Market Update

Financial markets ended the week on a mixed note as geopolitical tensions in the Middle East dampened investor sentiment. The ongoing conflict between Israel and Lebanon heightened fears of a broader regional escalation, causing caution in markets.
In Europe, stocks closed lower as investors adopted a defensive posture. The intensifying conflict in the Middle East drove oil prices higher, with Brent crude surpassing $78 per barrel by Friday. Energy stocks benefitted from this price surge, further bolstered by President Joe Biden’s comments on the possibility of Israeli strikes targeting Iran’s oil infrastructure. While Iran exports 1.5 million barrels of oil per day, any disruption to global supplies would likely be limited by existing US sanctions. However, rising oil prices could unsettle markets, especially with the upcoming US presidential election and the recent cooling of inflation, which has heightened expectations of interest rate cuts by major central banks.
On the other hand, US markets closed higher, despite the geopolitical concerns. Positive economic data helped boost investor confidence, with September’s jobs report showing a stronger-than-expected increase of 254,000 non-farm payrolls and a dip in the unemployment rate to 4.1%. The robust labour market reassured investors, alleviating earlier concerns about potential economic weakness. Despite last month’s 50-basis-point interest rate cut by the Federal Reserve, policymakers are expected to continue with a cautious, data-dependent approach going forward.
In Ireland, the unemployment rate fell slightly to 4.3% in September, down from 4.4% in August, marking its lowest level in five months. This decline points to a stable labour market, even amid high interest rates set by the European Central Bank. The number of unemployed individuals dropped by 1,000 to 124,300, the lowest since April.
In the UK, Bank of England Governor Andrew Bailey suggested that future interest rate cuts could be more aggressive if inflation continues to ease. His comments, along with concerns over rising oil prices, led to a decline in the pound. Bailey also mentioned that the Bank was closely monitoring developments in the Middle East, given the potential for higher oil prices to exacerbate inflation.
In China, markets were mixed as mainland exchanges remained closed for the holidays, while Hong Kong markets reopened on Wednesday. Optimism surrounding Beijing’s support measures helped lift sentiment, despite weak economic data. Factory activity contracted for the fifth consecutive month, with the official manufacturing PMI at 49.8 in September, while the Caixin survey showed a reading of 49.3. The real estate sector also struggled, with new home sales by top developers falling 37.7% year-on-year in September. While there remains short-term optimism, long-term sentiment may shift as attention turns back to China’s underlying economic fundamentals.