Weekly Overview 2. – 8. Dec 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: Most major European benchmark stock indices advanced this week even as political uncertainty in France still impacted the bond markets. Investors appear to be looking forward to an anticipated policy easing this week, as the ECB is likely to continue its rate-cutting cycle. They also seemed unperturbed as the DAX index crossed the 20k mark for the first time ever, despite continuing weakness in German industry as indicated by the final PMI figures, industrial output data and the negative development in the construction sector. Factory orders also dropped, indicating that subdued demand may persist and have further negative repercussions for German industries. ECB chief economist hinted at the possibility of shifting from a data-driven policy setting to one focused on forward-looking risk assessment. In the UK, the FTSE 100 gained a lot less compared to the major European counterparts. However, BoE governor Bailey gave an interview pointing to potential 4 rate cuts next year. Both the euro and the pound appreciated slightly against the US dollar this week.

– UNITED STATES: Major financial institutions focused on the macro data releases this week, commenting how they prove that the US economy is on a stable footing before the new administration takes over. The US consumer appears to be in good shape and the labor market seems rather resilient – job growth bounced back with 227k jobs added in November, which was better than expected. Unemployment did, however, tick up to 4.2%. But in addition to that, job openings had a good month, with 7.74m reported in October, which was higher than in September. Layoffs are more or less stable, but voluntary job quits have gone up. Some comments from Fed Chair Powell caused doubts about what the central bank’s next move might be – particularly in light of the strength of the US economy. He noted that in that context, they might try to be a bit more cautious as they try to find neutral. Despite all of that, all 3 major indices – the S&P 500, the Dow and the Nasdaq kept hitting new all-time highs this week. Many analysts keep expressing concerns that this level of stretched valuations, which by some measures already exceeds what was observed in the late 1990s/early 2000s, may not be sustainable for longer. Even so, major Wall Street banks came out with their projections for next year’s performance of the S&P 500 and most of them see further increases and higher levels by year-end.

– ASIA-PACIFIC: Both the Nikkei 225 and the TOPIX index gained week-on-week, as the yen weakened slightly against the US dollar. The JGB 10y yields remained steady. Expectations are that the Bank of Japan might be split on when to hike next, with even chances of doing it in December and January. In China, the outlook is that there will be new stimulus coming up soon, which once again brought optimism to the stock market. That was further supported by strong manufacturing data, with factory activity growing for the second month in a row. However, the property sector is clearly still struggling, as new home sales dropped again in November.

– BITCOIN: The largest cryptocurrency finally hit the psychological milestone of $100k this week. The new all-time high was achieved on the 5th of December at the $103,900.47 level, after which BTC retreated a bit back below $100k, hitting that mark again a few more times. One of the major drivers was likely the announced nomination by Donald Trump of Paul Atkins to be the new SEC Chair. Atkins is known for taking strong de-regulation positions and is expected to provide relief for the crypto sector. If past halvings are a credible guide, then there is more to be expected in terms of BTC rise in the coming months – this could be just the beginning of a strong uptrend that could bring BTC to much higher levels, according to analysts. Fund flows also show that both retail and institutional investor interest has been on the rise. In fact, the demand for Bitcoin has grown much more than the demand for gold. However, it is worth reminding individual investors at this point once again that BTC remains a highly volatile crypto asset whose market is likely very concentrated (there are analyses showing that 1.94% of total addresses hold 92.73% of all BTC). As such, it carries significant risk for any investor’s portfolio.