The week saw the Nasdaq Composite cross the 20,000 mark for the first time, rising 0.3% in its fourth consecutive weekly gain. Meanwhile, the S&P 500 and Dow Jones industrial Average ended down by 0.6% and 1.8% respectively. Entering the final weeks of what has been a solid year for US equity market returns, markets took a breather, with rising bond yields also weighing on performance. The yield on the 10-year Treasury note rose by a quarter percentage point to 4.398%, its biggest weekly gain since October 2023. Wednesday’s inflation report came in line with expectations, boosting the belief that the Federal Reserve will cuts interest rates by 25 basis points this week. However, the subsequent producer price report came in slightly hotter, with concerns that this could keep rates higher for longer next year.
The pan-European STOXX 600 snapped a three-week winning streak, falling 0.8%. Central banks took the stage, with the Swiss National Bank (SNB) cutting its key rate by 50 basis points to 0.5%, surprising markets who had expected just a quarter point cut. The SNB noted that inflationary pressures had further eased. Later on Thursday, the European Central Bank cut its deposit rate by 25 basis points, its fourth cut of the year. The UK FTSE 100 was down around 0.1% for the week, with the economy unexpectedly declining 0.1% in October. There were some signs of political stabilisation, with Francois Bayrou appointed as the new French prime minister, while Germany is set to have a vote of confidence on Monday, paving the way for February’s election.
Chinese equities were particularly weak on Friday as investors were left disappointed by a lack of details on supportive policy out of the Central Economic Work Conference. For the week overall, the Shanghai Composite ended 0.4% lower however, the Hong Kong Hang Seng gained 0.5%. The latest data out of China didn’t paint a particularly strong picture, with exports increasing by a lower-than-expected 6.7% last month, while imports dropped 3.9% and the producer price index remained in deflationary territory for its 26th month. Japan’s Nikkei was up around 1%, with a weaker yen on a growing possibility that the Bank of Japan may not hike rates this week. Meanwhile in Brazil, its central bank did hike rates on Wednesday, raising its Selic rate to 12.25% from 11.25% with increasing inflation expectations. The Bovespa index ended 1.1% lower.