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.
The U.S. equity markets ended the week on a high note, with major indexes, including the Dow Jones Industrial Average, S&P 500, and S&P MidCap 400, reaching record intraday highs. Notably, the small-cap Russell 2000 Index joined the rally, surpassing its previous peak from over three years ago with an intraday high of 2,466.49. Trading volumes were unexpectedly robust during the shortened Thanksgiving holiday week, despite markets being closed Thursday and operating for a half day on Friday.
Domestic policy developments played a significant role in shaping market sentiment. Investors reacted positively to the nomination of Scott Bessent as Treasury secretary. However, later in the week, President-elect Donald Trump’s surprise announcement of plans to impose steep tariffs on imports from Canada, Mexico, and China caused some turbulence. Despite this volatility, broader markets exhibited resilience. The S&P 500 extended its winning streak to seven sessions, marking its longest upward run in over two months. Positive sentiment was further supported by a cease-fire agreement between Israel and Hezbollah, which eased fears of an escalating Middle Eastern conflict. This agreement also influenced the energy sector, with oil prices retreating as geopolitical risks diminished.
Economic data released during the week presented a mixed picture of the U.S. economy. Personal income surged 0.6% in October—double market expectations—while personal spending rose 0.4%, suggesting strong consumer activity. Pending home sales also exceeded forecasts, climbing 2.0% after a significant upward revision to September’s numbers. Treasury yields fell sharply, with the 10-year note yield dropping 15 basis points to its lowest level in over a month, reflecting growing confidence in the stability of the economic outlook.
European equity markets managed to finish the week slightly higher, with the pan-European STOXX Europe 600 Index gaining 0.32%. The performance across the region was mixed, with Germany’s DAX climbing 1.57%, while Italy’s FTSE MIB and France’s CAC 40 posted modest losses of 0.70% and 0.29%, respectively.
Inflation dynamics remained a focal point in the eurozone. Annual inflation accelerated to 2.3% in November, up from 2.0% the previous month. This increase was largely expected, given the waning impact of last year’s energy price declines on the annual comparison. However, underlying inflation pressures appeared to ease slightly. Services inflation dipped to 3.9% from 4.0%, and core inflation held steady at 2.7%. Market participants continue to anticipate a rate cut from the European Central Bank (ECB) in the coming months, though the magnitude of the adjustment remains uncertain.
Economic data from Germany reflected ongoing challenges. Retail sales in October fell by a sharper-than-expected 1.5% compared to September, underscoring weakness in consumer spending. However, the labor market offered a glimmer of resilience, as the number of unemployed rose by only 7,000, much less than the forecasted 20,000 increase. The unemployment rate held steady at 6.1%, indicating relative stability despite broader economic struggles. In the UK, mortgage approvals hit their highest level since August 2022, signaling some strength in the housing market. However, consumer credit growth slowed to a two-year low, and retail sales volumes fell sharply, reflecting ongoing pressures on consumer demand.
Japanese equity markets saw modest losses during the week, with the Nikkei 225 declining 0.2% and the broader TOPIX Index falling 0.6%. Geopolitical tensions and the strengthening yen weighed on investor sentiment, particularly in export-driven sectors. The yen appreciated to around JPY 150 per USD, driven by safe-haven demand amid global uncertainties. Additionally, stronger-than-expected domestic inflation added to speculation about a potential Bank of Japan (BoJ) interest rate hike in the near term. Prime Minister Shigeru Ishiba unveiled a new stimulus package aimed at mitigating inflation’s impact on businesses and households. Key measures included energy subsidies, cash handouts to low-income families, and raising the tax-free salary threshold. These policies align with Ishiba’s vision of achieving wage growth that outpaces inflation and fostering investment-driven economic growth.
Chinese equity markets performed well, with the Shanghai Composite Index rising 1.81% and the CSI 300 gaining 1.32%. Investor optimism was fueled by expectations of government support despite fears of potential U.S. tariff hikes. The People’s Bank of China injected RMB 900 billion into the banking system through its medium-term lending facility, maintaining its lending rate at 2%. However, tighter liquidity conditions are anticipated as significant loan maturities approach in December, coupled with increased local government bond issuance aimed at stimulating the economy.
On the economic front, industrial profits contracted by 10% year over year in October, marking the third consecutive monthly decline. However, this was an improvement from the sharper 27.1% drop recorded in September, thanks to government support measures and profit growth in high-tech manufacturing sectors. Analysts expect additional policy actions in 2025 as Beijing seeks to consolidate the economic recovery.
In summary, global markets showed resilience last week, with U.S. equities hitting record highs amid strong consumer data and geopolitical developments, while European and Asian markets faced mixed outcomes influenced by inflation, policy changes, and geopolitical tensions. Key highlights included the nomination of a new U.S. Treasury secretary, easing eurozone inflation pressures, and China's ongoing economic support measures to counter domestic and external challenges.
