Market reaction to Friday’s non-farm payrolls report was positive, with employers added a higher-than-expected 199,000 jobs in November, while the unemployment rate eased to 3.7%. Furthermore, the University of Michigan’s consumer sentiment index rose to 69.4 in November, with inflation expectations falling. Markets are growing more confident that the economy will achieve a soft landing. This week the Federal Reserve will meet for its final time this year, with the central bank expected to keep rates on hold and the focus turning on whether the first rate cut could come as soon as March next year.
For the week the Nasdaq Composite advanced 0.7%, closing at its highest level since April 2022, while the S&P 500 added 0.2% to close at its highest level since March 2022 and logging a sixth consecutive weekly gain. On the S&P, energy stocks were the notable laggard, owing to declining oil prices. Tech companies got a boost from further enthusiasm around artificial intelligence. The Dow Jones ended the week marginally above the flatline while small caps outperformed large cap peers. Treasury yields ended little changed, with a surge in the 10-year Treasury yield on Friday, after the jobs report offsetting previous declines.
European markets were also higher on increasing bets that central banks were done with rate hikes. The pan-European STOXX 600 added 1.3% for the week, briefly touching its highest level since February 2022 on Friday. Travel and leisure stocks were amongst the best performers on the index while miners and energy lagged. Germany’s DAX index rose 2.2%, hitting an all-time high, while the UK’s FTSE 100 saw a more muted gain of 0.3%. Government bond yields turned lower, with dovish comments from European Central Bank policymakers fuelling hopes that the central bank could start cutting rates in the first half of 2024. This coming week will be a busy one for central banks, with the Bank of England, Swiss National Bank and ECB meeting.
Chinese markets were once again weaker, with the Shanghai Composite declining 2.1% and the Hang Seng retreating nearly 3%. Sentiment was hurt as Moody’s cut China’s sovereign debt rating to “negative”, saying that costs to bail out local governments and state firms could weigh on its economic growth. This overshadowed an improvement in the Caixin services PMI, while trade data delivered a mixed picture of better-than-expected export growth and weaker imports. Japanese markets were also lower, whereby the Nikkei 225 dropped 3.4%. The yen had surged over 2% to hit a three-month high against the US dollar following comments from Bank of Japan governor Kazuo Ueda that prompted speculation the central bank could be preparing to adjust its ultra-loose monetary policy.
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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.