Weekly market commentary

Market review

After the 38% rise in the S&P 500 since liberation day, it was inevitable that markets would pause for reflection. The US equity market saw its sharpest weekly decline since April with the S&P 500 falling by 1.5% on Thursday, now down 5.1% from its peak, while the NASDAQ dropped 2.2%, its worst day in two months. Asian markets mirrored the weakness, the Japanese Nikkei fell by 2.4%, Hang Seng 2.1% and KOSPI 3.7%. Consumer staples were the only S&P sector to advance, buoyed by Walmart’s strong earnings. Nvidia’s earnings were a major catalyst midweek, the company reported spectacular results, lifting its stock +5% intraday and driving European indices higher. However, optimism faded quickly as AI valuation concerns resurfaced, leading Nvidia to close -3.2% and triggering a broader tech sell-off, underscoring the fragility currently felt in high-growth sectors.

Japan announced a ¥21.3 trillion ($135.5 billion) stimulus package, the largest since the pandemic, signalling a strong commitment to expansionary fiscal policy under new leadership. The package includes ¥17.7 trillion in general account spending and ¥2.7 trillion in tax cuts, aimed at supporting growth amid persistent inflation. October core inflation rose 3.0% YoY, marking 43 consecutive months above the BOJ’s 2% target and the overall spending package is forecast to push inflation up by an average of 0.7% from February to April. While the stimulus boosted sentiment initially, concerns over Japan’s debt burden pushed government bond yields to record highs before easing as global risk-off drove a flight to safety, with 10yr sovereign yields down to 1.78%.

The delayed US September payrolls report showed 119,000 jobs created, more than double consensus expectations of 51,000, but unemployment rose to 4.4%, its highest in nearly four years. Futures now price a 30% chance of a December Fed rate cut, down from almost 70% three weeks prior, as data that is starting to come through shows that labour market concerns might not have been as bad as initially thought. This is the last payrolls report before the Fed’s 10th December meeting, making upcoming data critical for policy direction.

Outlook

Investors remain reactive to a mix of economic and geopolitical signals, generating volatility around key data points and announcements, while question are beginning to be asked of Tech valuations and Private Credit stability. As we come towards the end of Q3 earnings season, results broadly suggest that demand from consumers and businesses remains robust. 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