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US indices reach fresh highs

Strong corporate earnings announcements from leading American technology firms helped to drive US equity indices higher during October. US Federal Reserve (Fed) policymakers maintained the key federal funds rate, but appear to be preparing for further monetary tightening, despite ongoing concerns over the US’s anaemic inflationary backdrop.

  • Recent hurricanes distorted economic data
  • The US economy expanded by 3% YoY during Q3 2017
  • The Nasdaq Index hit a new high

“The Dow Jones Industrial Average Index rose above 23,000 points for the first time”

Strong corporate earnings announcements from leading American technology firms – including Amazon , Microsoft , and Google’s parent company Alphabet  – helped to drive US equity indices higher during October. The technology-rich Nasdaq Index  hit a new high at the end of the month, boosted by the news that US consumer confidence  had risen to its highest level in almost 17 years during October. Meanwhile, the Dow Jones Industrial Average Index  rose above 23,000 points for the first time during October; its performance was boosted by encouraging corporate earnings results from companies in the health care sector, including UnitedHealth  and Johnson & Johnson . Over October as a whole, the Dow Jones Industrial Average Index  rose by 4.3%, while the S&P 500 Index  climbed by 2.2% and the Nasdaq Index  rose by 3.6%.

US Federal Reserve (Fed)  policymakers maintained the key federal funds rate, but appear to be preparing for further monetary tightening “later this year”, according to the minutes from the Federal Open Market Committee’s (FOMC’s) most recent meeting. Nevertheless, there are still concerns over the US’s anaemic inflationary backdrop, which some FOMC members believe “might reflect not only transitory factors, but also the influence of some developments that could prove more persistent”.

Having expanded by 3.1% year on year during the second quarter, the US economy  grew at a better-than-expected annualised rate of 3% during the third quarter, despite the negative impact of several damaging hurricanes. Although growth in consumer spending slowed, it proved rather more resilient than expected. According to the Commerce Department, the US economy’s growth over the last six months represents its strongest six-month period since 2014; nevertheless, the current figures do not yet reflect all the damage inflicted by the storms.

Industrial production  rebounded in September from a sizeable fall in August. Nevertheless, activity remained subdued in the wake of hurricane-related disruption. Over the third quarter as a whole, output fell at an annualised rate of 1.5%.

The hurricanes also appeared to distort labour market data: US employment declined by 33,000  jobs during September, compared with the creation of 169,000 jobs in August. On a brighter note, average earnings grew at an annualised rate of 2.9% in September, compared with a rate of 2.5% in August , and the rate of unemployment fell from 4.4% to 4.2%, providing fresh fuel for expectations of an interest-rate increase.

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