Global market report - October 17

US markets' strong gains on Tuesday helped global equities claw back some of last week's losses

James Gard 17 October, 2018 | 5:00PM
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North America

Last week’s volatility has been set aside by encouragement from earnings season. The Nasdaq was up nearly 3% yesterday as tech stocks swung back into favour. Netflix (NFLX) put its weak second quarter behind it and posted record subscriber numbers yesterday. The company’s shares rose around 4% during market hours and are now up 10% in after-hours trading. Morningstar analysts rate Netflix as a one-start stock, meaning that it is significantly overvalued – they ascribe a fair-value estimate of $120 per share to the stock, against a current price of around $350 per share.

Netflix earnings are a useful bellwether for the tech sector as they come before the biggest tech giants. Last time a sharp fall in Netflix shares gave investors fair warning that they would be unforgiving in face of any missed expectations from the sector’s biggest names, and so it proved with Facebook (FB). Next Thursday Amazon (AMZN) and Google parent company Alphabet (GOOGL) release results.

Auction site eBay (EBAY) reports today, as does Kinder Morgan Canada (KML).

In economics, Federal Reserve meeting minutes will be released from the end of September meeting. Canadian inflation numbers are due on Friday. In September, the rise in the cost of living as measured by CPI is expected to be 2.7%, compared with 2.8% in August. Canadian retail sales are also due on the same day.

Europe

The FTSE 100 gained some strength early on from the global sentiment, and this was supported by a drop in the pound as September inflation came in below forecasts at 2.4%. The drop in the cost of living supports the idea that UK workers’ pay packets are rising faster than inflation, following yesterday’s wage growth figures.

Sterling is likely to react strongly to any signs of progress or otherwise from the crucial EU Summit, although it appears that UK Prime Minister Theresa May has only 30 minutes to discuss Brexit before dinner.

There were some strong movers on the FTSE 100 after trading updates: Mediclinic (MDC) surprised investors by reporting a fall in profits, and its share price slumped nearly 20%.

Pearson (PSON) was at the top of the leaderboard after upgrading its full-year profit forecasts.

On the FTSE 250, shares in housebuilder Crest Nicholson (CRST) were off sharply after a profits warning and the departure of its finance director.

Asia

China and Japan markets managed to claw back some of the recent losses after last week’s sell-off, inspired by a rise in US markets overnight on Tuesday. Earnings seem to be the biggest driver in the US rebound, but China’s gains were modest in comparison. Japan fared better, with the Nikkei rising nearly 300 points or 1.29% to 22,841 points.

The Hong Kong Stock Exchange was closed for a public holiday.

 

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James Gard

James Gard  James Gard is senior editor for Morningstar.co.uk.

 

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