Stocks have seen recent gains as markets grew more hopeful that central banks are nearing the end of their tightening cycles. However, the winning streaks were snapped on Thursday following hawkish comments from Jerome Powell. The Federal Reserve chair stated that policymakers were “not confident” that monetary policy was sufficiently restrictive to bring inflation back down to target, leaving the door open for future interest rate hikes. After Thursday’s blip, stocks sprang back into action on Friday, with the Nasdaq having its best day since May as tech stocks bounced back.
For the week, the tech heavy Nasdaq index added 2.4%, the S&P 500 was up 1.3% thanks to Friday’s gain, and the Dow Jones Industrial Average rose 0.7%. With a lack of notable economic data releases, there was particular attention on Treasury auctions for the week. The 10-year auction on Wednesday was favourably received, however the 30-year Treasury auction on Thursday saw weak demand and pushed up bond yields.
European markets ended the week modestly lower, with peak interest rate optimism dampened. The pan-European STOXX 600 ended 0.2% lower, although regionally, France’s CAC 40 was little changed and Germany’s DAX added 0.3%. On the STOXX 600 basic resources and real estate were the worst performing sectors. European Central Bank policymakers also delivered some hawkish commentary, trying to play down chances of rate cuts. Bank of England governor Andrew Bailey echoed this saying that it was too early to talk about cutting rates, pushing short-term UK gilt yields lower.
Chinese equity markets were mixed for the week, with the Shanghai Composite rising 0.3% while the Hang Seng declined 2.6% to snap a two-week winning streak. The latest economic data also delivered a mixed economic picture. China slipped back into deflation with consumer prices down 0.2% year-on-year in October, while producer prices remained contractionary for a thirteenth consecutive month. Exports also continued to decline however imports unexpectedly rose last month. In Japan, the Nikkei 225 advanced 1.9% on strong corporate earnings, while the yen weakened.
The MSCI Latam index ended the week slightly lower, hurt by Powell’s comments, with regional performance mixed. Mexican markets ended little changed in a week where the Bank of Mexico left its benchmark interest rate at 11.25% for a fifth consecutive time, as expected, although it softened its language stating that it expects rates to be held for “some time”. Meanwhile Peru’s central bank lowered its benchmark rate by 25 basis points to 7%, with its equity index rising 1.7% for the week.
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.