Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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Earnings season kicked off in earnest yesterday, as a number of big names across different sectors delivered their third quarter earnings. Industry giant 3M (MMM) convincingly beat expectations on Tuesday, rising the better part of 6% and providing momentum to the wider Dow Jones index, which closed the session a solid 1% in the green. Defence and aerospace company Northrop Grumman (NOC) also outperformed, gaining 4.5% after posting healthy margins and impressive free cash flow. The biggest outlier of all was SpaceX (SPCX), which reported earnings per share of $0.35 compared to expectations of just $0.16, as well as a net income of $4.4 billion for the third quarter, largely fuelled by its surging AI business. On top of that, it appears as though genuine efforts are being made to eventually merge SpaceX and Tesla into the same entity, according to the CEO of both companies Elon Musk. SpaceX surged more than 8% in extended trading hours following the earnings call. Speaking of Tesla (TSLA), the car manufacturer will report its own earnings after market close later today, as will Meta Platforms (META).
While the Dow Jones performed solidly yesterday, the S&P 500 only managed a 0.3% rise, while the Nasdaq-100 sank 0.1%. The divergence reflects a rotation away from the more volatile elements of the technology sector and into the broader spectrum of US equities. Given the unhealthy tech concentration of US stock markets so far this year, such movements are a welcome development.
The dollar has cooled off somewhat in recent sessions, bringing the DXY from highs of almost 103 last week to a more modest 101.8 as of this morning. Several Federal Reserve officials have signalled a willingness to hold off on further rate hikes for the time being, and markets are now overwhelmingly pricing in a pause during next week's FOMC meeting. The reprieve has awarded competing currencies some much needed breathing room, allowing the euro to halt its slide against the greenback – at least for now. The common currency was sadly unable to fully capitalise on the shift, and the political and fiscal problems emerging from France are largely to blame. French borrowing costs are hovering around 24-year highs, with yields on the 10-year bond edging dangerously close to 5%. Exploding debt-to-GDP ratios have soured lending appetite for the country in recent years, creating a 150-bps premium for French debt compared to that of its German neighbour. Credit is being squeezed hard and many different facets of the French economy are beginning to feel the pinch. To make matters worse, Moody’s will review France’s credit worthiness on Friday and is expected to carry out a downgrade, in line with fellow rating agencies Fitch and S&P Global.
France’s situation lies in stark contrast to that of the UK, which showed surprisingly resilient labour market conditions on Tuesday after the ONS revealed an additional 102k jobs in August, causing the unemployment rate to unexpectedly fall to 4.7%. The report briefly pushed the pound up to $1.34 yesterday before a modest pull back took hold, but more interestingly, cable has now risen to 1.19 against the euro, a 17-month high for the pair. This morning, UK inflation came in marginally higher than expected at 3.5% year-over-year. The increase further cements the Bank of England’s case for raising the main bank rate from 3.75% to 4% on the 5th of November, which would fully close the interest rate gap with the US dollar.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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