16th December 2024

U.S.

• Stock Market Performance:

• Most major indexes declined, except the Nasdaq Composite, which modestly advanced to hit a record high of 20,000.

• Large-cap stocks held up better than small-cap stocks, with the Russell 2000 Index underperforming the S&P 500 for the second consecutive week.

• Growth stocks, as measured by the Russell 1000, outperformed value stocks for the third consecutive week, driven by gains in Tesla (+12.08%) and Alphabet (+8.44%), the latter experiencing its largest two-day gain since 2015.

• Sector and Market Trends:

• The momentum factor, which focuses on buying strong-performing stocks and selling weak-performing ones, had its worst day in over a year on Monday but recovered by week’s end.

• Only the communication services and consumer discretionary sectors posted gains, while most other sectors declined.

• Daily trading volumes were above the six-month average throughout the week, despite the absence of major market-moving events.

• Economic Data:

• Inflation:

• Headline and core Consumer Price Index (CPI) both rose by 0.3% in November, aligning with expectations.

• Core annual inflation held steady at 3.3%, while overall inflation rose slightly to 2.7% from October’s 2.6%.

• Shelter costs accounted for nearly 40% of the November price increase, with very few components showing declines.

• Producer Price Index (PPI) ticked up to 0.4% in November, up from 0.3%.

• Labour Market:

• Weekly initial jobless claims unexpectedly rose to a two-month high of 242,000, attributed partly to seasonal factors around Thanksgiving.

• Continuing claims also rose, staying near three-year highs, signalling prolonged job searches for some unemployed individuals.

• Federal Reserve Expectations:

• Markets solidified expectations for a December rate cut, with the CME FedWatch Tool indicating a 97.1% likelihood, up from 86.0% the prior week.

• Treasury yields rose across most maturities, resulting in negative returns for U.S. Treasuries and investment-grade corporate bonds.

• High-yield bond market activity increased midweek following the CPI report but later turned lower due to rising Treasury yields and subdued macro sentiment.

Europe

• Market Performance:

• The STOXX Europe 600 Index fell 0.77%, reflecting investor concerns about the European Central Bank’s (ECB) pace of monetary easing.

• Major indexes showed mixed results:

• Germany’s DAX rose slightly (+0.10%).

• Italy’s FTSE MIB increased (+0.40%).

• France’s CAC 40 (-0.23%) and the UK’s FTSE 100 (-0.10%) declined.

• Central Bank Policies:

• ECB:

• Cut the deposit rate by 0.25% to 3.0%, marking its fourth reduction this year.

• Dropped language about keeping rates “sufficiently restrictive” to signal potential future easing.

• Revised growth and inflation forecast downward.

• Swiss National Bank (SNB):

• Implemented a surprise 0.50% rate cut, the largest since 2015.

• Adjusted its inflation forecast for 2025 down to 0.3%, half of its September projection.

• Economic Updates:

• UK real GDP contracted by 0.1% in October after a similar decline in September.

• Services sector output remained flat, while industrial production dropped 0.6%—its second consecutive monthly decline.

• The Bank of England is expected to hold interest rates steady at its next meeting amid persistently high inflation.

Japan

• Stock Market Performance:

• The Nikkei 225 rose 0.97%, and the broader TOPIX Index gained 0.71%.

• Market sentiment was buoyed by China’s announcement of proactive fiscal measures and looser monetary policy.

• Monetary Policy:

• Speculation grew that the Bank of Japan (BoJ) will delay a December rate hike to January, weakening the yen to the mid-JPY 153 range against the USD.

• Final GDP data exceeded expectations, with the economy growing 0.3% quarter-on-quarter in Q3.

• The BoJ’s tankan survey indicated improving business sentiment among manufacturers.

China

• Stock Market Performance:

• The Shanghai Composite Index fell 0.36%, and the CSI 300 lost 1.01%, while the Hang Seng Index in Hong Kong gained 0.53%.

• Economic Updates:

• Inflation remained muted: CPI rose 0.2% YoY in November, down from October’s 0.3%; core inflation edged up to 0.3%.

• Exports grew 6.7% YoY, slowing from 12.7% in October, while imports dropped 3.9%, deepening October’s 2.3% decline.

• Trade surplus widened to USD 97.4 billion, driven by higher exports to the U.S. and Southeast Asia.

Other Key Markets

• Turkey

• October’s current account surplus of USD 1.9 billion significantly improved the YTD deficit to USD 3.3 billion, down from USD 36.1 billion in 2023.

• Ongoing macroeconomic adjustments, including narrower energy and gold deficits, contributed to the improvement.

• Policymakers may begin reducing interest rates at the December 26 meeting or in early 2025.

• Brazil:

• The central bank raised the Selic rate by 1.00%, from 11.25% to 12.25%, citing domestic inflation risks and strong economic activity.

• Policymakers indicated plans for similar rate hikes in the next two meetings if inflation pressures persist.

PLEASE NOTE:

This content is for informational purposes only and should not be construed as investment advice or a specific recommendation to act on any investment. It is importnat to assess your own circumstances before making investment decisions. The views expressed are as of the date indicated and whilst we believe the information is from reliable sources, we do not guarantee it’s accuracy. Past performance is not indicative of future results, and all investments carry market risks, including the potential loss of the principal.