Weekly market commentary

Market review

As the US government shutdown continued – now the second longest in history, investors have had limited data to ascertain the health of the US economy. Instead, focus has been on geo-political developments and quarterly earnings releases from around the globe. These have generally been taken positively by markets, contributing to another strong week for equities.

Following recent fears that regional US banks may not be as resilient as they initially seemed, which had led to a sell-off in the sector, the earnings reports for 2 of the banks under the spotlight did allay some of those concerns. Zions Bancorp and Western Alliance both posted better than expected results, with strong Earnings per Share (EPS), stable margins and improving asset quality. In further positive earnings news, International Business Machines (IBM) also beat expectations, driven by strong demand for its software in the rush to deploy AI models.

The US announced sanctions against some of Russia’s largest oil companies, citing Russia’s lack of commitment to end the war on Ukraine. It has been further reported that China has suspended seaborne Russia oil purchases and Indian refiners are due to sharply cut their Russian oil imports, while the EU has approved a new Russia sanctions package. The increased risk of oil supply disruption has contributed to a strong rally in oil – with Brent Crude up over +7% through the week.

Markets have reacted positively to progress on tariff negotiations, with the White House confirming a meeting between US President Trump and Chinese President Xi generating optimism that a trade deal between the two nations may finally be struck.

Outlook

Whilst markets remain reactive to a mix of economic and geopolitical signals, investors seem largely undeterred and are continually buying into short term softness. As the Q3 earning season gets underway, investor attention is shifting back to corporate results, which are a key focus amid growing caution across markets. As inflation trends diverge and labour markets evolve, central banks may take increasingly different paths - raising the potential for greater dispersion across asset classes and regions in the period ahead.

Movers table