Weekly Overview 18. – 24. Nov 2024

The content of this post does not constitute financial advice. It is intended for information and education purposes only.

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The Week in Global Markets

Financial markets summary:

– EUROPE: The performance of the main European stock indices was mixed this week, likely driven by the negative macro releases. Specifically, the flash Purchasing Managers Indices (PMI) for November indicated that Germany and France are continuing to drag down business activity and output in the euro area. In France, output dropped at the fastest pace since January, with pessimism clearly taking hold in business surveys. Meanwhile in Germany, the economic weakness has now spread to the service sector again – which started to contract after 9 months of expansion. Goods production is also falling and manufacturers themselves are suffering from a lack of incoming new work. What’s even worse is that inflationary pressures have picked up across Germany midway through Q4 with both input costs and output prices rising the quickest in 3 months. Additionally, German gas prices are rising amid rapidly depleting gas reserves, lower-than-usual temperatures and looming supply cuts from Russia. At the EU level, gas storage has dropped below the 5-year average. This is expected to keep negatively affecting energy-intensive industries. The euro plunged further this week, temporarily dropping below 1.04 US dollars per euro, while German 10-year government bond yields declined by 11bp. The UK FTSE 100 stock index outperformed its European benchmark peers this week, rising nearly 2.5%. As inflation readings returned back above the 2% target level, it seems unlikely that the Bank of England will cut rates further by the end of 2024. Markets are now only pricing in 2 rate cuts for 2025. The pound depreciated further against the USD.

– UNITED STATES: Optimism returned this week to the US stock market as investors focused on a bit more positive macro releases and further policy expectations as more appointments of the upcoming US administration were being announced. Notably, Donald Trump confirmed that billionaire and founder of hedge fund Key Square Capital Management Scott Bessent will be nominated for Secretary of the Treasury. Bessent’s macro views on the US economy can be summarized as the so-called “3-3-3” approach: a) cutting the budget deficit to 3% of GDP by 2028; b) achieving a GDP growth of 3% per annum; c) adding 3 million barrels of oil per day in US output. His belief is that globalization has caused an unsustainable wealth gap in the US, enriching mainly the top 50% of Americans and that deregulation and more inclusive and organic growth can help address this issue. One contributor to the positive market performance this week was the decline in initial jobless claims for the prior week, despite the 3-year peak in continuing claims. Additionally, existing home sales rose due to strong economic growth despite the ongoing mortgage rate rise. The small-cap index Russell 2000 recovered its losses from last week and is now up almost 10% since the US election. For the fifth quarter in a row (with almost all Q3 results in as of Friday), companies in the S&P 500 are expected to post YoY earnings growth – an average earnings gain of 5.8% over Q3-2023, according to FactSet. Reminder: due to Thanksgiving day, US markets will be closed on Thursday, November 28th and will have an early close on Friday, November 29th.

– ASIA-PACIFIC: In Japan, both the Nikkei 225 and the TOPIX reversed course this week, ending the week lower compared to the one prior. The 10y JGB yield approached a nearly 13-year peak of 1.1% on above-target inflation, deteriorating geopolitical conditions, and BoJ expectations for higher inflationary pressures due to wage growth. The PMI readings showed that the service sector is still in expansion, but manufacturers are still struggling with declining output. In China, stocks were also down on a pessimistic investor outlook. While loan prime rates remained steady as expected, following a number of fiscal a monetary measures to stimulate the economy, there is likely a number of other initiatives that will only be revealed in 2025 once the new US administration is in office and its full suite of tariffs and other policies come into force.

– BITCOIN: BTC reached another all-time high this week against the USD – at $99.8k. However, it did reverse some of the gains by Sunday (at the time of writing trading around $96.2k) – ironically, after CNBC “Mad Money” host Jim Cramer posted on X that he would encourage buying Bitcoin and that the largest cryptocurrency is a “winner”. However, this correction is likely to be only short-term, while the medium to long-term trend is still bullish. At the SEC, Commissioner Jaime Lizárraga has announced his intention to step down from the agency after the resignation of Chair Gary Gensler. Lizárraga advocated for stronger regulation of the cryptocurrency market but with his and Gensler’s departures, the Trump administration is likely to appoint new SEC leadership which more closely aligns with his view that the US should become the “crypto capital of the planet“.