declines and follows several weak indicators for the sector – e.g., pending home sales, mortgage applications, sentiment. According to the NAR’s chief economist, “This is the lowest existing home sales level since November 2015,” he said. “A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”
To subscribe to receive this market update directly in your inbox, please email RockCreekMarketUpdates@TheRockCreekGroup.com.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or to participate in any strategy. Nothing contained herein shall be relied upon as a promise or representation as to the past or future performance. This material represents the views of RockCreek. This information should not be construed as investment advice. Some of the information may be provided to discuss general market activity, industry or sector trends, or other broad-based economic, market, or political conditions. Information and opinions are as of the date of this material only and are subject to change without notice. RockCreek has no obligation to provide any updates or changes to such information. The opinions, forecasts, assumptions, estimates, and commentary contained in this material are based on information provided to RockCreek on both a formal and informal basis. Further, any such opinions, forecasts, assumptions, estimates, and commentary are made only as of the date of this material, are subject to change at any time without prior notice and cannot be guaranteed as accurate.