European and U.S. Markets Hold Steady
European stocks and U.S. equity futures remained steady on Friday as traders reassessed their expectations for interest rate cuts following strong retail sales. Meanwhile, gold prices reached a new record high.
The Stoxx 600 index in Europe saw support from rising mining stocks, boosted by positive economic news from China. S&P 500 futures were largely unchanged, while Nasdaq 100 futures showed a slight increase.
U.K. Retail Sales Show Economic Resilience
The British pound strengthened, and U.K. bond prices fell after September retail sales unexpectedly rose. This increase suggests economic resilience, supporting the case for a gradual reduction in interest rates by the Bank of England.
In the U.S., Treasury yields steadied following significant selling on Thursday. Stronger-than-expected retail sales figures underscored the continued strength of consumer spending in the American economy. This news follows a strong jobs report and higher-than-expected consumer inflation earlier this month, reinforcing the view that the U.S. is not heading into a recession.
Gregory Peters, co-chief investment officer at PGIM Fixed Income, commented on Bloomberg TV, “I think the bond market is a little schizophrenic and is reading too much into every single data print. There is a bias in the marketplace that any news means more rate cuts, and I am not sure this is the environment we are in.”
Dollar Index and Currency Movements
An index measuring the strength of the U.S. dollar dipped slightly after gaining on Thursday. The Japanese yen strengthened against the dollar, recovering from a previous session where it weakened past 150 per dollar, following a 2.5% rise in Japan’s headline inflation.
China’s Market Gains and Economic Data
In China, stocks extended their gains after the People’s Bank of China announced a relending mechanism for listed companies and major shareholders to buy back shares. This move aims to boost the capital markets. Recent data also showed that China’s gross domestic product, industrial production, and retail sales figures exceeded estimates.
A series of strong economic indicators has pushed the U.S. version of Citigroup’s Economic Surprise Index to its highest level since April. This index measures the difference between actual economic releases and analysts’ expectations.
Ellen Zentner of Morgan Stanley Wealth Management stated that the retail sales data highlighted “undeniable strength across the economy.” She added, “Strong data will encourage some pushback from Fed participants regarding rate cuts in November, but Chair Jerome Powell is unlikely to be swayed from pursuing steady, quarter-point moves.”
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