The Dow advanced more than 800 points on Friday, and the S&P 500 and the tech-heavy Nasdaq added over 2.5% each as investors digested a slew of economic data and earnings reports while reassessing their expectations for more rate increases from the Federal Reserve. The Fed's favorite inflation rate, the PCE price index, showed that annual core inflation came slightly weaker than expected but still pointed to increasing inflationary pressures. Meanwhile, a Commerce Department report showed that consumer spending rose above expectations in September. On the corporate side, Apple jumped over 8% after the iPhone maker topped analysts' estimates for revenue and profit. Conversely, Amazon.com shares tumbled almost 10% after forecasting holiday-quarter sales below Wall Street expectations. The Dow and S&P finished the week higher by roughly 5.6% and 4.0%, respectively, while the Nasdaq lagged, finishing only 2.0% higher.
European equity markets advanced about 3.5% in the fourth week of October, the best performance since mid-March. Domestically, the DAX index rose 4%, the fourth consecutive week of gains. Stocks were able to close slightly above the flatline on Friday, after trading most of the session in the red. Shares of Volkswagen were down almost 2% after the company reported behind pre-pandemic levels in third-quarter earnings and said it expected deliveries to be around the same as last year. On the other hand, Danone shares added nearly 3% after the company raised its 2022 revenue growth forecast. On the macro front, preliminary figures showed the German economy unexpectedly grew in Q3 while inflation rose more than expected in October.
Equities in London lost ground on Friday, with the blue-chip FTSE 100 closing around the 7,050 mark, dragged by heavyweight financials and materials stocks. The export-oriented index came under pressure on concerns about a deteriorating growth outlook, particularly in China, as widening coronavirus-induced restrictions dented activity. Adding to the gloomy mood were headlines suggesting that the UK's new government was looking to raise windfall tax on oil and gas producers. Natwest Group and Ocado Group were among the biggest laggards on the index, down around 9.3% and 4.9%, respectively. Big miner Glencore also dropped more than 1% after warning of a drop in second-half earnings for its trading unit. The FTSE 100 added more than 1% for the week to post a second consecutive weekly gain.
The FTSE MIB index closed 0.3% lower at 22,525 on Friday, cutting sharper losses from earlier in the session but still underperforming its European peers as investors continued to assess the impact of higher interest rates on growth while digesting a batch of macroeconomic data. Domestic inflation soared to a 38-year high of 11.9% in October, well above estimates of 9.6%, as energy costs rebounded sharply. On the growth front, Germany’s GDP surpassed forecasts, while the French and Spanish economies expanded at rates broadly in line with expectations. Losses were dominated by tech shares, falling 2% on average amid persistent pressure from expectations of higher borrowing costs in the near future and poor earnings results from US tech giants. On the other hand, Eni gained 1.7% after delivering strong corporate results. Still, the FTSE MIB advanced 4.5% on the week, supported by the ECB’s omission of quantitative tightening plans in its policy decision.
The IBEX 35 index closed virtually unchanged at 7,916.5 on Friday, as investors took some profits from the recent four-day rally, while weighing economic data from the US and Eurozone's biggest economies and the ongoing earnings season. On the domestic economic front, Spain's economic growth slowed markedly to 0.2% in the third quarter from 1.5% in the second quarter, slightly missing market estimates, amid a sharp slowdown in investment. Meanwhile, preliminary data showed Spain's inflation rate eased markedly to a nine-month low of 7.3% in October from 9.3% due to lower electricity and gas prices. On the corporate front, banks led the losses, with Caixabank slipping 7%, after it maintained guidance despite profits being above market estimates. IAG shares fell 2.7% despite the airline group announcing positive results for the third quarter. Top gainers were Mapfre (+3.7%) and Telefonica (+3.3%).The IBEX 35 booked a notable 4.9% gain this week, the biggest rise since early May.