This week is massive for US investors: five of the Magnificent Seven companies are set to report their latest earnings. And the US will release two important updates on how the world’s biggest economy is performing, with its third-quarter growth figures and key monthly jobs data.
The Magnificent Seven shares have been driving the S&P 500 higher for the past couple of years. So investors will want to pay close attention as Alphabet, Microsoft, Amazon, Meta, and Apple open their books this week. Analysts predict that these five companies – along with Nvidia and Tesla – saw their earnings grow by 18% in the third quarter compared to the same period last year. The serious seven are projected to continue to be the top contributors to the index’s earnings growth, just as they have been in recent quarters.
Another important consideration for investors participating in the current bull market is the performance of the US economy and its potential implications for future interest rate trends. The Federal Reserve Bank of Atlanta’s GDPNow model – which provides a real-time economic growth estimate based on the latest data – projects that US economic output rose at an annualised 3.4% rate in the third quarter, which would mark an acceleration from the second quarter’s 3% pace. This is encouraging news for the economy, though it may lead to mixed reactions among investors. On one hand, robust growth tends to support corporate earnings. However, a steady performance from the US economy could prompt the Federal Reserve to take a more measured approach to cutting interest rates.
On The Calendar
- Monday: Earnings: Ford.
- Tuesday: Japan unemployment (September), UK M4 money supply (September), US consumer confidence (October), US job openings and labor turnover survey (September). Earnings: Alphabet, AMD, McDonald’s, PayPal, Pfizer, Mondelez, Visa.
- Wednesday: UK autumn budget, eurozone economic growth (Q3), eurozone economic sentiment (October), US economic growth (Q3). Earnings: Microsoft, Meta, Coinbase, AbbVie, Amgen, Caterpillar, Eli Lilly, Starbucks.
- Thursday: Japan industrial production and retail sales (September), Bank of Japan interest rate announcement, China PMIs (October), eurozone inflation (October), eurozone unemployment (September), US personal income and outlays (September). Earnings: Amazon, Intel, Apple, Mastercard, Merck, Uber.
- Friday: US labor market report (October). Earnings: Chevron, ExxonMobil.
What you might’ve missed last week
Global
- The International Monetary Fund lowered its 2025 global growth forecast.
- Gold prices hit another record high.
Asia
- Chinese banks slashed their benchmark lending rates.
UK
- The IMF significantly raised its growth forecast for the UK, marking the largest upgrade among G7 nations after the US.
- British retail sales rose by 0.3% in September, surpassing economists’ expectations of a 0.3% decline.
- The UK recorded a larger-than-expected government deficit in the first half of the fiscal year, intensifying pressure on the government to address budgetary challenges.
- UK car production declined for the seventh straight month in September.
- British homebuilder Barratt Redrow reported signs of market stabilization, with improved mortgage affordability suggesting a more positive outlook for the UK’s housing sector.
Why It Matters
The International Monetary Fund (IMF) lowered its global growth forecast for next year and warned of rising geopolitical risks, from wars to trade protectionism. Its latest outlook predicts that economic output will expand by just 3.2% in 2025, slower than the 3.3% it previously estimated. It left its projection for this year unchanged at 3.2%. Looking to 2025, the IMF bumped up the outlook for US growth by 0.3 percentage points, thanks to the country’s strong consumer base. But it bumped down the eurozone’s outlook by the same amount, blaming the persistent drag in Germany and Italy’s manufacturing sectors.
The price of gold hit another all-time high last week, touching $2,760 an ounce on Wednesday, putting its year-to-date gain at over 30%. Several factors have been driving the rally. First, interest rates are falling in most of the world, shrinking the opportunity cost of owning gold, which holds value but doesn’t generate income. Second, central banks are snapping up the metal to diversify their US-dollar-heavy reserves. Third, heightened economic and geopolitical risks are boosting demand for safe-haven assets, like gold.
China unveiled some of its sharpest cuts to lending rates in years, as policymakers sought to boost the economy to get it closer to the country’s 5% year-end growth target. Last week, the People’s Bank of China said that the country’s one-year prime rate, which is set by big Chinese banks and acts as a benchmark for consumer and business loans, would fall to 3.1% from 3.35% – the steepest drop on record. Meanwhile, the five-year loan prime rate, which underpins mortgages, would be lowered to 3.6% from 3.85%.
The IMF recently raised the UK’s growth forecast to 1.1% for this year, supported by easing inflation and lower interest rates. However, concerns persist over the rising national debt, which is expected to reach 96.4% of total economic output by 2029. The government’s plans for substantial borrowing to invest in infrastructure and public services aim to address fiscal gaps and ambitious investment targets, but may complicate future efforts to stabilize debt.
Retail sales showed unexpected resilience, with a 0.3% increase in September, indicating that consumer spending remains strong despite concerns over potential tax hikes. Still, consumer confidence is fragile due to high living costs and uncertainty ahead of the Budget.
The Bank of England noted faster-than-anticipated disinflation, paving the way for possible rate cuts in November. However, officials are divided on the pace of easing, with some wary of ongoing inflation risks, particularly in the services sector.
Meanwhile, the automotive industry is facing a transitional phase, as car production declines while manufacturers shift toward electric vehicles. In the housing market, companies like Barratt Redrow are optimistic, with easing mortgage rates and supportive government policies boosting recovery prospects and signaling a potential stabilization after a challenging period.
Important Information
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