Weekly Digest – INVESTEC

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We have seen a positive start for European markets for this week, after stabilisation in the US on Friday and a very strong performance overnight for equity markets in China and Hong Kong. Chinese markets have risen more than 4%, the biggest rise in over two years and Hong Kong markets are up 2% after the Chinese government announced tax cuts over the weekend.

Earnings season in US and Europe this week will dominate equity news flow. European bank reports will be closely watched, given Q3 turmoil in Turkey and Italy. The US earnings season has started strongly and the technology giants take centre stage this week. In particular, we will be keeping a close eye on Amazon, Alphabet (Google) and Microsoft who are all reporting, especially as it comes at a sensitive time for the sector, given recent sharp under-performance.

Bond markets remain volatile, with two year US Treasuries touching a new decade-high level of 2.90% on Friday. Italian bond yields have fallen noticeably for the second day, following rating agency Moody’s review of sovereign debt on Friday.

In commodity markets, oil prices have this morning continued their strength from Friday, with Brent regaining to $80. Metal prices are also higher in part due to the weaker US Dollar.

There are several key events that will gain investor attention in the week ahead, including the ECB meeting on Thursday, where policy rates are expected to be unchanged. In the US, Q3 GDP data will be released on Friday, with estimates of 3.3% annualised growth, a deceleration from the 4.2% rate in Q2. Tuesday will also see the start of the “Davos in the Desert” Saudi conference that has attracted so much controversy.