They were the latest to offer some upbeat news on the earnings season, which has been mixed overall, especially on the revenue side where the percentage of companies beating analysts’ expectations has been below the long-term average.
Microsoft (MSFT.O) gave the biggest boost to all three major indexes, while Amazon.com (AMZN.O) also helped the S&P 500 and Nasdaq. Microsoft shares jumped 6 percent at $35.73, a day after it reported profit and revenue above analysts’ expectations.
The S&P 500 reached yet another record high at the end of a week in which mounting speculation that US monetary policy would remain accommodative for the foreseeable future provided solid support for equities, Treasury bonds and gold.
Source: Financial Times – S&P 500 ends week at record high
The benchmark US equity index closed 0.4 per cent higher on the day – with further support coming from well-received earnings from the likes of Microsoft and Amazon – giving it a weekly gain of 0.9 per cent.
Across the Atlantic, the FTSE Eurofirst 300 fell 0.1 per cent, leaving it 0.6 per cent up over the week. The Nikkei 225 in Tokyo stood out on Friday with a fall of 2.8 per cent, its biggest one-day drop since early August. It fell 3.3 per cent over the five-day period.
In the government bond arena, the yield on the 10-year US Treasury bond fell 2 basis points to 2.50 per cent – down 9bp over the week and its lowest level for three months.
The German Bund yield also shed 2bp on Friday to 1.75 per cent – a drop of 9bp from a week earlier.
Gold , meanwhile, was $6 higher on the day at $1,352 an ounce and up about $36, or 2.7 per cent, on the week.
Underpinning those gains was the view that the Federal Reserve would not begin scaling down, or “tapering”, its quantitative easing programme until next year.
The September US employment report, delayed because of the government shutdown earlier this week, showed that a relatively meagre 148,000 jobs had been created last month – although the jobless rate slipped to 7.2 per cent.
Chris Iggo, chief investment officer of fixed income at Axa Investment Managers, noted that growth in non-farm payrolls had slowed to the point that the six-month moving average in September was 163,000, compared with over 200,000 when Ben Bernanke, Fed chairman, started to hint at tapering in late spring.
“If QE was appropriate when job growth was running at over 200,000 per month then it is surely appropriate now that job growth has slowed,” Mr Iggo said. “Supporters of QE will also cite the fact that mortgage rates are still much higher than they were in the first four months of the year.
“For many at the Fed, QE needs to continue to support the economy through the mechanism of rising asset prices generating enough confidence to provide investment and employment growth.”
However, any disappointment that growth bulls may have felt about the US jobs data were at least partially offset by fresh signs that the Chinese economy would avoid a “hard landing”.
The October HSBC/Markit purchasing managers’ index of Chinese manufacturing activity reached a seven-month high, suggesting that the improved growth momentum of the third quarter was continuing.
There were some concerns about a sharp rise in Chinese money-market rates this week as the People’s Bank of China declined to inject liquidity into the system. But analysts seemed fairly relaxed.
“We do not think the recent volatility in money markets in China is a precursor to a squeeze of the magnitude experienced in June,” said analysts at Barclays. “However, with the PBoC targeting a ‘prudent’ monetary policy and a slowdown in credit growth, episodes of volatility are likely to recur.”
In the eurozone, there were some signs that the region’s economic recovery was stumbling – the composite PMI suffered its first decline in seven months in October and the Ifo index of German business confidence fell for the first time since March.
But generally, economists remained optimistic. “Easing of fiscal austerity and stronger exports are expected to drive the recovery further over the coming years,” suggested analysts at Danske Bank.
A preliminary assessment by the Bank of Spain this week suggested that the country had managed to pull out of a two-year recession. Spain’s 10-year government bond yield fell 12bp over the week to 4.16 per cent.
And the week’s eurozone data releases did little to unsettle the euro, which climbed 0.9 per cent over the week against the broadly weaker dollar, touching a two-year high above $1.38 in the process.
The single currency also gained on the pound over the week, even as UK third-quarter GDP data showed Britain’s economy growing at its fastest pace since 2010.
The chief whipping boy in the FX markets remained the dollar, which fell 0.6 per cent against a basket of currencies to its lowest in nearly nine months.
However, this did little to help industrial commodities over the week – copper fell 0.8 per cent in London to $7,185 a tonne while Brent oil tumbled $3.01 to $106.93 a barrel.