Our Multi-Asset Solutions team produce a weekly market recap which aims to summarise the previous week’s major events and developments that may impact markets. They try to include points that may aid you in your decision making or conversations with clients. This is supplemented by a market data sheet, offering a summary of financial market performance. Last week’s summary is below. 










The UK 


The UK government announced tax cuts for workers, incentives for business investment, and measures to support the housing market in its fall budget. The Office for Budget Responsibility (OBR) forecast that the economy would expand 0.6% this year but slashed its growth forecasts for 2024 and 2025 by about half to 0.7% and 1.4%, respectively.






The US 


The holiday week – markets were shuttered Thursday in observance of the Thanksgiving holiday and closed early Friday – 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. A sharp drop in highly volatile civilian aircraft orders was largely to blame, but orders excluding aircraft and defence purchases – typically considered a proxy for business investment – also fell slightly for the second month in a row.

On Friday, S&P Global released its estimates of growth in business activity in November, which indicated that a pickup in the services sector – the fastest in four months – had compensated for a bigger-than-expected slowdown in manufacturing. However, S&P also noted that “relatively subdued demand conditions and dwindling backlogs led firms to cut their workforce numbers for the first time since June 2020.”








European Central Bank (ECB) policymakers 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. ECB President Christine Lagarde said rates could be steady over “the next couple of quarters,” while France’s François Villeroy de Galhau said rates had reached a plateau where they would probably remain for the next “few quarters.” Belgium’s Pierre Wunsch said the ECB was likely to stand pat both in December and January. Separately, the minutes of the ECB’s October meeting revealed that policymakers insisted that another rate hike should be kept on the table, even if further policy tightening was not part of the main scenario.

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. The HCOB Flash Eurozone Composite Purchasing Managers’ Index (PMI) Output Index reading was 47.1, up from a three-year low of 46.5 in October. PMI readings less than 50 signal a contraction.









A hot October consumer inflation print stoked speculation about further monetary policy normalisation by the Bank Japan (BoJ). Private sector activity stalled in November, according to flash PMI data, largely due to further deterioration in business conditions in manufacturing.

Against this backdrop, the yield on the 10-year Japanese government bond (JGB) rose to 0.77%, from 0.75% at the end of the previous week. The BoJ reduced its JGB purchase operations for the second straight week. In the currency markets, despite initially strengthening to its highest level in over two months amid general weakness in the greenback, the yen finished the week only slightly stronger at JPY 149.4 against the US dollar, compared with 149.6 at the end of the previous week.

Japan’s core consumer price index (CPI) accelerated for the first time in four months in October, rising 2.9% year on year (y/y), following a 2.8% y/y increase the prior month. Although falling short of consensus expectations of a 3.0% rise, the hot CPI print showed that inflation continued to hover above the BoJ’s 2% target for the 19th straight month and fuelled speculation that tighter monetary policy could be imminent in Japan.

However, while the BoJ has tweaked its yield curve control (YCC) framework to allow JGB yields to rise more freely (but effectively only up to 1%), the central bank has indicated that it intends to wait for stronger wage growth to come through before considering removing YCC or lifting interest rates from negative territory. Evidence of sustained wage growth could be provided by next year’s “shunto,” or annual spring wage negotiations, which some investors believe could mark a pivotal point in the BoJ’s monetary policy trajectory.













Equity Markets 


Last week, the MSCI All Country World Index (MSCI ACWI) rose 1.0% (16.7% YTD).

In the US, the S&P 500 Index closed 1.0% higher (20.5% YTD) over a quiet holiday-shortened trading week. The week brought one carefully watched third-quarter earnings report, with shares in artificial intelligence chipmaker NVIDIA – recently, the world’s sixth-largest company by market capitalisation – falling after the company beat earnings and revenue estimates but issued cautious guidance because of export restrictions to China.

NVIDIA’s weakness was reflected in the underperformance of the technology-heavy Nasdaq Composite Index – adding 0.9% (37.2% YTD) – but growth stocks outperformed value stocks overall and large-caps outperformed small-caps. The Russell 1000 Growth Index returned 1.1% (36.7% YTD), the Russell 1000 Value Index 1.0% (4.7% YTD) and the Russell 2000 Index 0.6% (4.0% YTD).

In Europe, the MSCI Europe ex UK Index gained 1.0% (12.7% YTD) amid hopes that central banks would start cutting interest rates in the first half of next year. Major stock indexes advanced. Germany’s DAX Index firmed 0.7% (15.1% YTD), France’s CAC 40 Index put on 0.8% (16.0% YTD) and Italy’s FTSE MIB Index rose 0.6% (30.3% YTD). Switzerland’s SMI Index ended up 1.3% (4.6% YTD). The euro was little changed versus the US dollar, ending the week at USD 1.09 for EUR.

In the UK, the FTSE 100 Index declined -0.1% (4.1% YTD) and the FTSE 250 Index lost -0.5% (1.0% YTD). The British pound appreciated versus the US dollar, ending the week at USD 1.26 for GBP, up from 1.25.

Japan’s stock markets registered muted returns for the week. The TOPIX Index was broadly flat (29.4% YTD) and the TOPIX Small Index advanced 0.9% (22.7% YTD). Early in the week, the Nikkei 225 Index rose to its highest level since 1990, boosted by a strong domestic corporate earnings season, with manufacturers’ earnings benefiting from weakness in the yen and easing supply chain constraints. Expectations that US interest rates had peaked also supported sentiment and notably pushed growth stocks higher.

In Australia, the S&P ASX 200 Index retreated -0.1% (5.5% YTD) in the quiet Thanksgiving week. Australian government bond yields moved higher with the curve largely unchanged. The Australian dollar strengthened against the US dollar by 0.8% due to narrower interest rate differential.






Emerging Markets and other Markets 


MSCI Emerging Markets Index closed 0.5% higher (5.3% YTD), with a positive contribution to performance from the stock markets of Taiwan, India, South Korea and Brazil and a negative contribution from that of China.

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. The Shanghai Stock Exchange Index lost -0.4% (1.1% YTD) and the blue-chip CSI 300 Index decreased -0.8% (-6.4% YTD). In Hong Kong, the benchmark Hang Seng Index gained 0.7% (-7.9% YTD).

In Hungary, the National Bank of Hungary (NBH) held its regularly scheduled meeting on Tuesday and reduced its main policy rate, the base rate, from 12.25% to 11.50%. The NBH also reduced the overnight collateralised lending rate – the upper limit of an interest rate “corridor” for the base rate – from 13.25% to 12.50%. In addition, the central bank lowered the overnight deposit rate, which is the lower limit of that corridor, from 11.25% to 10.50%. These rate cuts were widely expected.

According to the central bank’s post-meeting statement, “The widespread and general decline in domestic inflation continued in October.” Policymakers also noted that “core inflation slowed across a wide range of products and services” and that the “three-month annualised change in core inflation, an indicator better capturing underlying inflation in the current situation, fell below 3%.” In addition, central bank officials restated their belief that domestic CPI inflation and core inflation “will continue to decrease” due to the “strong disinflationary effect” stemming from “tight monetary policy, the downward pressure on prices from the Government's measures to strengthen market competition, lower commodity prices compared to the previous year and subdued domestic demand.”

In Colombia, investors have been hit with a barrage of unexpected fiscal developments in recent days. For example, according to EXM Capital  emerging markets sovereign analyst Aaron Gifford, the government reported that the economy contracted -0.3% in the third quarter versus expectations of a 0.5% increase in GDP growth. Shortly thereafter, President Gustavo Petro stated that he believes the country’s fiscal rule – which is intended to contain government spending – needs to be dropped in order to increase public investment. Gifford notes, however, that Petro lacks support in Congress to modify the fiscal rule.

In addition, the country’s Supreme Court struck down part of the 2022 tax reform that denied oil companies the ability to deduct royalties from tax payments. This measure was expected to increase government revenues. As a result of the Supreme Court’s ruling, Gifford believes that the government will need to adjust its budget estimates.





Fixed Income Markets 


Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.1% (2.8% YTD), Bloomberg Global High Yield Index (hedged to USD) 0.9% (8.4% YTD) and Bloomberg Emerging Markets Hard Currency Aggregate Index 1.0% (4.1% YTD).

Slowing growth signals and dwindling inflation fears may have contributed to strong demand for a USD 16 billion auction of 20-year US Treasury bonds on Monday. The healthy bid-to-cover ratio appeared to help assuage worries over a weaker auction of 30-year Treasuries earlier in the month and drive down the yield on the benchmark 10-year US Treasury note to an intraday low of 4.37% on Wednesday – its lowest level in over two months. Yields rallied to close the week higher on Friday, however. Over the week, the 10-year Treasury yield increased 3 basis points (bp), up to 4.47% from 4.44% (up 59bp YTD). The 2-year Treasury yield increased 6bp, up to 4.95% from 4.89% (up 52bp YTD).

European government bond yields edged higher. The yield on Germany’s 10-year bund increased 5bp over the week, ending at 2.64% from 2.59% (up 8bp YTD), and climbing from a more than two-month low of 2.52% earlier in the week. Yields rose after reports that Germany intends to suspend debt limits for the fourth consecutive year and on statements suggesting that ECB policymakers are determined to keep monetary policy tight for the time being. French and Swiss bond yields also climbed.

In the UK, the 10-year gilt yield increased 18bp, to 4.28% from 4.10% (up 62bp YTD), after a PMI unexpectedly rose into positive territory in November.

The rest of the US fixed income market was generally quiet over the holiday week. Spreads in the investment-grade corporate bond market tightened on Monday amid limited issuance and remained largely unchanged on Tuesday before the Thanksgiving holiday. Monday’s issuance was oversubscribed.

High yield bonds traded higher on Monday amid solid equity performance and the successful auction of 20-year Treasuries. Trade volumes were light, although buyers showed a preference for higher-quality below investment-grade bonds. The primary market was quiet with no new deals expected until after the holiday. Similarly, the leveraged loan market was mostly unchanged on light volumes.