As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.
U.S. markets experienced a strong rebound last week, with major indexes recovering from prior losses. The gains were broad-based, highlighting the resilience of the market despite ongoing uncertainties regarding the incoming Trump administration’s policies and escalating geopolitical tensions linked to the Russia-Ukraine conflict. Smaller-cap indexes outperformed their larger counterparts, reflecting investor confidence in diversified growth sectors. Additionally, an equal-weighted version of the S&P 500 Index outperformed its traditional capitalization-weighted counterpart, emphasizing strength across the broader market. Bitcoin continued its post-election rally, marking its third consecutive week of double-digit gains.
Amid a relatively light economic calendar, NVIDIA’s third-quarter earnings became a focal point. While the chipmaker’s results met expectations, its cautious fourth-quarter guidance tempered investor enthusiasm, resulting in minimal movement in its stock price. However, the company’s commentary on artificial intelligence (AI) and clean energy demand positively impacted the utilities sector, which emerged as one of the week’s top-performing industries. In contrast, communication services lagged behind due to a drop in Alphabet shares. The decline followed reports that the Justice Department proposed a breakup of the internet search giant, underscoring regulatory pressures on the tech industry.
Positive labor market data added to the week’s optimism. Initial jobless claims dropped unexpectedly to 213,000, the lowest since April 2024, signaling continued strength in the job market. This improvement was particularly noteworthy, given that continuing claims reached a three-year high of 1.91 million due to lingering effects from Boeing’s aircraft machinist strike, which has since been resolved. Housing data also buoyed sentiment, with the National Association of Realtors reporting a year-over-year increase in existing home sales for October, the first since July 2021. Stabilizing mortgage rates, job growth, and steady economic conditions were cited as key drivers of this recovery.
Monetary policy remained in focus as investors anticipated the Federal Reserve’s final meeting of the year in December. Fed Governor Lisa Cook reinforced expectations of gradual interest rate cuts, emphasizing the continued progress in disinflation while cautioning that decisions would remain data-dependent. The bond market reflected mixed trends. U.S. Treasuries posted gains, with short-term yields rising and long-term yields declining. Municipal bonds also saw strong demand, especially in the primary market, where some new issues were oversubscribed by as much as 20 times. Investment-grade corporate bond spreads tightened, supported by macroeconomic stability, a rally in technology stocks, and lower interest rates. High-yield bond volumes also increased, suggesting growing investor confidence. In a noteworthy development, Spirit Airlines filed for bankruptcy, highlighting ongoing pressures in the travel industry.
European markets ended the week with mixed performances. The pan-European STOXX Europe 600 Index rose 1.06%, driven by hopes that the European Central Bank (ECB) might cut borrowing costs in December following weak purchasing managers' index (PMI) data. In the UK, inflation outpaced expectations in October, rising to 2.3% year-over-year due to higher household energy bills. Core inflation, which excludes volatile food and energy prices, also increased to 3.3%, aligning with Bank of England (BoE) forecasts. These trends led markets to scale back expectations for rate cuts in 2025, with BoE policymakers expressing diverging views on the persistence of inflation and future rate paths.
Japan’s stock markets experienced a pullback, with the Nikkei 225 Index losing 0.93% and the broader TOPIX Index falling 0.56%. Geopolitical tensions and rising interest rate expectations dampened risk appetite, prompting increased demand for safer assets like the Japanese yen. The yen traded within the JPY 154 range against the U.S. dollar, reflecting market caution. Consumer inflation remained above the Bank of Japan’s (BoJ) 2% target in October, further justifying the bank’s recent hawkish stance. The 10-year Japanese government bond yield approached a 13-year high of 1.1%, reflecting tightening monetary conditions. BoJ Governor Kazuo Ueda emphasized that wage-driven inflation is likely to intensify as economic recovery progresses, reinforcing expectations of further rate hikes. Meanwhile, Japan’s government approved a USD 250 billion economic package aimed at easing inflationary pressures and supporting regional economies through energy subsidies and increased disposable incomes.
In China, markets faced a downturn, with the Shanghai Composite Index dropping 1.91% and the CSI 300 losing 2.6%. Weak economic data and uncertainty surrounding U.S. policy changes contributed to risk aversion. While the government implemented several stimulus measures, including a RMB 10 trillion debt swap for local governments, the housing sector and consumer demand remain areas of concern. Chinese banks maintained their lending rates after a significant cut in October, signaling cautious optimism. Youth unemployment showed slight improvement, with the jobless rate for 16- to 24-year-olds dropping for the second consecutive month. However, broader challenges, including tepid housing demand and global trade uncertainties, continue to weigh on China’s economic outlook.
Global markets experienced mixed performance last week, with U.S. stocks rebounding strongly amid resilient labor and housing data, while European and Asian markets grappled with weak economic indicators and geopolitical uncertainties. Key themes included expectations of rate cuts in the U.S. and Europe, Japan's inflation-driven monetary tightening, and China's continued struggle with housing and consumer demand challenges.
