This came after policymakers, Christopher Waller and Mary Daly, signalled that they would support a December rate cut. In addition, the latest economic data added further weight to expectations of a cut, with retail sales for September coming in softer-than-expected while the Conference Board’s November consumer confidence index fell to its lowest level since April. Such expectations pushed Treasury yields slightly lower for the week, with the 10-year note ending at 4.02%.
Markets were shut for the Thanksgiving holiday on Thursday and trading volumes were thin in the following session. Equity indices managed to still log gains, with the S&P 500 adding 3.7%, the Dow Jones Industrial Average adding 3.2%, while the Nasdaq Composite jumped 4.9%. Tech stocks saw some recovery from recent declines around valuation concerns, while some retailers also increased on improved guidance. For the month of November, the S&P 500 was up 0.5% and the Dow Jones rose 0.3%, small increases but still their seventh consecutive monthly rise. In contrast the Nasdaq dropped 1.5%, its first loss since March, in a month which saw growing concerns around an artificial intelligence bubble.
European markets also advanced on the Fed rate cut hopes, with the STOXX 600 index rising 2.4% for the week, while regional indices also notched gains. There was also additional support on signs that Russia and Ukraine could be moving closer to a peace deal. However this weighed on defensive stocks. Basic resources was the best performing sector of the week, up 5.7%, helped by copper prices reaching record highs. Banks also saw strength, as the UK autumn budget spared the sector from tax hikes. UK gilt yields declined, primarily as the Office for Budget Responsibility leaked some details ahead of the official budget statement.
US rate cut optimism also fed through to Japan, and the bounce back in tech stocks was also evident. For the week the Nikkei 225 added 3.4%, while the yen was little changed against the US dollar. Tokyo’s core inflation held steady at 2.8% year-on-year in November, adding to expectations that the Bank of Japan could hike its interest rates in the near-term. In response the yield on the 10-year Japanese government bond ticked up and neared a 17-year high. In China, the Shanghai Composite grew 1.4%, while Hong Kong’s Hang Seng added 2.5%. Tech stocks led gains, offsetting concerns around economic growth, whereby China’s industrial sector profits unexpectedly declined in October.