Market update: Positivity exudes in the US and Asia; China and Europe more cautious – 28.10.2013

Source: Henderson Global Investors

US stocks rallied on Friday extending their recent climb as the government avoided a debt default, and on speculation that the Federal Reserve will likely delay its tapering intentions. The S&P 500 index closed at another record high at 1,759; up 0.4%. The Dow Jones and Nasdaq indices were up by similar amounts. Gains in utilities and technology shares propelled the rally. Microsoft and Amazon delivered strong results, which saw their share prices gain 6.0% and 9.4% respectively. All ten S&P sectors were higher, with healthcare being the laggard, although the sector did edge higher at the close.

The handover from the rallying US markets on Friday to Asian bourses overnight on Monday was a positive one. A weaker yen helped Tokyo shares bounce back after falling 2.8% on Friday as exporters found favour; the Nikkei 225 closed up 2.2%. Most stock markets were higher given the reduction in worries about the health of China’s financial system; China’s short-term liquidity as measured by the 7-day repo rate having risen sharply last week eased back to 4.93% on Monday. However, mainland China itself remained more cautious with the Shanghai Composite barely changed. In Europe this morning, despite expectations of a strong start, the FTSE Eurofirst 300 and the FTSE 100 indices were flat (at the time of writing). European stocks seemingly pared their advance as automakers fell and investors awaited data on China’s economic health. This includes the official October manufacturing purchasing managers’ index on Friday.