Market and Macro Overview for the Week (22nd – 29th Nov 2024)

Macro Trends

Wall Street climbed to new highs last week, driven by optimism following the ceasefire between Israel and Hezbollah and growing expectations of a Federal Reserve rate cut on December 18. In contrast, European stock markets lagged, weighed down by persistent economic challenges in the Eurozone. The region's bleak outlook could prompt the European Central Bank to lower rates again in December. However, market stability remains precarious, particularly amid Germany's economic difficulties and France's political unrest. Concerns over potential government censure and the risk of failing to pass next year’s budget further exacerbate tensions. Poor liquidity was apparent on Thursday and Friday as markets struggled to digest the geopolitical implications.

Stock Markets

In a holiday-shortened week, U.S. stocks posted another round of gains, with the Dow Jones Industrial Average, S&P 500 Index, and S&P 400 MidCap Index reaching record intraday highs. The small-cap Russell 2000 Index also hit a new intraday high of 2,466.49, surpassing the previous record set over three years ago. In Europe, the EURO STOXX 50 rose 0.32%, shrugging off concerns about U.S. trade tariffs and interest rate uncertainty. Performance across major European stock indexes was mixed: Germany's DAX climbed 1.57%, Italy's FTSE MIB dropped 0.70%, and France's CAC 40 slipped 0.29%. Meanwhile, the UK's FTSE 100 edged up by 0.24%. Japan’s stock markets ended the week with modest declines, as the Nikkei 225 Index slipped 0.2% and the broader TOPIX Index dropped 0.6%. Geopolitical risks dampened global investor sentiment, prompting a shift toward safer assets. The strengthening yen is another challenge for Japan’s export-dependent industries.

Fixed Income and STIRs

Former President Trump’s nomination of Bessent as Treasury leader contributed to a sharp decline in long-term Treasury yields last week. The yield on the 10-year note fell 22 bp, reaching its lowest level since October 24, as expectations grew for a Federal Reserve rate cut in December. European and UK bond markets largely mirrored the downward trend in yields. In Japan, a hotter-than-expected domestic inflation reading fueled speculation over the timing of the Bank of Japan’s (BoJ) next interest rate hike, with forecasts split between December and January. The Tokyo-area core consumer price index (CPI), considered a leading indicator of nationwide inflation, increased by 2.2% year-over-year in November, surpassing consensus estimates and accelerating from October’s 1.8% growth. The RBNZ delivered a 50 bp rate cut largely as expected, keeping the door open to further stimulus.

FOREX Markets

The U.S. Dollar Index (DXY) faced headwinds this week, as the likelihood of a December Federal Reserve rate cut rose by roughly 10%. This shift was driven by the release of the Fed’s meeting minutes and stronger-than-expected jobs data. Despite the dollar's weakness, EUR/USD could not break through the 1.0600 level, while GBP/USD (Cable) gained traction, climbing back above the 1.2700 mark. Meanwhile, the yen strengthened significantly, reaching around JPY 150 against the USD, down from the upper JPY 154 range the previous week. This movement was supported by its safe-haven appeal and better-than-expected domestic inflation data.

Cryptocurrency

Bitcoin (BTC) struggled to break past the psychological barrier of $100,000 last week, displaying heightened volatility after reaching a new all-time high of $99,700 earlier in the week. Meanwhile, a notable shift in the cryptocurrency market narrative suggests that the recent underperformance of Ether (ETH) relative to Bitcoin may be reversing. ETH, the second-largest cryptocurrency by market cap, rose nearly 8% to $3,600 over the week, while Bitcoin dipped 1.55%. Spot ETFs mirrored this trend: bitcoin-backed exchange-traded products saw net outflows of $500 million, while ether-backed ETFs recorded net inflows of $130 million. Ether has yet to reclaim its all-time high of $4,800, reached at the end of 2021, whereas Bitcoin has surpassed its previous records for several months.

Commodities & Energy

The ceasefire between Israel and Hezbollah triggered a decline in oil prices last week as geopolitical tensions eased, eroding part of the risk premium. Investors adopted a cautious, wait-and-see approach ahead of the OPEC+ meeting, initially set for this weekend but now rescheduled for December 5. This meeting may delay the planned production increase, given the prevailing low oil prices. Base metal prices remained largely steady, with zinc being the notable exception, climbing to USD 3,130 (cash) in London. Bullish sentiment is also evident across the industrial metals market, fuelled by uncertainties over U.S. trade policy under the Trump administration, which is pushing for stricter tariffs on imports. Meanwhile, gold prices retreated, pressured by a strengthening dollar.

What to watch next week

MON - Chinese Caixin Manufacturing PMI (Final), EZ Unemployment, US ISM Manufacturing PMI & Construction Spending / Speakers: Fed’s Williams, Waller; ECB’s Lagarde TUE - Swiss CPI, US JOLTS / Speakers: Fed’s Goolsbee, Kugler; ECB’s Cipollone WED - Australian GDP, US ADP, ISM Services PMI & Factory Orders, Fed Discount Rate Minutes / Speakers: Fed’s Powell, Musalem; ECB’s Lagarde, Cipollone; BoE’s Bailey THU - Swiss Unemployment, US Challenger Layoffs & Weekly Claims, OPEC+ / Speakers: Fed’s Barkin, BoJ’s Nakamura, BoE’s Greene, ECB’s Patsalides FRI – German Industrial Output, Canadian Unemployment, US NFP & Uni. of Michigan prelim. / Speakers: Fed’s Bowman, Goolsbee, Hammack & Daly

MARKETS WEEKLY PRICING COMPARISON