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U.S. Indices End the Week By Hitting New Highs, Low Retail Sales in The UK Have no Effect on FTSE 100 & Gold Prices Reach September Highs

S&P 500, Dow Jones rally to new high

The S&P 500 and Dow Jones both rallied to new highs on Friday, as Q3 earnings season continued to provide better than expected returns.

So far this week, Netflix, and Tesla stole the majority of the headlines, with both parties reporting that Q3 earnings have risen beyond forecasts, boosting stock prices in the companies as a result.

In addition to this, index markets were also boosted by the news that business activity within the services sector rose to its highest level in 3-months.

💡 NASDAQ’s reflection on Q3 and early Q4 prediction
Earnings growth in Q3 and beyond represent a significant deceleration from the first-half’s high pace, but it is nevertheless positive and favorable. Estimates for the current period (2021 Q4) have started nudging up, which represents an improvement over what we had seen in the comparable period last quarter. If sustained, this will be a notable positive development in the current environment of cost inflation and logistical problems.

Figures from the IHS Markit U.S. services PMI rose to 58.2 in October, from 54.9 a last month.

As of writing, the S&P 500 was trading 0.21% lower, after hitting a high earlier in the session.

FTSE 100 rises, despite lower retail sales

In the United Kingdom, the FTSE 100 ended the week higher, despite figures showing that retail sales had declined.

Data on Friday showed that sales volumes in Britain fell by 0.2% in September, versus expectations for a rise of 0.5%.

The decline in sales comes as a result of rising consumer prices, with the country’s inflation rate still above the Bank of England’s 2% target.

💡 What challenges do retailers face with inflation
Whether they decide to increase prices or not, many retailers will face a decrease in profits. Although some may implement digital strategies or aggressive accounting tactics, this is a critical time in the retail and restaurant sectors especially after a challenging 2020

Aside from sales, business activity in the UK was reported to have climbed in September according to data from the IHS Markit services PMI.

Figures were at 56.8 this month, an increase from 54.9 in September, and better than the forecasted figure of 54.0.

London’s FTSE 100 closed 0.20% higher.

Gold prices climb to highest since September

Gold prices rose to their highest level since September, as the U.S Dollar slipped in today’s trading session.

Both GBPUSD and EURUSD were lower to end the week, as markets expected the Federal Reserve to hold firm on its rate hike stance.

It is expected that the Bank of England will raise rates next month, with the European Central Bank also coming under pressure to do the same.

Despite other major banks on the cusp of hikes, the Fed could continue to monitor inflation rates, and potentially act next year.

💡 How does gold react to inflation?
Gold is a hedging tool against inflation and hence price reacts to inflation numbers. Typically, the value of gold rises when the cost-of-living increases.

XAUUSD rose to an intraday high of $1,813, its highest price since September 7th, however it slipped during the session, and now trades at $1,793.

“He who knows when he can fight and when he cannot, will be victorious.”

– Sun Tzu

Eliman Dambell

Senior Market Analyst

 

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