Weekly Espresso

Asian stocks advanced on Monday, buoyed by stronger-than-expected US payroll data that underscored the resilience of the world’s largest economy. On Friday, both the S&P 500 and US Treasury yields rose as traders adjusted their outlooks, scaling back expectations of imminent Federal Reserve rate cuts. European equity futures posted modest gains today, while US futures remained relatively unchanged.

Chinese equities extended a notable recovery, with the CSI 300 Index rising as much as 6.5% on Monday, the largest increase since 2015. This follows a significant decline of over 45% from its 2021 peak through mid-September. The index now appears poised to enter a technical bull market, as investors sought to capitalise on opportunities ahead of a week-long holiday in China. In commodities, iron ore prices rose alongside optimism surrounding China’s economic outlook, while Japanese equities declined.

The recent optimism surrounding the potential for European equities to outperform their U.S. counterparts appears to be waning, as concerns about an economic slowdown have started to weigh on European earnings forecasts. While Europe initially seemed poised to benefit from a rotation away from large-cap technology stocks, investors are increasingly favouring undervalued sectors within the U.S. market. This shift in preference is largely driven by data indicating the resilience of the U.S. economy, coupled with growing expectations that the Federal Reserve may implement interest rate cuts sooner and more aggressively than previously projected

The recent optimism surrounding the potential for European equities to outperform their U.S. counterparts appears to be waning, as concerns about an economic slowdown have started to weigh on European earnings forecasts. While Europe initially seemed poised to benefit from a rotation away from large-cap technology stocks, investors are increasingly favouring undervalued sectors within the U.S. market. This shift in preference is largely driven by data indicating the resilience of the U.S. economy, coupled with growing expectations that the Federal Reserve may implement interest rate cuts sooner and more aggressively than previously projected

The recent optimism surrounding the potential for European equities to outperform their U.S. counterparts appears to be waning, as concerns about an economic slowdown have started to weigh on European earnings forecasts. While Europe initially seemed poised to benefit from a rotation away from large-cap technology stocks, investors are increasingly favouring undervalued sectors within the U.S. market. This shift in preference is largely driven by data indicating the resilience of the U.S. economy, coupled with growing expectations that the Federal Reserve may implement interest rate cuts sooner and more aggressively than previously projected

San Francisco Federal Reserve President Mary Daly has indicated that it may soon be appropriate for the Federal Reserve to consider lowering interest rates. Daly’s comments align with recent remarks by Fed Chair Jerome Powell, who noted at the Jackson Hole symposium last week that he is increasingly confident inflation is returning to the Fed’s 2% target. Powell suggested that a potential adjustment in monetary policy could be forthcoming as inflation stabilises. In parallel, there are emerging dynamics in global markets.