Welcome to this week’s Market Roundup, where we explore the latest financial trends, economic insights, and key global developments. This week was marked by notable divergences in equity market performance, political turbulence in Europe, and central banks adopting dovish tones. Growth stocks surged in the U.S., political shifts stirred European markets, and optimism about stimulus lifted Asian equities. Let’s dive into the highlights.

Global Markets: A Divergence in Momentum

Equity markets experienced a divergence in momentum as growth stocks in the U.S. outperformed, European bonds faced pressure due to political unrest, and Asian markets gained on stimulus hopes. While the U.S. and Chinese markets saw optimism around economic policies, Japanese equities benefited from a weakening yen that boosted exporters. Cryptocurrencies also made headlines, reaching historic highs, and U.S. Treasuries rallied on declining yields, reflecting the market’s dovish expectations.

Review of Last Week: U.S. Markets – Growth Stocks Take the Spotlight

U.S. markets continued their upward trajectory, with the S&P 500 rising nearly one percent and the NASDAQ Composite climbing over three percent, driven by growth stocks. In contrast, the Russell 2000 fell slightly, underperforming after weeks of gains.

Macroeconomic data painted a picture of resilience. November nonfarm payrolls rebounded to 227,000, exceeding expectations and recovering from hurricane disruptions in October. Although unemployment edged up to 4.2%, annual pay growth held steady at 4%. The University of Michigan’s Consumer Sentiment Index increased for the fifth consecutive month, reaching 74. Meanwhile, Federal Reserve officials hinted at a 25-basis-point rate cut during the December meeting, spurred by steady labor market improvements and moderated inflation concerns.

Treasury yields declined across all maturities, driven by strong demand and the market’s dovish stance toward the Federal Reserve’s outlook.

Europe: A Rollercoaster of Politics and Policy

In Europe, the STOXX Europe 600 advanced two percent, supported by impressive rallies in Germany and Italy, with the DAX and Ftse Mib climbing nearly four percent each. France’s CAC 40 rose by almost three percent, demonstrating resilience despite political challenges.

Economic data provided mixed signals. Eurozone retail sales fell by 0.5% month-over-month in October, and Germany's industrial output contracted by 1%, missing recovery expectations. The European Central Bank (ECB) signaled a shift in its rate decision-making process, incorporating forward-looking risk assessments over strict data dependency.

French political turmoil made headlines as Prime Minister Michel Barnier's government fell after a no-confidence vote. This widened yield spreads on French bonds, though stocks remained relatively unaffected. President Macron announced plans to stabilize the situation with a new government.

United Kingdom: Cautious Optimism Amid Monetary Policy Hints

The FTSE 100 recorded a modest gain, reflecting the cautious sentiment among investors. Improvements in retail activity and a rebound in consumer sentiment signaled recovery, yet the housing market struggled with weak mortgage approvals driven by higher borrowing costs.

The Bank of England (BoE) maintained a dovish outlook, with Governor Andrew Bailey suggesting potential interest rate cuts in 2025, contingent on economic conditions aligning with projections. This has positioned the BoE as a central bank to watch amid slowing growth and easing inflation pressures.

Japan: Riding the Yen’s Tailwinds

Japanese markets rallied last week, with the Nikkei 225 rising over two percent and the TOPIX advancing nearly two percent. A weaker yen supported export-driven industries, providing a much-needed boost to the economy.

While nominal wages increased by 2.6% year-over-year in October, household spending fell by 1.3%, reflecting mixed economic momentum. The Bank of Japan’s (BoJ) policy direction remains ambiguous, with Governor Ueda emphasizing the need to monitor wage trends into 2025. Market participants remain divided on whether the BoJ will raise rates in December or January.

China: Stimulus Hopes Energize Markets

Chinese equities saw gains as the Shanghai Composite advanced by over two percent and the CSI 300 rose nearly one and a half percent. Optimism stemmed from expectations of new stimulus measures and resilient manufacturing data. The official manufacturing PMI edged up to 50.3, signaling expansion.

Despite these positives, property market challenges persisted, with home sales by major developers declining 6.9% year-over-year in November. Attention now turns to the Central Economic Work Conference starting December 11, where policymakers are expected to outline growth targets and strategies for stabilizing the struggling property sector.

What to Watch This Week

• China’s Central Economic Work Conference (December 11-12): A key event where fiscal measures to boost consumption, stabilize the property sector, and enhance infrastructure investment will be announced.

• U.S. Consumer Price Index (CPI) Report (December 12): This critical inflation reading will set the tone for the Federal Reserve's upcoming policy decision.

• Eurozone Industrial Production (December 13): A vital metric for gauging the region’s economic resilience amid manufacturing struggles.

• Bank of Japan Monetary Policy Meeting (December 19): All eyes will be on potential rate hikes or continued dovishness.

• U.S. Housing Starts and Permits (December 20): These figures will provide insight into housing market activity in a high-interest-rate environment.

FAQs

1. How do declining Treasury yields affect the stock market?
Lower Treasury yields often make stocks more attractive as the opportunity cost of investing in fixed income decreases. This tends to support equity valuations, particularly in growth sectors.

2. Why is China’s PMI important for global markets?
China's PMI reflects the health of its manufacturing sector, a key driver of global trade. An expanding PMI signals stronger demand, influencing commodities and trade-sensitive equities worldwide.

3. What are the implications of France’s political turmoil?
Political unrest in France can increase bond yield spreads, affecting European financial markets. However, its limited impact on equities shows that investors remain focused on broader economic fundamentals.

4. Why is the Federal Reserve considering a rate cut?
The Fed is signaling a rate cut due to moderated inflation pressures and steady labor market conditions, aiming to support sustained economic growth.

5. How does a weaker yen benefit Japan’s economy?
A weaker yen boosts Japan’s export-heavy industries by making their products more competitive abroad. This often leads to improved corporate earnings and supports equity markets.

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