Update Equities: Earnings season off to a good start
Equity market indices were in positive territory this week. Investors in European stocks, measured by the return of the MSCI Europe, and US stocks, measured by the S&P 500 index, saw modest gains. The more growth- and technology-tilted US index, Nasdaq, outperformed the broad-based S&P 500 index.
Last week, markets turned volatile after a sharp escalation in trade tensions. This week, however, investor sentiment improved, after US President Donald Trump signaled his openness to a deal with China. Stock prices also rose on the back of the increasing belief that the US central bank is on track to deliver another 25-basis-point rate cut later this month. This belief is based on Federal Reserve Chair Jerome Powell indicating that labor-market prospects continue to worsen.
Tuesday marked the unofficial kickoff to the S&P 500 index third-quarter earnings season, as BlackRock, Wells Fargo, JPMorgan Chase, Goldman Sachs and Citigroup reported their results. The reporting by the big banks is always seen as the start of the S&P 500 reporting season, essentially ignoring the fact that PepsiCo and Delta Airlines already released their results last week. Citigroup, Wells Fargo and BlackRock reported better than expected results, which investors rewarded with mid-single digit share-price gains the day after the announcements.
Shares of apparel company LVMH jumped by more than 12% in Wednesday’s trading session, as organic sales unexpectedly returned to growth in the third quarter. LVMH, the first luxury company to report results, is often seen as a bellwether for the luxury industry. All LVMH divisions had better than expected sales figures, indicating a positive environment for luxury companies reporting later in the earning season, such as Richemont and Hermes.