On Thursday the core personal consumption expenditures price index, the Fed’s preferred inflation gauge, eased to 3.5% year-on-year in October, still above target but the lowest level since April 2021. Earlier in the week, stocks reacted positively to comments from Fed governor Christopher Waller that he was “increasingly confident” current policy would get inflation back to the 2% target. On Friday there was further cheer as chair Jerome Powell said that the policy was “well into restrictive territory”.
Powell’s comments pushed the yield on the 10-year Treasury note lower to end the week down at 4.22%. For November, the Bloomberg US Aggregate bond index rose 4.5% in its best month since 1985, while the global index experienced its strongest month since December 2008. The declining bond yields have helped push up equities. For the week, the Dow Jones Industrial Average rose 2.4% in its fifth consecutive weekly gain, its best streak since 2021.The S&P 500 gained 0.8% and the Nasdaq Composite rose 0.4%. The two indices saw their best monthly performances since July 2020, up 8.9% and 10.7% respectively.
Strong November gains weren’t just limited to the US, MSCI’s All Country World index advanced 9% in its best month since November 2020. In Europe, the STOXX 600 climbed 1.4% for the week and experienced its best monthly gain since January, fuelled by real estate and tech stocks. Eurozone inflation cooled to 2.4% in November, lower than expected, another factor raising hopes of the European Central Bank cutting rates next year. Meanwhile Bank of England governor Andrew Bailey pushed back on rate cut talks.
The mood in the Asia Pacific region was more cautious. Japan’s Nikkei 225 lost 0.6% for the week amid some profit taking, with the index gaining 8.5% in November. The Shanghai Composite ended 0.3% lower while the Hang Seng index dropped 4.1%. Economic data was mixed with the official manufacturing Purchasing Managers’ Index falling to 49.4 in November, marking its second month in contractionary territory, however Caixin’s manufacturing PMI reading rose by more than expected to 50.7, returning to expansion.
Latin American stocks ended the week higher, benefiting from peak rate hopes and managed to record a strong monthly gain. Argentina’s Merval index was the notable decliner, down over 5% following on from the 42% surge seen the prior week. Oil prices were weaker with investors sceptical over whether the newly announced production cuts from OPEC+ would be sufficient and followed by nations. Brazil is reportedly set to join the oil alliance from next year.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.