Microsoft and Amazon boost stocks with strong results

Share Markets:

EQUITY markets posted modest gains on Friday. Investors continued to be encouraged by the prospect that the Federal Reserve would delay tapering its stimulus program for some time.

There were also some strong results from Microsoft and Amazon which boosted technology stocks.

The S&P500 rose 0.4% on Friday to a new record high, while the Dow and Nasdaq also lifted 0.4%.

Bonds:

US treasuries were little changed, although 10-year yields remain close to near a three-month low, around 2.50%.

The bond market appears to have digested the news that the Federal Reserve will begin tapering sometime in 2014.

Attention will be turning towards the Federal Reserve meeting scheduled on Wednesday this week.

Foreign Exchange:

The US dollar index was also little changed on Friday. The euro rose near a two-year-high but then retreated later on.

The Australian dollar weakened to just below 96 US cents, weighed down by a spike in Chinese money market yields over last week. 

Commodities:

Commodity prices were marginally higher on Friday, with increases in gold, oil and copper prices. For the week, gold had strong gains on hopes that the Federal Reserve would continue providing stimulus.

Australia:

No data to report from Friday.

China:

The People's Bank of China (PBoC), China's central bank, has started to publish a new lending rate based on quotes from nine major lenders.

It follows a move in July to remove the lower limit on borrowing costs, giving banks more control over setting their own interest rates.

It is a step closer to having interest rates being set by the market rather than being determined by the PBoC.

In other news, money market rates rose on Friday, with the 7-day repurchase rate rising 1.40 percentage points last week. 

It is reported that the rise is a deliberate move to refrain from injecting funds by the central bank as a way to tighten liquidity.

Europe:

The IFO business climate index fell from 107.7 to 107.4 in October, with both the current assessment and expectations falling in the month. The fall was the first in six months and was a surprise for the market.

It highlights that there remains some weakness within the European economy, despite beginning to some growth.

Japan:

Inflation in Japan edged up from an annual rate of 0.9% to 1.1% in the year to September, the highest in nearly five years.

Prices excluding fresh food and energy (core-core) were flat in the year to September, but this was the first time they did not fall, also in nearly five years.

The data is an encouraging sign that Japan is escaping deflation. To date, this has yet to translate to an increase in wages which could further help build momentum in the economy.

United Kingdom:

The UK economy expanded at 0.8% in the September quarter, the strongest quarterly growth in over a year.

It was also the third consecutive quarter of growth, and saw the annual growth rate lift to 1.5% in the year to the September quarter GDP and suggests that the UK economy is slowly recovering.

United States:

Durable goods orders rose 3.7% in September, following a 0.2% increase in the previous month.

It was the largest increase in three months, but was boosted by a jump in aircraft. Excluding the volatile transportation category, durables fell 0.1% in September, while orders excluding defence and aircraft fell 1.1%.

This underlying weakness is continuing to suggest that firms remain hesitant to invest. 

The University of Michigan consumer confidence index for October was revised up to 73.2 from 75.2 in the final estimate, but was still a 10-month low.

The decline likely reflected the uncertainty regarding the government's partial shutdown and the debt ceiling.


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