U.S. Markets:
U.S. markets staged a robust recovery last week, with major indexes rebounding from prior losses. Gains were broad-based, underscoring market resilience despite uncertainties around the incoming Trump administration’s policies and escalating geopolitical tensions tied to the Russia-Ukraine conflict. Small-cap indexes outperformed their larger peers, reflecting investor confidence in diversified growth sectors. Additionally, the equal-weighted S&P 500 Index outpaced its capitalization-weighted counterpart, highlighting strength across the broader market.
Bitcoin extended its post-election rally, posting a third consecutive week of double-digit gains.
The spotlight of the week was NVIDIA’s third-quarter earnings. While the chipmaker met expectations, cautious fourth-quarter guidance tempered investor enthusiasm. Nevertheless, NVIDIA’s commentary on artificial intelligence (AI) and clean energy spurred gains in the utilities sector, one of the week’s top performers. Communication services lagged, weighed down by a drop in Alphabet shares following reports of a proposed Justice Department breakup of the company.
Economic Highlights:
- Labor Market: Initial jobless claims fell unexpectedly to 213,000, the lowest since April 2024, signaling ongoing strength despite lingering effects from Boeing’s resolved machinist strike.
- Housing Market: The National Association of Realtors reported a year-over-year increase in October’s existing home sales, the first since July 2021, driven by stabilizing mortgage rates, job growth, and steady economic conditions.
Monetary policy remained a key focus. Fed Governor Lisa Cook signaled gradual interest rate cuts while emphasizing the data-dependent approach amid continued progress in disinflation.
Bond Market Trends:
U.S. Treasuries posted gains, with short-term yields rising and long-term yields declining. Municipal bonds saw strong demand, particularly in the primary market, where some issues were oversubscribed by 20 times. Investment-grade corporate bond spreads tightened, buoyed by macroeconomic stability and a tech stock rally. High-yield bond volumes also increased, reflecting growing investor confidence. Notably, Spirit Airlines filed for bankruptcy, highlighting ongoing challenges in the travel sector.
European Markets:
The pan-European STOXX Europe 600 Index rose 1.06%, driven by hopes of a potential ECB rate cut in December following weak purchasing managers’ index (PMI) data.
In the UK, October’s inflation exceeded expectations, climbing to 2.3% year-over-year due to rising household energy costs. Core inflation rose to 3.3%, consistent with BoE forecasts. The data tempered expectations for 2025 rate cuts as BoE policymakers offered mixed views on inflation persistence and rate paths.
Asian Markets:
- Japan:
Japanese markets dipped, with the Nikkei 225 losing 0.93% and the TOPIX falling 0.56%, as geopolitical tensions and rising interest rate expectations curbed risk appetite. The Japanese yen strengthened slightly, trading within the JPY 154 range against the U.S. dollar.
Consumer inflation in Japan remained above the BoJ’s 2% target in October, supporting the bank’s hawkish stance. The 10-year Japanese government bond yield reached a 13-year high of 1.1%. BoJ Governor Kazuo Ueda emphasized that wage-driven inflation could intensify, justifying potential further rate hikes. Meanwhile, the government announced a $250 billion economic package to ease inflationary pressures and support regional economies.
- China:
Chinese markets struggled, with the Shanghai Composite Index dropping 1.91% and the CSI 300 losing 2.6%. Weak economic data and U.S. policy uncertainty drove risk aversion, despite government stimulus measures like a RMB 10 trillion local government debt swap. Housing and consumer demand remain key challenges, though youth unemployment showed slight improvement for a second consecutive month.
Summary:
Global markets delivered mixed results last week. U.S. stocks rebounded on resilient labor and housing data, while European and Asian markets contended with weak economic indicators and geopolitical uncertainty. Investors are eyeing potential rate cuts in the U.S. and Europe, Japan’s inflation-driven tightening, and China’s ongoing efforts to stabilize its economy.
