Equities: Markets close lower on higher-for-longer prospects
Higher-for-longer rates continue to weigh on global equities. Global equity indices fell for the week ended 29 September as the US economy continues to show resilience (2Q23 US GDP growth +2.4% y/y) and higher-for-longer rates takes hold. Global equities fell 1.0% for the week, with Developed Markets (DM) and Emerging Markets (EM) equity indices registering -0.9% and -1.2% respectively.
US equities were largely down for the week, with the Dow and S&P recording weekly losses of -1.3% and -0.7% while the NASDAQ eked out a 0.1% gain. This was despite core PCE inflation for August easing to 3.9% vs 4.3% in July. Europe markets continued their losing streak in spite of headline inflation easing to a two-year low; STOXX 600 and FTSE 100 ceded 0.7% and 1.0% for the week respectively. China equities ended another week in red due to weak growth data; HSI and HSCEI fell 1.4% and 1.8% respectively.
Topic in focus: US Equities – Not too hot, not too cold. In 3Q23, the S&P 500 saw a subdued performance of 0.6% (as of 6 September), following an 8.7% gain in 2Q23. While defensive sectors such as Utilities (-5.6%) and Consumer Staples (-3.3%) were major drags on performance, the Energy sector, supported by rising crude oil prices, surged 12.4%. This quarter's gains were attributed to valuation expansion, reflecting optimism for a "soft landing" for the US economy. The latest sectoral allocation numbers suggest that the following themes are in play:
Figure 1: Investors are overweight on telecom services, healthcare, and financials
Source: Bloomberg, DBS
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