USA
U.S. equities faced heightened volatility as a stream of economic data and upcoming political events fueled uncertainty. The S&P 500 declined by 1.37%, the NASDAQ fell by 1.50%, and the Dow Jones Industrial Average slipped by 0.15%. Friday’s employment data showed a surprising slowdown in job creation, with only 12,000 jobs added in October against expectations of 106,000, likely influenced by recent hurricanes and labor strikes. However, the unemployment rate held steady at 4.1%, and hourly wage growth accelerated from 0.3% to 0.4%.
The October Manufacturing PMI declined further to 46.5, signaling a contraction in the manufacturing sector, yet components like prices and new orders saw an unexpected increase, indicating inflationary pressures.
Q3 GDP grew at a solid annualized rate of 2.8%, slightly below the prior estimate but still robust. Household spending remained strong, while the GDP deflator softened marginally, suggesting that inflation may be cooling gradually. Initial jobless claims fell significantly from 228,000 to 216,000, reflecting a resilient labor market. Meanwhile, personal income and spending data for September showed month-over-month growth of 0.3% and 0.5%, respectively, pointing to strong consumer activity.
With the U.S. presidential election only a day away, market concerns have intensified. A potential Republican victory is seen as a catalyst for increased fiscal spending, which could heighten inflationary pressures and potentially shift Fed policy expectations.
Europe
Major European indices closed the week in the red, with the Stoxx 600 down 1.52%, the FTSE 100 down 0.87%, Germany’s DAX 40 down 1.07%, and France’s CAC 40 down 1.18%. The Eurozone showed mixed economic signals this week, as consumer confidence improved in Germany, yet persistent concerns around inflation and employment stability weighed on sentiment. Key economic indicators—including GDP growth, inflation, and labor market data—shaped market movements as investors assessed the region’s resilience amid ongoing geopolitical and economic challenges.
In October, Eurozone inflation ticked up slightly, driven primarily by increases in energy and food prices. Core inflation, which excludes volatile items like food and energy, remained stable at 2.7% but came in marginally above expectations. This modest rise, following a sharper decline in September, underscores the challenge of sustainably achieving the European Central Bank’s inflation target. The ECB recently cautioned that "the last mile is the hardest" in its disinflationary efforts, a statement that resonates given the slow pace of core inflation decline.
Preliminary third-quarter GDP data showed seasonally adjusted growth of 0.4% in the euro area and 0.3% in the EU, reflecting a mild acceleration from Q2. This growth rate exceeded expectations, suggesting the Eurozone economy retains some momentum despite headwinds. However, growth appears uneven, with Germany anticipated to report a slight contraction due to a downturn in manufacturing.
Japan
Japanese markets saw increases, with the Nikkei 225 up by 0.37% and the Topix index by 0.99%. The Bank of Japan, as widely anticipated, held its benchmark rate steady at 0.25% on Thursday, a decision underscored by Governor Kazuo Ueda’s less cautious tone on economic risks. Ueda’s commentary indicated that the BOJ might be approaching a point where rate hikes are considered, fueled by a stabilizing U.S. economic outlook and consistent domestic data on wages and prices.
Market expectations for a near-term rate hike gained momentum as Ueda hinted at a clearer path forward, should economic conditions continue aligning with BOJ projections. This optimism saw the yen strengthen briefly to 151.90 against the dollar, reflecting investor anticipation of possible policy normalization.
The BOJ’s quarterly report highlighted the central bank’s confidence in achieving stable 2% inflation, projecting core consumer inflation to reach 2.5% by March 2025 and remain near this target in subsequent years. Growth projections were also steady, with the economy expected to expand by 0.6% in the current fiscal year and maintain around 1.0% growth in the next two fiscal years.
However, Ueda expressed a need for caution, acknowledging the importance of ongoing data evaluation and noting that economic stability is critical before adjusting the policy stance. Given these factors, some analysts speculate the BOJ could initiate a rate increase by December if domestic and global economic indicators continue to improve.
China
The Chinese stock market experienced negative performance, with the Shanghai Composite Index decreased by 0.84% and the Hong Kong Hang Seng Index down by 0.41%. China's equity markets experienced mixed performance this week amid anticipation of fiscal stimulus measures and geopolitical uncertainty surrounding the U.S. presidential election. Analysts expect details on fiscal support to be announced following the National People's Congress meeting, with the stimulus package potentially larger if Donald Trump wins, due to fears of increased trade barriers.
Economic data shows ongoing challenges, particularly in consumer demand and real estate, as local governments face fiscal pressures. While President Xi Jinping has called for enhanced support, the effectiveness of any stimulus remains in question, particularly regarding direct consumer benefits. The market will be closely watching the election outcome and its implications for U.S.-China relations, which will significantly influence China's economic policy and growth trajectory moving forward.