This week, key US stock indices, the S&P500, the Dow Jones and the tech-heavy Nasdaq, made fresh all-time highs supported by a strong September-quarter earnings reporting season.
The ASX200, made a six-week high near 7470 mid-week, only to give back gains, after Australia’s core inflation rate significantly surprised to the upside, sending bond yields sharply higher.
Here is a review of the top five things that happened in markets this week.
1. US September-quarter earnings season
September-quarter earnings reporting season continued with updates from US tech giants Facebook, Microsoft and Google.
Microsoft smashed earnings expectations reporting earnings per share (EPS) of $2.71 v $2.07 expected.
The Microsoft share price responded with a new record high above $326.00.
Facebook reported mixed earnings.
Quarterly revenues of $29.01 billion missed consensus expectations of $29.45 billion.
The share price of Facebook is currently almost 20 per cent below its September $384.33 high.
2. Surging energy prices
Crude oil traded above $85.00 for the first time since October 2014.
In response, petrol prices at the bowser in some parts of Sydney rose to a record high above $1.80 per litre ahead of a relaxation of regional travel restrictions on November 1, expected to see another increase in weekend getaways.
This week it was Australia’s turn to feel the heat of rising inflation.
Inflation is rising globally due to COVID-related disruptions, including surging energy prices, supply bottlenecks and pent-up demand.
The trimmed mean (the RBA’s preferred measure of inflation) rose by 0.7 per cent in the September quarter to be 2.1 per cent higher over the year, the highest annual rate since late 2015.
Despite the RBA’s dovish bias, the Australian interest rate market is now pricing 100 basis points of interest rate hikes by the RBA by year-end 2022.
4. Bitcoin falls
After making new highs following the launch of the first US Bitcoin ETF, Bitcoin has fallen by about 10 per cent to $58,300, a modest decline in the world of digital assets.
Markets don’t move in straight lines, and the pullback is likely a correction in a bull market with dips towards support at $55,000/$53,000 to be well supported.
5. Natural gas/European energy crisis
At the start of October, there was a lot of focus on an energy crisis in Europe as the price of natural gas – used to heat and power buildings and water and make fertiliser for mass food production – steamed higher.
After some respite, a shift in weather models last weekend that predicts colder weather has natural gas approaching its recent highs near $6.50.
If natural gas breaks above $6.50, there are real risks of a disorderly move towards $10.00, an unwelcome development ahead of the northern hemisphere winter.
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