Healthcare stocks were notably under pressure on Friday in response to Robert F. Kennedy Jr., a vaccine sceptic, being picked to lead the Health and Human Services Department. Meanwhile, Elon Musk was tapped to be co-head of a new Department of Government Efficiency, adding support to the Tesla ‘Trump trade’. However, the stock later lost ground and was ultimately lower for the week on news that consumer tax credits for electric vehicle purchases could be eliminated under the new government. For the week, the S&P 500 declined 2.1%, eroding some of the prior week’s gains. The Dow Jones Industrial average lost 1.2% while the Nasdaq Composite was down 3.2%.
After being somewhat overshadowed by the election, monetary policy re-emerged as a focal point for investors. The consumer price index rose 2.6% year-on-year in October from 2.4% in the prior month, while producer prices also picked up. On Thursday, Federal Reserve chair Jerome Powell delivered hawkish commentary, indicating that the current economic environment would allow the central bank to proceed carefully with rate cuts. This prompted traders to reduce their bets on a quarter percentage point cut at the next meeting in December, with CME’s FedWatch tool pricing it in at around 58% at the end of the week. This was reinforced by retail sales data, in which they climbed more-than-expected in October. In response, Treasury yields rose, with the 10-year note briefly hitting 4.505%, its highest level since late May, and ended the week at 4.439%.
European markets also declined on concerns around the new Trump administration and the implications on trade policy. The pan-European STOXX 600 declined 0.7% in its fourth consecutive weekly loss, while regional performance was mixed. Italy’s FTSE MIB actually managed to log a 1.1% advance, France’s CAC declined 0.9% while the German DAX managed to bounce back from losses earlier in the week to end flat. Minutes from last month’s European Central Bank meeting indicated that the quarter point cut was fuelled by “prudent risk management”. The UK FTSE 100 was slightly lower for the week, with the economy unexpectedly slowing in the third quarter, while annual wage growth excluding bonuses for the period was unchanged at 4.8%.
A number of Trump’s pick for his administration are seen as China hawks, putting further pressure on Chinese equities. Inflation data also failed to lift the mood. The consumer price index eased to 0.3% year-on-year in October, from 0.4% in the prior month, while producer prices once again remained in deflationary territory. In addition, other economic data released was mixed, with retail sales rising by a better-than-expected 4.8% in October while industrial production missed expectations. For the week, the Shanghai Composite dropped 3.5% and the Hang Seng lost 6.3%. In Japan, the Nikkei 225 declined 2.2% and was unable to benefit from the yen weakness. Declines in the yen could put pressure on the Bank of Japan to hike rates soon.