US markets rally ahead of a wave of earnings, Sunak crowned prime minister and oil dips.

Today, the Dow Jones was up 1.4%, Nasdaq was up 0.90% and the S&P 500 gained 1.2%. The S&P rallied in today’s session adding to gains from a strong last week as investors look ahead to a storm of quarterly earnings from big tech companies.

Health care and consumer staples led some of the gains, almost a 7% jump in HCA. Sentiment on health care stocks has improved as investors weigh up industries that could be less exposed to the risk of higher interest rates and slowing economic growth.

The overview on the economy worsened further due to the weaker than expected services and manufacturing activity.

Over in the UK, Rishi Sunak will become Britain’s new prime minister on Tuesday, first ever prime minister of colour, after he won the race to be the leader of the Conservative Party.

As a result, government bonds shot up after the announcement, the pound took support form the news of Sunak but, the 10-year bond yields fell to their lowest since Kwarteng’s mini-budget on September 23^rd.  Paul Johnson, Director of Institute for Fiscal Studies, has stated that the markets are still ‘spooked’ and it will require clear and decisive action to gauge a medium-term outlook on what is to come.

Also in the UK, according to retail experts Springboard, footfall declined in all primary destination types. 3.3% in high streets, 1.5% in retail parks and 0.7% in shopping centres. The most evident factors for the decline in consumer activity is the squeeze on household incomes.  

Just like in recent trading sessions, the Covid trapped China combined with the soft demand weighed on crude prices today. However, ironically the market recovered due to weak U.S. business activity results which suggests the Fed might hold onto the aggressive rate hikes for the time being. The ideology that investors seem to know the Federal Reserve better than it knows itself, has kept oil prices afloat for the past week. Even though fundamentals suggest otherwise.

PMI data:

• U.S. Composite PMI fell to 47.3 this month from 49.5 in September.
• U.K Composite PMI fell to 47.2 this month from 49.1 in September.
• Eurozone Composite PMI fell to 47.1 from 48.1 in September.