In summary

•  Global equities enjoy a better week despite lingering post US-election interest rate worries
•  China woes weigh on the country’s equity markets as investors worry about perceived inadequate stimulus and US-China trade tariff risk 
•  US dollar notches up eighth week in a row of gains, but with it comes challenges for emerging markets in particular
•  Investors have more inflation data this week to focus on, as another US interest rate cut in December still hangs in the balances

Global equities enjoy a better week despite lingering post US-election interest rate worries

Global equities in aggregate generally had a better week last week with gains for both the US S&P500 and pan-European STOXX600 equity indices in local currency price return terms; a notable outlier however was China, where equities there were down over the week following a very poor session on Friday. On the whole, sentiment seemed to stabilise despite continued worries around the risks of higher-for-longer US inflation and interest rates which kept US bond yields and the US dollar currency both elevated. Turning to the week ahead, market volumes will likely be front-end loaded given US equity and bond markets will both be closed for the Thanksgiving holiday this coming Thursday.

China woes weigh on the country’s equity markets as investors worry about perceived inadequate stimulus and US-China trade tariff risk

Over in Asia the China CSI300 equity index last Friday fell -3.1% in price return local currency terms, its biggest one-day fall in over a month. Adding in another day’s -0.46% decline earlier today, the index has now notched up a cumulative -13.5% fall since its intraday peak back in early October. Investor concerns have appeared to deepen around: (1) US president-elect Trump’s return-to-power and what it might mean for US-China trade tariffs; as well as (2) a growing frustration over the lack of both the pace and scale of Beijing’s fiscal stimulus rollout so far. Last week in particular appears to have been a tipping point for some investors as a clutch of Chinese technology companies that reported last week failed to revive any sense of China market investor euphoria.

US dollar notches up eighth week in a row of gains, but with it comes challenges for emerging markets in particular

Turning to currencies, the US dollar has been in focus for investors lately. Last week the US dollar index (a currency index that tracks changes versus a basket of other key developed market currencies), capped an eight-week rally, the longest such rally since September 2023. The latest catalyst for US dollar strength has been the US election outcome, which has boosted US interest rate expectations on account of better economic growth but at the expense of stickier inflation and interest rate expectations. That dollar currency strength has significant impacts for the rest of the world given its global reserve currency status – including headwinds for emerging market economies given their reliance on both US dollar debt funding as well as international investment flows more broadly.

Investors have more inflation data this week to focus on, as another US interest rate cut in December still hangs in the balance

Finally, it seems investors have to continue to keep a watch on inflation signals. This week sees a continued focus on inflation after last week’s UK Consumer Price Index (CPI) data, and US CPI the week before that. The highlight this week is more US inflation data but this time it comes in the form of Personal Consumption Expenditures (PCE) data which is due out on Wednesday. The US Federal Reserve (Fed) has its next meeting outcome on 18 December, in just over three weeks’ time, and with hopes for another 25-basis points interest rate cut finely balanced (at a 60% probability of a cut earlier this morning), this week’s data will be an important market for the Fed as they deliberate between making another cut or pausing instead.

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References

Source: https://www.brooksmacdonald.com/individuals/resources/insights/weekly-market-commentary-global-equities-enjoy-better-week-despite-lingering