CMC Markets Weekly Report

Stocks in the U.S finished flat on Friday, but dropped more than 2 percent across the board for the week, as ongoing worries over global growth trumped a better-than-expected earnings announcement from JPMorgan Chase.

Stocks in the U.S finished flat on Friday, but dropped more than 2 percent across the board for the week, as ongoing worries over global growth trumped a better-than-expected earnings announcement from JPMorgan Chase.

The Dow Jones Industrial Average eked out a tiny gain of 2.46 points, or 0.02 percent, to close at 13,328.85. The S&P500 erased 4.25 points, or 0.30 percent, to end at 1,428.59 whilst the Nasdaq slipped 5.30 points, or 0.17 percent, to finish at 3,044.11.

Stocks saw a brief lift after a report showed consumer sentiment rose in October to its highest level in five years, according to the Thomson Reuters/University of Michigan's preliminary reading.

Among earnings, JP Morgan posted quarterly results that topped expectations as the financial giant began to put its "London Whale" trading losses behind. Still, shares ended in negative territory.

Weak global demand has raised investor worry over the third-quarter earnings season. According to Thomson Reuters, earnings are expected to decline 3 percent from a year ago, the weakest since 2009.

Also on the economic front, producer prices rose in September as the cost of energy surged, according to the Labor Department.

European shares ended lower as Spanish Prime Minister Mariano Rajoy continued to deny Spain needs a full bailout. Investor sentiment remains subdued on Europe after this week’s gloomy economic forecasts for the continent from the International Monetary Fund.

Meanwhile, euro zone industrial production gained in August, beating expectations for a decline.

Gold saw a solid jump last month on the QE3 announcement and ECB commitment, but with stock and commodity markets failing to follow, gold dropped US$13.20/oz to US$1654.50/oz as traders lost their confidence. The drop came despite the US dollar index falling 0.1 percent to 79.68 for the session. On the LME base metals fell 1-3 percent whilst Brent fell US$1.04 to US$114.67/bbl and West Texas lost US28c to US$91.79/bbl. The Aussie has slipped 0.3 percent to US$1.0232.

On Saturday, China shocked all and sundry by announcing a widening of its trade surplus in September on a surge in exports. Exports rose 9.9 percent in the month compared to only 2.7 percent in August and against a 5 percent consensus expectation.

This week sees a raft of Chinese data beginning today, with the September inflation numbers. They will be followed on Thursday with September industrial production, retail sales and fixed asset investment, and, importantly, the September quarter GDP result. Consensus has an easing to 7.4 percent (year on year) from 7.6 percent in June.

The US earnings season will roll on this week and feature more banks, several big tech names and, on Friday, Bellwether General Electric. It will also be a busy week on the economic data front beginning tonight, with the Empire State manufacturing index, retail sales and business inventories.

Tomorrow night it's the CPI, industrial production and housing sentiment, Wednesday housing starts, Thursday the Philly Fed manufacturing index and the leading economic index, and Friday existing home sales.

In Australia today we'll see housing finance and investment lending along with vehicle sales. Tomorrow, the minutes of this month's RBA meeting will be released. On Wednesday, Westpac will provide a leading index for Australia and on Thursday NAB will provide a summary of September quarter business confidence.