Stock Market Outlook

European equities: individual stocks continue to be valued on the back of final earnings

 The S&P 500 and the Dow Jones Industrial Average retreated. Ahead of the FOMC* meetings on the 1st and 2nd, there was widespread selling from the beginning of the week to adjust holdings. Stocks were significantly weakened after Fed Chairman Powell hinted that policy rates could be higher than the Fed's assumed terminal rate and also ruled out the possibility of an early halt to rate hikes.

 For now, the market is expected to react nervously to economic indicators and statements from Fed officials, and this week will need to focus on what will happen to the U.S. Consumer Price Index (CPI) for October, which will be released on the 10th. In addition, stock price gains associated with increased expectations of a slower pace of interest rate hikes in the near term will not be sustainable unless speculation of upward swings in terminal rates is removed.It is necessary to accurately understand the statements of key players and calmly assess the market reaction.

 The Stoxx Europe 600 has risen for three consecutive weeks. The first half of the week was fueled by speculation of a slower pace of interest rate hikes in the U.S., as well as buying of stocks with good final accounts. The weekend rallied again as selling pressure increased due to speculation of a long-term rate hike after the US FOMC meeting, and also possibly due to expectations that China's "zero interest rate policy" will be eased in the coming months.

 Approximately 60% of the companies that make up the Stoke Europe 600 Index exceeded market expectations for EPS. With 64 companies set to report earnings this week, the market may be led by individual stocks. China's health authorities reportedly said over the weekend that they intend to stick to their "clean-up policy," which could also have an impact on Europe, as expectations of a consumer recovery in that country could be stripped away and selling pressure on retail stocks and other sectors could increase.