Market Outlook Summary — Nov 2024
Macroeconomic Events and Risks
In the US, nonfarm payrolls surged by 227,000 in November, a significant increase from the previous month, although the unemployment rate edged up to 4.2%. Wage growth also exceeded expectations with a 0.4% rise for the month, and 4.0% year-over-year. Consumer inflation rose slightly at 2.7%, driven largely by rising shelter costs, while the Federal Reserve lowered interest rates by 25 basis points, signaling fewer cuts in 2025. Tensions over trade resurfaced, with President Trump threatening tariffs on imports from Canada, Mexico, and China, a move that could disrupt existing trade agreements and escalate inflation risks.
In Europe, inflation rose to 2.3% in November, with services inflation remaining high. The European Central Bank cut its key interest rates further to 3.00%, reflecting continued concerns about economic growth. Investors are pricing in further rate cuts through 2025, particularly in response to persistent inflationary pressures and weaker economic signals.
Geopolitical Events and Risks
President Trump and his transition team are working on a plan to facilitate negotiations between Ukraine and Russia, with the aim of reaching a peaceful resolution to the conflict. Trump has suggested that both sides may need to make compromises to achieve peace. On the trade front, Trump has threatened to impose tariffs on imports from Canada, Mexico, and China, which could disrupt trade relationships and contribute to inflation risks. Additionally, sanctions targeting Russian oil exports have had limited impact on the global oil market so far.
Market Trends
US equity markets experienced mixed performance. The S&P 500 dropped by 0.8%, with tech stocks rallying while cyclical stocks underperformed, partly due to tariff concerns. Meanwhile, European stocks rose, particularly Germany’s DAX, benefitting from a weaker euro and a dovish ECB stance. Emerging markets saw modest gains, with Hong Kong’s Hang Seng and Japan’s Nikkei posting slight increases.
In the bond market, US Treasury yields rose in response to a more hawkish Federal Reserve stance and concerns over potential inflation from Trump’s trade policies. The 10-year US Treasury yield increased to 4.51%, up from 4.37%, and the 2-year yield rose to 4.35%. In Europe, bond yields generally fell, with the German 10-year yield dropping to 2.25%, reflecting the ECB’s continued dovish approach.
In commodities, gold dropped by 1.0%, trading sideways after peaking in October, while oil prices remained steady. Bitcoin surged 9.0% over the month, hitting an all-time high as expectations of a pro-crypto administration under Trump grew.
Currency Trends
The US Dollar Index increased by 1.7%, with the US dollar gaining against most currencies. The euro weakened by 2.0% against the dollar, while the Canadian dollar and Japanese yen both saw significant declines against the greenback.
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