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1112 2023

Market Insights

Market Insights – Week 50

Bas Kooijman

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.

In the U.S., major stock indexes experienced mixed results, with the Russell 2000 Index outperforming the S&P 500 for the third time in four weeks. Growth stocks modestly extended their lead over value shares. The technology sector, particularly influenced by advancements in artificial intelligence (AI), played a significant role in market movements. Alphabet's reveal of its new AI model and Advanced Micro Devices' AI chip launch notably boosted their shares.

Apple's market capitalization briefly surpassed USD 3 trillion again. On the economic front, the nonfarm payrolls report showed a higher-than-expected addition of 199,000 jobs in November, and the unemployment rate fell to 3.7%. The University of Michigan’s consumer sentiment index in December also rose, reflecting easing inflation concerns. Economic data were mixed overall, with a decrease in job openings but modest pickups in services sector activity.

European stocks advanced, with the STOXX Europe 600 Index gaining for the fourth consecutive week. This rise was supported by expectations of potential interest rate cuts from central banks in 2024, due to slowing inflation and faltering European economies. Major indexes across France, Germany, Italy, and the UK also experienced gains.

European government bond yields declined, fueled by dovish comments from ECB policymakers. ECB Executive Board member Isabel Schnabel indicated a less likely rate increase, while others emphasized the ongoing battle against inflation. Germany's industrial output continued to fall, and the jobless rate rose, indicating economic struggles. In the UK, the construction sector weakened, primarily due to a slump in homebuilding.

Japanese markets declined, with the Nikkei 225 and TOPIX indexes falling amid speculation of an earlier-than-expected shift in the Bank of Japan's monetary policy. This speculation, along with a more significant contraction in Japan’s GDP than initially estimated, dampened investor sentiment. The yen strengthened against the U.S. dollar, and yields on Japanese government bonds rose.

In China, equities dropped following Moody’s downgrade of China's sovereign debt outlook, reflecting concerns about the country's economic outlook amidst a prolonged property market downturn and weak consumer confidence. Despite a positive private Caixin/S&P Global survey of services activity, bearish sentiment prevailed, overshadowed by the decline in overseas exports and unexpected fall in imports. The overall trade surplus increased, but the results fell short of revitalizing the economy.

In conclusion, while U.S. markets displayed mixed performance with a focus on technology and AI advancements, European stocks rose amid dovish central bank expectations, and Asian markets, particularly Japan and China, faced challenges with policy speculation and economic headwinds, encapsulating the diverse and complex global financial landscape.

Bas Kooijman

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