Earnings pulls equities higher as markets finish the week on a high – Zurich Weekly 18th October 2021

Stock markets rose over the course of last week as a slew of earnings and
US economic data provided confidence to equity bulls. Core inflation (which
strips out food and energy costs) was up 4.0% for the year to the end of
September. Whilst, well in excess of the approximate 2% target, it was in line
with market expectations. Producer prices rose 0.5% in September, which
was less than in August and below consensus estimates. This combined
with a post-pandemic low in jobless claims to give the S&P 500 its best day
since March last Thursday. There were also reassuring tones emanating from
the latest Fed minutes, which stated that short end interest rates would
remain depressed into the medium term. On Friday, Retail Sales for
September topped expectations by coming in at 0.7% versus a forecast of –
0.2%.
Q3 earnings season started with a bank led by the big US banks. Goldman
Sachs saw revenue for the first nine months of the year hit, $46.7bn – which
is higher than any full calendar year they have ever report. JP Morgan and
Morgan Stanley saw fees rise 52% and 67% respectively, with Citibank and
Bank of America also enjoying a strong earnings release.
Eurozone equities were higher last week, taking their lead from the US
despite mixed economic data and a cut in growth forecasts from a number of
German economic institutions. In the UK, GDP in August rose just 0.4%
whilst the July figure was revised down from +0.1% to -0.1%. On a more
positive note, the latest labour market data saw the largest three month
increase in employment since the summer of 2015 as the unemployment rate
fell to 4.5%. In Japan, the lower house of parliament has been dissolved,
setting the stage for a Halloween General Election as new Prime Minister
Fumio Kishida looks to consolidate power.