Weekly comment: Mixed weeks for stocks as US continues to rise but Europe pulls back

3 minute read

Weekly podcast – Market overview

This week’s host, Property Research Analyst, Ollie Creasey discusses the ups and downs of the past week with Head of Fixed Interest Research, Richard Carter, and Consumer Discretionary Analyst, Mamta Valechha. Among the topics discussed – the developments in the middle east conflict and the effects on the wider stock markets, employment stats, latest payroll numbers in the US, and much more.

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Market overview – Richard Carter, Head of Fixed Interest Research

Global equites pulled back a little last week as the MSCI All Country World index posted a -0.6% return (2.4% September, 18.5% YTD), with European in particular falling as the Middle East conflict escalated.

United States:

US stock benchmarks outperformed, notching up a fourth consecutive weekly gain after a stellar US jobs report on Friday. Sentiment had been a little negative during the week as Iran retaliated against Israel with a missile strike and industrial action effectively closed operations at all major East and Gulf coast ports. Tech stocks lagged as yields rose on the strong US employment figures, with the 10-year Treasury yield tagging 3.98% — the highest level in nearly two months.

United Kingdom:

There was little change for UK equities on the week, as large caps returned -0.5% (10.4% YTD). A resurgent dollar meant the pound exchange rate fell to 1.31 from 1.34. The UK 10-year gilt yield gained alongside international counterparts, rising 15 basis points on the week to close at 4.13%. The yield ended down 1 basis point in September but remains 60 basis points higher year-to-date.

Europe (excl. UK):

French and Italian bourses were amongst the largest decliners last week, returning -3.2% (2.9% YTD) and -3.3% (15.4% YTD) respectively. Germany fared a little better (-1.6%, 14.1% YTD) but overall, it was a soft week for the MSCI Europe ex UK (-2.1%, 9.7% YTD) as Middle Eastern concerns rose and economic data worsened.

US employment data bounces back

The latest monthly US jobs report came in well above expectations, providing a boost to the US economy after a couple of reports that had shown some softening. 254k jobs were added in September, comfortably higher than the 140k consensus estimate and also the readings from the two previous months. A print of 114k for July sparked concerns that the world’s largest economy was slowing faster than predicted, but the latest print goes some way to allaying those concerns.

The unemployment rate also dipped to 4.1%, down from the 4.2% reported last month. Although wage growth ticked up to 4.0% on an annual basis, from 3.8% prior, it should not cause too much concern for the Fed.

Earlier this month, the Fed kicked off its rate cutting cycle with a half point interest rate cut and the market has been pricing in further reductions at the two meetings left in 2025. Before the jobs data, the market was pricing in cuts totalling 66 basis points before year end. The market looks like it may have got ahead of itself somewhat here and the Fed may opt to take a more slow and steady approach, with a 25 basis point cut at its next meeting looking increasingly likely. That said, there will be another monthly jobs report before that meeting, as well as numerous other key data points, so things could change.