Markets were mixed over the last week with Europe and Japan down a few percent and the UK FTSE 100, S&P 500 and ASX 200 proving more resilient. The U.S. economy looks to be holding up well and the debate is shifting from a ‘soft landing’ to a potential no landing while Germany continues to suffer from the Chinese slowdown. 

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Australia’s Job Market Powers On Despite Rate Pressures

Australia’s economy remains resilient, with the labour market adding 64,000 jobs (51,000 full-time) and the unemployment rate holding steady at 4.1% for six months. The participation rate rose to 67.2%, and the employment-to-population ratio hit a record 64.4%. NAB’s survey shows one in three firms still face labour shortages. Given strong employment and wage pressures, the RBA has maintained its tightening stance, delaying any immediate rate cuts and signalling that future easing will depend on inflation data. This was reflected in bond yields which pushed higher in Australia and the U.S.

China's Economy Slows, but Markets Rally on New Support Measures

China's latest economic data showed mixed results, with GDP growth slowing to its weakest in seven quarters. Despite this, the CSI 300 jumped 3.6% on Friday after new market support measures were announced, including a share buyback program and equity swap tools. While retail sales and industrial production in September saw slight improvements, concerns remain over the declining property sector. The People's Bank of China's gradual approach to stimulus has left markets anticipating more significant fiscal measures

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Oil Prices Fall as China Slows and Risks Ease

Oil prices continued their descent, with Brent crude falling 1.9% on Friday to near $73 per barrel, marking a $6 decline over the week. The weakness reflects China's slowing oil import growth and reduced Middle East risk premiums as concerns about potential disruptions to the Iranian energy sectors eased.

Q3 2024 Earnings Season

We're still in the early stages of the Q3 2024 earnings season, with only 14% of S&P 500 companies having reported so far. While 79% have beaten Earnings Per Share (EPS) estimates and the overall growth rate of 3.4% marks the fifth consecutive quarter of growth, it’s the lowest since Q2 2023.

A concerning sign is that most of the growth is concentrated in the "Magnificent 7" tech companies—without them, the rest of the S&P 500 would show just 0.1% growth over the past year. Last week, ASML (a key supplier in the tech/AI sector) reported disappointing orders, which raises concerns about potential overbuilding in AI-related infrastructure. As the earnings season continues, markets will be watching for further signs of economic strength in the U.S.

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Looking beyond this earnings season, analysts project much stronger earnings growth of 14% for Q4 2024 and 15.1% for 2025, suggesting a broad based earnings rebound is priced in and company outlook statements will be closely scrutinised.