US Equity Marks Its Strongest Week in Almost a Year, Europe Fails to Catch Up

After the largest plunge this autumn two weeks ago, US equities surprised investors with what was the best week-on-week performance this year. All major indicators were well in the green zone: S&P gained 3.3% over the week at the close on Friday, DJ added 3.4% and Nasdaq was up 3.6%.

After Minutes from the Fed’s October meeting were released on Wednesday, the markets were pricing out uncertainty associated with October’s hike. The Fed’s resolve to commence tightening next month was widely treated as an indicator of a sound economic outlook.

Shares in technology, healthcare and consumer goods were among the leaders last week. Nike rose as much as 5.5%, after a robust growth in earnings and a $12 billion buyback were announced last week. A buyback, or share repurchase, is an act of a company investing cash in itself and is generally well-perceived by the markets.

Growth in healthcare was driven by a 3.45% increase in the Irish drugmaker Allergan. The company got closer to being acquired by Pfizer in the largest tax-inversion deal yet, after Pfizer made a $363 per share bid for Allergan (currently trading at $304). Pfizer decides to push forward with the largest deal in the health-care industry on record, attempting to evade an effective income rate of 26% that it currently faces in the US. The US government criticized the deal, pledging to introduce the necessary provisions to the tax law and limit the possibilities of corporate tax evasion.

European equities started this week on the back foot, depressed by Turkey’s downing of a Russian military plane on Tuesday. Waiting for the Russian response to the event, many investors were fleeing to save havens. The Russian ruble and the Turkish lira sank, along with the equity and fixed income markets of the two countries.