Indices

US stocks posted another profitable week thanks to the growing speculation about a slowdown in the pace of interest rate hikes by the Fed. Stock indices posted the biggest gains on Wednesday after Fed chief Jerome Powell hinted at the aforementioned slowdown at the December FOMC meeting. Even surprisingly good news from the labor market did not reverse the trend in the end. Despite the low appreciation the DJIA index entered the bull market territory at the end of November, closing more than 20% above the low hit in September 2022.

Stocks in Europe were helped by the lower-than-expected inflation data, which could also lead to a slower pace of interest rate hikes, but equity indices ended the week with mixed results. The pan-European STOXX Europe 600 ended the week 0.58% higher, France’s CAC 40 added 0.44%, Germany’s DAX lost 0.08%, and the UK’s FTSE 100 Index gained 0.93%.

Forex

The US dollar is again one of last week’s losers, losing ground against most of the world’s currencies. Analysts and traders are expecting less of a rate hike than expected after Wednesday’s speech by the Fed chief. Friday’s surprisingly good labour market news ultimately did little to help the dollar and the strengthening was more speculative in nature. The dollar index has in the past week approached the 104 points level, where it was last at the end of June, and markets are already starting to speculate about a drop below the 100-point level where the index was in April this year.

The Canadian dollar was another currency that lost significantly over the past week. Signs of an economic slowdown following Tuesday’s release of GDP data, coupled with the speculation that the BOC will also slow the pace of rate hikes, led to the Canadian dollar losing ground against most of the world’s currencies. “In a weak U.S. dollar environment, the Canadian dollar often lags,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. “You get paid more in the USD.”

Macro

The US economy created 263,000 non-farm jobs in November, beating the estimate of 200,000. Growth was particularly strong in leisure and hospitality, health care and government sectors, while retail trade, transportation and warehousing sectors declined. The unemployment rate remained at 3.7%.

The head of the US Federal Reserve said in a speech at the Brookings Institution on Wednesday that interest rates are likely to remain at higher levels for an extended period of time and the maximum interest rate is likely to be “a little higher” than previously estimated. But he also added that the Fed could move to slow down the pace of rate hikes as early as at the time of its meeting in mid-December this year.

The personal consumption expenditures price index, which is considered the main inflation gauge for the Fed, fell to 6.0% from 6.2% in October, while the core reading, which excludes food and energy costs, fell to 5.0% from 5.2%.

The Conference Board’s consumer confidence saw a drop to 100.2 points from 102.2, due to the inflation expectations.

Purchasing managers’ indices in manufacturing also fell, with the final reading from S&P Global dropping to 47.7 from 50.4, and the reading from ISM falling to 49 from 50.2, putting it in the contractionary activity range for the first time since May 2020.

Inflation in the Eurozone slowed for the first time in 17 months, falling from the record 10.7% to 10% year-on-year. On a month-on-month basis, prices fell by 0.1%.