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Weekly Outlook

Weekly Outlook 2 Oct 2023 – 8 Oct 2023

Weekly Commentary: 2 Oct 2023 – 8 Oct 2023

Major US equity benchmarks were mixed for the past week. Home sales in the US have been falling since January as Existing-home sales decreased 0.7% MoM to an adjusted annual rate of 4.04 million. On a YoY basis, August sales fell 15.3%. Household spending, however, remains up as consumers are not fettered by inflation. Americans spent 5.8% more in August than a year earlier. The tough housing markets have left consumers more spare change as they would have historically saved for and now they are splurging on a once-in-a-lifetime experience.

China’s economy is showing signs of picking up. Factories are reporting their first expansion in activity since the spring, while railway and flight bookings are pointing in a positive direction for tourism. The manufacturing sector rose to 50.2 in September from 49.7 in August. The nonmanufacturing sectors rose to 51.7 to 51, led by consumer spending on eating out, travel, and other services.

Stock returns were mixed over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (-1.34%), S&P 500 Index (-0.71%), and NASDAQ Composite Index (+0.07%). Other notable key market indices that generated negative returns consist of MSCI AC ASEAN Index (-0.68%) & Hang Seng Index (-1.37%). All S&P 500 sectors registered mixed returns last week with notable sectors – Consumer Staples (-1.97%), Utilities (-6.92%), and Financials (-1.55%) falling more than the rest of the sector. For 2022, index returns were negative for the Dow Jones Industrial Average (-8.78%), S&P 500 (-19.44%), and the NASDAQ Composite (-33.10%).

The yield-curve remains inverted as the 10Y-2Y US Treasury spread tightened to -0.47%. driven by U.S 2-year and 10-year Treasury yields falling 2 bps to 5.09% and rising 19 bps to 4.62% respectively. Market sentiment also became more risk-off as the U.S. High Yield (HY) – Investment Grade (IG) credit spread widened 5 bps to 2.73% while the CBOE Volatility Index (VIX) rose 32 bps to 17.52%.

This coming week, major economies of Europe, Japan, the UK, and the US will report PMI data. For China, the Golden Week continues and financial markets are closed.

The global REITs market’s return were mostly in the red across the numerous benchmarks. FTSE EPRA Nareit Germany Index (-4.58%) and FTSE EPRA Nareit Canada Index (-4.18%) are the notable REITs that generated negative returns over the past week. Closer to home, the iEdge S-REIT Index (-1.32%) and most of its subsectors generated negative weekly returns with Real Estate Operating Companies (-7.89%) and Data Center REITs (-3.15%), the notable sector that underperformed the rest last week. REITs generally have been affected by decreasing yield spread as interest rates surged and investors price in the possibility of reduced distributions stemming from higher financing costs. However, we do expect inflows to return to the sector given the existing attractive valuations on offer and resilience offered by the REIT asset class in light of the waning global growth outlook.

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