Data on Tuesday showed that the US consumer price index was flat month-on-month in October and rose 3.2% from a year earlier, both coming in below expectations. The cooler report helped fuel expectations that the Federal Reserve was done with rate hikes, pushing stocks higher. For the week, the S&P 500 ended 2.2% higher with gains broad-based and has advanced in 13 of the last 15 sessions. The tech-heavy Nasdaq rose 2.4% while the Dow Jones added 1.9%. Small caps outperformed, with the Russell 2000 up over 5%. Also supportive of stocks was declining Treasury yields. The yield on the 10-year note ended the week down at 4.44% as it continues to retreat from the 5% level reached late last month.
European stocks were also higher as attention turned to the possibility of central bank rate cuts next year amid the cooling inflation. This was even as European Central Bank President Christine Lagarde said that she expected a pick-up in inflation early next year as base effects drop out, and that there would likely be no change in rates for the next few quarters. For the week, the pan-European STOXX 600 added 2.8%, with regional indices also seeing solid gains, while sovereign bond yields fell back. The UK FTSE 100 rose nearly 2% in a week where inflation eased more than expected to 4.6% in October.
Japan’s Nikkei 225 was 3.1% higher over the week, with US rate expectations offsetting a disappointing GDP figure. For the third quarter, Japan’s economy contracted by 0.5%, snapping two quarters of gains. The yen was higher for the week although continued to hover close to the 149 to the dollar mark. Chinese markets were also higher but saw more modest gains. The Shanghai Composite added just 0.5% while the Hang Seng increased by 1.5%. This was even after a slump in Hong Kong listed shares of Alibaba, after it scrapped its plans to spin off its cloud business. Chinese economic data for the week was mixed, with industrial production and retail sales growing more than expected in October while data from the property sector remained weak.
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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.