Markets were lifted by a range of tailwinds this week. Positive talks between US President Donald Trump and Chinese President Xi Jinping boosted hopes that trade tensions would ease. Markets also welcomed a second interest rate cut from the US Federal Reserve, although this was already largely priced in. But the single most important factor appears to be the blockbuster results that US corporations are reporting for the third quarter (Q3).
In the US, the S&P 500, Nasdaq Composite, Dow Jones Industrial Average, and Russell 2000 all hit record closes on Monday. This is the second time this year that these indices have touched all-time highs on the same day, underscoring the strength of the current risk-on environment. Before 18 September, the last time this happened was 2021.
Stronger-than-expected corporate earnings have, for now, banished fears that the US economy may be upended by tariffs, persistent inflation, and geopolitical noise. According to Bloomberg Intelligence data, nearly 70% of S&P 500 constituents have exceeded sales estimates, which is the highest beat rate since late 2021. If the trend continues, earnings growth could accelerate to around 13% year-on-year in Q3, up from 9.3% in Q2.
What emerges from the third quarter is that corporate America has shown an ability to manage tariffs, and its capability to overcome cost pressures has surprised even the more optimistic analysts. Companies across the board have found ways to drive efficiencies in their businesses, contain costs, and strengthen profitability. At the same time, while some low-end consumers have cut expenditure, wealthier consumers continue to spend.
The optimism has spilled into markets worldwide. London’s FTSE 100 marked record closes several times in recent weeks, helped this week by a weaker pound and good performance from mining and pharma stocks. Japan’s Nikkei 225, meanwhile, topped the 50,000 level for the first time as new Prime Minister Sanae Takaichi prepared to meet Trump. Emerging market indices also benefited from renewed appetite for risk assets.
The S&P 500 is up more than 40% since the lows it recorded around “Liberation Day” in April, when Trump announced plans to introduce sweeping tariffs. This index closed at another all-time high on Tuesday, meaning that the index has recorded fresh record closes 36 times this year. At the time of writing, the Nasdaq 100 had gained 1.50 % for the week, exceeding that of the S&P 500.
Apart from Nvidia, which crossed the $5 trillion market cap threshold this week and only reports earnings in November, most Big Tech stocks reported positive earnings this week. But Deutsche Bank points out that sectors such as financials, real estate, materials, and utilities are also showing double-digit earnings gains. America’s corporate resilience is not only an artificial intelligence (AI) story, and there are signs the rally is broadening beyond tech.
Markets stumbled in the second half of the week as investors expressed concerns about the magnitude of AI investment and the timelines for returns. Cautious remarks from Fed Chairman Jerome Powell also stalled momentum, as market participants digested his warning that further rate cuts are not a foregone conclusion. But there may well be room for markets to keep rising.
The resilience of equities amid the US government shutdown, ongoing geopolitical tensions, and dampened expectations for further interest rate cuts suggests that investors still believe in the fundamentals of unexpected earnings changes.
“It’s not earnings changes that cause stock price changes, but earnings changes that come as a surprise.”
– Howard Marks, US investor and billionaire
Global News
- 70% of S&P 500 companies have exceeded third-quarter sales forecasts, the highest proportion since 2021 and a sign of broad-based corporate resilience despite trade and inflation pressures, Bloomberg Intelligence data showed on Monday. The results highlight how companies are leveraging pricing power, cost discipline, and diversified revenue streams to offset headwinds from US tariffs, slowing global demand, and currency volatility. Analysts said the widespread outperformance signals underlying consumer strength and improved operational efficiency, fuelling optimism that earnings momentum could extend into 2026, even as markets brace for tighter policy and moderating growth.
- The Fed cut its benchmark rate by 25bps on Wednesday, its second reduction of 2025, and in line with market expectations. The Fed also announced it will pause its balance sheet runoff from 1 December to ease liquidity pressures. During the press conference, Powell cautioned that a December rate cut is “far from assured”. Powell noted that, while inflation pressures have moderated, underlying price stability remains uncertain, and the Fed must balance the risk of tightening too slowly against the risk of easing too soon. Markets interpreted the decision as a measured shift toward gradual policy easing amid an uncertain economic outlook.
- According to Paul Donovan, Chief Economist of UBS, the US (although China has not yet confirmed this) announced a year-long Sino-US trade agreement. The details have yet to be worked out. Markets are likely to be cheered, but not wildly enthusiastic. In a climate of scapegoat economics, economic nationalism is a convenient position to return to if political leaders need a distraction from domestic economic problems.
- The US government shutdown, now on its 31st day, has already cost the economy at least $18 billion this year, a toll that “will intensify” if it continues, the Congressional Budget Office said on Wednesday. Much of the impact is temporary, with some boost to growth expected in the first quarter of 2026, but between $7 billion and $14 billion of lost output may not be recovered, depending on the shutdown’s duration. GDP is set to be at least one percentage point lower in the fourth quarter, with losses rising to $28 billion after six weeks and $39 billion if it lasts eight weeks.
- Global companies are stepping up job cuts as demand weakens and the shift toward AI-driven automation accelerates. Reuters reported that US companies announced over 25,000 layoffs in October, excluding UPS’s 48,000 cuts since early 2025, while European companies shed more than 20,000 jobs, including 16,000 at Nestlé. Most reductions are in white-collar roles seen as vulnerable to automation, as businesses seek to monetise massive AI investments. Among the latest moves, Amazon plans to cut about 14,000 corporate jobs across logistics, payments, video games, and cloud divisions as CEO Andy Jassy streamlines operations and reduces bureaucracy. At the same time, Paramount Skydance has begun cutting 1,000 positions following its August merger, with a second round expected to bring total layoffs to around 2,000. Analysts warn that, with the US government shutdown limiting official data, the job market may be entering a “low-hiring, low-firing” phase, heightening risks to consumer confidence and economic stability.
- Alphabet, Meta, and Microsoft together spent about $78 billion on capital projects last quarter, up 89% from a year earlier, mainly on data centres and graphics-processing hardware to power the next phase of AI development, Bloomberg reported on Thursday. Meta lifted its 2025 capital expenditure forecast to $70 to $72 billion and signalled “notably larger” spending for 2026, while Microsoft continues to expand its AI-related outlays. Analysts said the spending surge reflects both companies’ belief that AI will drive the next global growth cycle. Still, they cautioned that investors are growing restless, questioning when such heavy capital commitments will begin to deliver meaningful revenue gains.
- Nvidia became the first public company to reach a market valuation of $5 trillion on Wednesday, propelled by its dominant role in the AI ecosystem. The surge follows the company’s announcement of $500 billion in AI chip orders, seven new government supercomputer deals, and progress in developing its next-generation Blackwell chip for China, despite regulatory uncertainty. Analysts interpret these developments as underpinning the ongoing AI-driven momentum in big tech, while also highlighting the challenge these companies face in converting their massive spending into sustained earnings growth. Nvidia is now worth more than the GDP of every country excluding the US and China.
- Alphabet on Wednesday beat expectations as demand for its cloud and AI services surged. The company reported strong third-quarter revenue and earnings, with plans for record capital spending to expand its AI capabilities, including its Gemini large language model across search and other products. The company said capital expenditure for the year will be $91 billion to $93 billion, up from its earlier estimate of $85 billion. Shares rose as much as 7.5% in extended trading and are up 45% year to date.
- Mark Zuckerberg on Wednesday pledged that Meta Platforms will spend even more aggressively on AI next year as the company seeks pole position in the AI race, raising fresh investor concerns over returns on its massive outlay. Zuckerberg and CFO Susan Li said AI investments are already helping target ads and content, underpinning the core business that generates about 98% of revenue. Meta reported third-quarter revenue up 26% on solid advertising revenue and said capital expenditures could reach $72 billion. Meta Platforms announced a massive $30 billion debt sale to fund its expanding AI investments, triggering an 11% drop in its shares.
- Amazon reported yesterday that its cloud unit Amazon Web Services (AWS) grew its third-quarter revenue by 20% year-on-year to $33 billion, registering its fastest pace of growth since 2022 and surpassing Wall Street’s 18% estimate. The performance eased concerns among investors worried about competitive pressure in the cloud-computing market, with AWS remaining a key profit engine for Amazon. Analysts highlighted the result as a win for Amazon’s AI and infrastructure investments, helping to offset softer retail growth and keep the company in strong tech-growth contention.
- Microsoft continues to face a computing capacity crunch despite spending $34.9 billion on data centres in the first quarter, up $10 billion from the previous period. CFO Amy Hood said on Wednesday that spending will rise again this quarter as demand for Azure remains “significantly ahead” of available capacity. Azure revenue grew 39% year on year, above estimates, though a Barclays analyst said the pace fell slightly short of investors’ most bullish expectations.
- OpenAI is giving Microsoft a 27% ownership stake as part of a year-long restructuring, clearing the way for the ChatGPT maker to become a for-profit business. Under the revised deal, Microsoft’s stake is valued at about $135 billion, with access to OpenAI’s technology, including GenAI models, until 2032. Microsoft will continue receiving 20% of OpenAI’s revenue, with adjustments possible later. OpenAI said on Tuesday its corporate restructure is now complete. Microsoft surpassed $4 trillion in value on Tuesday on the news.
- Apple’s market value hit $4 trillion on Tuesday, making it only the third public company to reach that milestone, after Nvidia and Microsoft. Apple’s stock has gained more than 56% since April, boosted by optimism over its updated iPhones and easing tariffs. Yesterday, Apple issued an upbeat outlook, forecasting 10% to 12% revenue growth for the next quarter. Still, its results were marred by weaker-than-expected sales in China, where revenue slipped 3.6% to $14.5 billion, below analyst forecasts. Analysts said the results underscore Apple’s global strength yet highlight its growing challenges in Asia, where competitive and economic pressures are weighing on momentum.
- Tesla investors will vote on 6 November on a potential $1 trillion package for Elon Musk, the largest-ever CEO pay deal. Chairman Robyn Denholm warned on Wednesday that Musk could leave if the deal is rejected. Critics, including Democratic state leaders and union officials, are against the plan. Tesla’s US sales would have been between 67% and 83% higher had it not been for Musk’s political involvement, according to a working paper from the National Bureau of Economic Research by Yale University economists, CNN reported on Tuesday.
- Novo Nordisk launched a bold move yesterday when it submitted an unsolicited bid of at least $6.5 billion (including $4.6 billion upfront and up to $2.5 billion in milestone payments) to acquire US obesity-drug developer Metsera, aiming to outbid Pfizer and derail Pfizer’s earlier agreement with Metsera. It marks a strategic pivot by Novo Nordisk into acquisitions as it looks to outpace rivals and build on the runaway success of its blockbuster weight-loss treatments.
- Eli Lilly & Company raised its annual revenue outlook yesterday after reporting strong third-quarter results driven by booming demand for its weight-loss and diabetes drugs: Zepbound and Mounjaro. The company reported record sales as global appetite for GLP-1 treatments continues to soar, cementing its lead in the fast-growing obesity market ahead of rivals like Novo Nordisk. Analysts said the outlook reflects sustained momentum despite intensifying competition and potential pricing pressures, with Lilly also preparing to launch new oral formulations to expand its reach in the multibillion-dollar metabolic health sector.
- As at Thursday’s close the S&P 500 was 0.45% up for the week.
Local News
- South Africa cannot become complacent after exiting the Financial Action Task Force’s (FATF’s) greylist last Friday, Deputy Finance Minister David Masondo warned on Wednesday. Addressing Parliament’s Finance Committee, Masondo said the country must maintain its anti-money-laundering and counter-terrorism standards, noting that the FATF will reassess South Africa in two years. He stressed the need for effective institutions to preserve investor confidence, noting that the criminal justice system must address financial crimes decisively.
- Tax revenue collected to end-September reached R925 billion, 2% above estimates, South African Revenue Service Commissioner Edward Kieswetter told Parliament’s finance committee on Tuesday. He said R18 billion in withdrawals under the new two-pot retirement system generated an extra R6 billion for the fiscus. Year-on-year revenue growth was 9.3%, driven by domestic VAT, corporate provisional tax, and PAYE. The results bolster the outlook ahead of the mini-budget on 12 November.
- South Africa has the largest untapped export potential in Africa, according to Rand Merchant Bank’s Where to Invest in Africa report released in conjunction with the Gordon Institute of Business Science on Monday. The study, covering 31 African economies, found that if fully leveraged, South Africa could add up to R1.3 trillion in annual exports by 2029 – giving it more potential than Egypt, Morocco, and the DRC combined.
- The US dollar spot index is maintaining its recent stronger level, and this has again only slightly affected the fair value estimate for the USD/ZAR exchange rate, nudging it up to R17.76 with the spot level at R17.22 according to our Investment Committee’s Currency Decoder. The current spot level for the USDZAR exchange rate is still holding on to levels that are stronger relative to the fair value estimate. The strength in the USD/ZAR exchange rate is currently driven primarily by positive local sentiment, underpinned by the resilient gold price. However, the strength in the exchange rate is also being supported by aggregate strength in Emerging Market currencies as well.
- Record high gold prices are fuelling a surge in illegal mining, with major producers such as Harmony Gold recording a tenfold increase in arrests at non-operating shafts and more than 2,600 arrests in the year to end-June, over 2,100 of which were illegal immigrants. The mining houses, facing escalating theft, security costs, and production disruptions, describe the trend as an “expensive underground war” that erodes revenue and deepens risk. With some 6,000 mines abandoned and the illicit trade estimated to cost the economy around R60 billion annually, analysts warn that criminal networks are entrenched and the state’s capacity to combat illegal activity is increasingly questioned.
- Old Mutual announced on Tuesday that it will acquire a majority stake in wealth technology firm 10X Investments for R2.2 billion in a move that strengthens its presence in the fast-growing fintech space. The transaction follows similar investments by established financial institutions such as Standard Bank’s Shyft. The deal will see 10X management retain a significant stake. The transaction, bought from Old Mutual Private Equity and DiGAME, is expected to close in the second quarter of 2026, subject to regulatory approval.
- Pick n Pay CEO Sean Summers said on Monday that the retailer is no longer chasing scale, focusing instead on store quality, profitability and operational fundamentals. Its interim results to August showed narrowing headline losses by 56% and stabilised supermarket performance. A review of the sector shows Shoprite plans 300 new stores, Spar 40, and Pick n Pay’s Boxer 60 outlets in the 2026 financial year, including liquor stores and Superstores. Boxer, listed separately but majority-owned by the group, delivered market-leading turnover growth of 13.9%.
- WeBuyCars shares fell as much as 14.7% on Tuesday, reaching their lowest level since May, even as the used-car retailer forecast that headline earnings for the year to end-September would double. The company said that the 83 million new shares issued between February and its April 2024 listing to fund the IPO would weigh on earnings through share dilution. Despite the recent drop, the shares have gained 55% over the past year, giving it a market value of about R19 billion, a level that analysts say outpaces the company’s underlying growth. However, its expansion strategy has continued to drive earnings momentum since listing.
- Chinese vehicle manufacturer Chery, owner of Omoda and Jaecoo, is assessing the feasibility of manufacturing in South Africa, which could boost the local market, the company told Business Day on Monday. Chinese brands, including Haval, Jetour, Chery and BAIC, have grown in popularity, with Motus and Combined Motor Holdings (CMH) noting strong demand, particularly among cash-strapped consumers, with nearly half of CMH’s new-vehicle sales coming from Chinese and Indian brands.
- As at the time of writing, the rand was 0.30% weaker against the dollar, and the ALSI was 0.80% down for the week.
Sources: Dynasty, Bloomberg, CNN, ITWeb, BusinessLIVE, Business Report, Reuters, NYT, etc.
