Top Stories Last Week
• US Stocks Reached New Records
Global equities rallies as US Congress passed the funding bill and raised the debt ceiling. The federal government reopened on Thursday. Corporate earnings have been strong as Google, GE and Morgan Stanley beat estimates. In the week, S&P index rose 2.4%, and MSCI EAFE index climbed 2.5%. The MSCI Emerging Market Index moved up by 0.8%. Gold rallied 3.5%, but the SPGC commodity index dropped 0.1%. The bond markets rose as well. Barclays US Treasury index was up by 0.7%, but US high yield bonds was up 0.6%.
• Government Reopened as Congress Passed the Funding Bill and Raised the Debt Limit
Federal agencies and national parks reopened Thursday morning, after the Congress ended a bitter fiscal standoff that triggered a 16-day government shutdown and drove the nation toward the brink of default. The agreement struck by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell offers only a temporary solution and does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. It funds the government until January 15 and raises the debt ceiling until February 7. Both the Democrat-controlled Senate and Republican-controlled House of Representatives approved the deal, with the Senate passing the measure by 81 votes to 18 and the House 285 votes to 144.
• Chinese Economic Growth Accelerated in Q3
China’s economic growth picked up pace in the third quarter, the first rise in three quarters. The world’s second-biggest economy grew 7.8% from a year earlier, up from 7.5% expansion in the second quarter. The figures also showed growth in industrial productions, retail sales and fixed asset investment. However, there have been some concerns over whether the economic rebound is sustainable in the long run. Many market observers are concerned about potential housing bubbles. Housing prices have now risen for eight months in a row, despite government efforts to cool the market.
• Euro Zone Inflation Fell to Three-and-Half-Year Low
Euro zone inflation fell as expected in September to its lowest in 3.5 years as inflationary pressures continued to ease amid a weak domestic demand. The rate of consumer price inflation in the 17 countries using the euro fell to 1.1% year-on-year in September, well below the European Central Bank’s (ECB) official target of an inflation rate of 2%.
The low inflation allows the ECB to keep an ultra-loose policy with the main refinancing rate at a record low of 0.5%. ECB said repeatedly it stood ready to react if the economy needs additional policy boost.
• Strong Earnings Pushed S&P 500 to Record
General Electric, Morgan Stanley and Google all rose after reporting better than expected earnings. The Standard & Poor’s 500 index reached 1,744, to set a second consecutive daily record. Google continued the dominance of the mobile and video advertising businesses. GE said its third-quarter profit and revenue fell amid a shrinking finance business and negative effects of foreign currency exchange rates, but GE’s profit margins and order demand improved. Morgan Stanley reported a 50% rise in quarterly revenue as higher income from equities sales and trading offset a drop in its fixed-income business.
Top Stories to Watch This Week
• US Employment Reports
The delayed reports caused by government shutdown are likely to show the US added 180K jobs in September and unemployment rate remained at 7.3%.
• US Durable Goods Orders
US durable goods orders are expected to rise 1.1% in September.
• Bank of Canada Monetary Policy
Bank of Canada (BOC) will keep interest rates unchanged, according to economists’ consensus.
• UK GDP
UK economy is expected to continue expansion at an annual pace of 1.5% in the third quarter.
• More Earnings Reports:
Large companies reporting earnings this week include:
Monday:
Texas Instruments, Netflix, McDonald’s, Gannett and Halliburton
Tuesday:
Travelers, Novartis, Lockheed Martin, and Delta Air Lines
Wednesday:
AT&T, Boeing, Bristol-Myers, Caterpillar, General Dynamics, Nasdaq OMX Group and Owens Corning
Thursday:
Ford, Amazon.com, Chubb, Dow Chemical, Raytheon
Friday:
Procter & Gamble and UPS