Last week, global equity markets experienced a sell-off amid a flurry of third-quarter corporate earnings announcements. At the same time, bond yields continued their upward trajectory, and oil prices saw a strong rally.
What You Will Learn
- How global markets reacted to earnings season volatility, rising bond yields, and an oil price rally.
- The impact of Tesla’s strong performance amid minimal earnings growth for most S&P 500 companies.
- Insights into regional equity trends, with Chinese gains from stimulus and declines in Japan and Europe.
- Why US Treasury yields are rising and what it means for the bond market and investor sentiment.
- The drivers behind the recent rally in oil prices despite broader market pressures.
“Magnificent Seven” Expected to Drive US Earnings Growth
As we reach the midway point of the third-quarter earnings season, a handful of mega-cap technology giants in the US are anticipated to drive the bulk of earnings growth.
Analysts project that the so-called “Magnificent Seven” will post an average third-quarter earnings growth of 18.1%. In stark contrast, the other 493 companies within the S&P 500 are expected to manage a meagre 0.1% growth.
Tesla Leads Gains in S&P 500 with Strong Earnings Surprise
Tesla, one of these tech behemoths, led the charge as last week’s top performer in the S&P 500, boosting the broader index and staving off a steeper decline.
The electric vehicle maker delivered a robust earnings surprise and an optimistic projection of 20% to 30% vehicle sales growth in 2025. This promising outlook drove Tesla shares to an 11-year record, surging by 22% in a single day on Thursday.
Global Markets Performance: US, Europe, Japan, and China
Equities in the US slid broadly by 1% over the week, with value and small-cap stocks hit hardest, dropping nearly 3%. Meanwhile, technology stocks managed a modest gain.
Across the Atlantic, European shares also fell by over 1% as investors recalibrated their expectations regarding the path and timing of interest rate cuts.
Japanese equities dropped nearly 3% in anticipation of the country’s general election on Sunday, while Chinese stocks climbed over 1% after the central bank unveiled further stimulus, injecting over 700 billion renminbi and slashing one- and five-year lending rates by 25 basis points.
US Treasury Yields Continue to Climb
US Treasury yields continued their ascent, with the 10-year note climbing for the fifth time in six weeks. The yield closed at 4.24% on Friday, up from 4.07% the previous week and well above its recent low of 3.62%.
This marks a rough patch for US government bonds, which are on track for one of their worst monthly performances in years. Rising yields are attributed to persistently strong economic data and an emergent “Trump trade” linked to reflationary forces.
Oil Prices Rebound Amid Market Volatility
Finally, crude oil prices in the US rallied almost 5% last week, reaching nearly $72 per barrel by Friday afternoon. However, this uptick wasn’t enough to reverse the previous week’s decline of over 8%, leaving prices well below July’s high of around $83 per barrel.
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