Stock markets ran the gauntlet this week of some weak financial performance from the technology industry, as well as disappointing economic data, but without sustaining much damage. In fact, the resilience of markets to bad news raises the possibility that the recent bottom could mark the end of the current bear market.

This hope is dependent on central banks softening the tone of their comments on interest rate rises, examples of which were in evidence twice during the week. The Bank of Canada increased rates by 0.5% rather than the 0.75% that markets had expected, and noted that past rate rises were beginning to affect household spending and housing markets. More importantly, the European Central Bank met expectations with a 0.75% rate rise but hinted that a slowdown in the pace of tightening is imminent with the comment that “substantial progress” has already been made towards tighter monetary policy.

Last week was one of the busiest of the year for companies reporting results and was marked by some notable successes in the world of bricks and mortar, offset by significant disappointments in the technology sector. Companies such as Unilever, Coca-Cola and McDonald’s saw strong revenue growth and were able to exploit their dominant brands by pushing through price increases. Shares in Visa and Mastercard jumped after reporting solid results, suggesting only a mild slowdown in the volume of credit-card transactions. Oil companies produced record profits which, predictably, prompted threats of windfall taxes from politicians.

The technology sector was beset by problems as online transactions and advertising expenditure shrank again in the third calendar quarter, and growth in even the most cutting-edge online technologies began to slow. Amazon reported a slowdown in online expenditure and shocked markets by projecting revenues for the current quarter that would represent the slowest growth-rate in the company’s history during the important holiday season. Crucially for investor sentiment, however, Apple (the world’s most valuable company) pleased investors when it reported revenues and profits that beat expectations. Apple shares rose 7%, despite management warning that the rate of revenue growth is likely to fall in the current quarter.

As the week came to an end, stock markets were able to shrug off weak economic data from China, where business activity is floundering due to a combination of Covid-lockdowns, the crisis in the property sector, and falling exports to the developed world. Even more remarkable was the lack of market reaction to dreadful inflation data in continental Europe, where another acceleration in energy prices was compounded by rapid increases in food-price inflation and in the cost of services. It seems likely that inflation in Europe has yet to peak. With problems mounting in the supply of agricultural commodities, mainly due to the war in Ukraine, food-price inflation could become a real issue for investors hoping that central banks can “pivot” towards less aggressive rises in interest rates. 

Coca-Cola showed its pricing power when it reported revenue growth of 16% in the third calendar quarter from the same period a year ago, excluding the impact of acquisitions and currency movements. This easily beat analysts’ expectations and prompted the company to raise its revenue forecast for the full year. Coca-Cola shares are now up for the year to date.

Microsoft shares fell 7% after the company reported that sales of Windows software had fallen by 15% in the previous quarter, and forecast that revenue growth at its cloud-computing services business will slow from its current rapid rate. Nevertheless, the company was able to produce revenue growth of 11% versus the same period last year.

Revenue and profits at Alphabet, the parent of Google, both disappointed market expectations, prompting a 10% decline in its share price. Despite the search engine having been hitherto relatively immune to economic conditions, it finally succumbed to the slowdown in digital advertising that had already affected competitors.

Shares in Meta Platforms, formerly known as Facebook, plunged by 30% after the company announced a decline in revenues and raised its estimate of the cost of investments in virtual reality technology. So far this year the company’s value has lost over $600 billion dollars.

Shares in industrial bellwether Caterpillar had one of their best days in years after the company reported strong shipments of bulldozers, as well as price-rises that will more than offset inflation in the company’s own cost-base. Profits for the third quarter easily surpassed expectations. 

• The US economy comfortably outstripped expectations with a 2.6% increase in GDP for the third calendar quarter. However, the driving force was a huge swing in net foreign trade, while domestic demand rose by only 0.5%. Still, the economy seems likely to avoid recession, at least in the current year.
• Inflation in the Eurozone rose to 10.7% in October, from 9.9% in September, well above expectations for a rise only to 10.2%. Energy inflation remained elevated in October, at 41.9%, while inflation in food, alcohol and tobacco jumped to 13.1% from 11.8% last month. The hope is that November’s inflation data will have softened ahead of the European Central Bank’s next meeting in December. 

• The US Federal Reserve is expected to raise rates by 0.75%, and Chair Powell is likely to repeat that the pace of hikes will slow only once the Fed is confident that the rate of inflation has turned downwards.
• The highly scrutinised monthly US employment data is expected to show that 190,000 jobs were created in October. Markets, however, would cheer a weaker outcome as evidence that interest rate rises are weakening the demand for labour.
• The Bank of England is expected to raise rates by 0.75%, but analysts will be scrutinising the degree to which members of the Monetary Policy Committee disagree with the majority view, and whether the bank will signal the likelihood of smaller hikes at future meetings.