Market Developments
US equities ended the week higher. The S&P 500 rose 1.2% and the Dow Jones gained 0.9%, while the NASDAQ lagged at 0.2%. Chip stocks sold off on Thursday after a report put OpenAI’s annualised revenue at about $50 billion, well below the widely cited $68 billion. Nvidia and AMD, both OpenAI partners, fell 2.9% and 3.9%, and the Philadelphia Semiconductor Index dropped 3.4%. Technology shares partly recovered on Friday. Telecom stocks came under pressure on Friday after SpaceX agreed to buy nationwide low-band spectrum. T-Mobile, AT&T and Verizon each fell more than 7%, as investors saw SpaceX as a direct competitor for mobile subscribers. Minutes from the Fed’s September meeting showed most officials expect one more hike by year end. Governor Waller said the Fed has flexibility on timing. Markets now expect a pause in October and a hike in December. CME FedWatch put the odds of an October hike at about 22% midweek, against about 85% for a hike by December. The 10-year Treasury yield reached 5.37% on Wednesday, its highest since 2002. It then eased on strong auction demand and President Trump’s pledge of no strikes on Iran before the 3 November midterms, closing the week at 5.24%. Inflation signals stayed firm. The ISM services prices index rose to 74.0, the highest since July 2022. University of Michigan sentiment fell to a five-month low of 46.3 as households cited the cost of living. Equities rose despite the weak data, helped by the pullback in yields.
The Reserve Bank of India raised its repo rate by 25 basis points to 5.50%, its first hike in nearly four years. The vote was unanimous, and the RBI changed its stance to “calibrated tightening”. The rupee still weakened 0.4% against the dollar, pressured by high oil prices and foreign outflows. The SENSEX fell after the decision but closed the week up 0.8%, as banks and consumer staples recovered. In Europe, the account of the ECB’s September meeting confirmed a unanimous hike to 2.5% and flagged upside risks to inflation. The Stoxx 600 ended flat, while the UK 10-year Gilt yield rose 7.7 basis points to 5.44%. The Nikkei rose 1.1% after closing above 70,000 midweek. The Hang Seng gained 1.0% on a Friday technology rebound. Mainland Chinese shares fell, and the STAR 50 technology index dropped 4.8% on Thursday on reports of possible US curbs on Chinese optical components. Oil stayed volatile. Prices dipped midweek after the IEA agreed to bring forward about 100 million barrels of stock releases. Brent then settled above $104 on Thursday after two tanker attacks in the Gulf, Houthi strikes on Riyadh’s airport and a storm that shut in Gulf of Mexico output. WTI ended the week up 0.8% at $91.9. Gold rose 1.3% to $4,194, even though US yields hit a 24-year high midweek. It recovered as yields eased and Gulf tensions rose.
