Stocks Extend Gains On Light Trading Week
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US equities closed higher over a quiet holiday-shortened trading week in celebration of Thanksgiving. The S&P 500 rose 1%, the Nasdaq 100 rose 0.91%, and Dow Jones also increased by 1.27%. Demand for riskier assets has remained solid this month as investors bet the US Federal Reserve is done with monetary tightening and that a resilient labor market will help ease the world’s biggest economy into a soft landing. The holiday week also featured a couple of notable economic releases. On Wednesday, the Commerce Department reported that durable goods orders had dropped 5.4% in October, marking the second-biggest decline since April 2020.
The STOXX 600 Europe increased by 0.91% last week amid hopes that central banks would start cutting interest rates in the first half of next year. An S&P Global purchasing managers’ survey showed that Eurozone business activity fell for a sixth month running in November, a sign of a looming recession. European Central Bank reiterated that the fight to curb inflation was not over and sought to disabuse financial markets of expectations that the central bank would soon cut interest rates.
The CSI 300 Index dropped 0.84% for the week. Stocks in China retreated as news that Beijing may introduce fresh stimulus measures for the property sector was not enough to offset broader economic woes. Chinese regulators formulated a funding plan for property developers in its latest efforts to consolidate growth as the country grapples with an ongoing property crisis. The list, which reportedly includes 50 private and state-owned developers, will act as a guide for financial institutions to deliver a range of financing measures to strengthen balance sheets, according to Bloomberg.
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China is contemplating a significant move to address its property crisis by potentially permitting banks to provide unsecured short-term loans to qualified developers. This marks a notable shift in policy as part of a broader set of measures aimed at supporting the real estate industry, a sector currently impeding growth in the world's second-largest economy.
In contrast to conventional loans for builders, which typically necessitate collateral such as land or assets, this proposed financing option would be unsecured. It is designed to serve day-to-day operational needs, potentially unlocking capital for debt repayment.
Over recent months, we have closely monitored an exchange-traded fund comprising USD bonds issued by Chinese developers, some of which are trading at remarkably low levels, between 5 and 10 cents on the dollar. The ETF has experienced a significant decline from its peak of 80%, a threshold often associated with market bottoms.