Weekly market recap

Your weekly global financial market newsletter

  • Donald Trump has won the presidential election, and the Republicans have secured a majority in Congress, gaining control of both the House of Representatives and the Senate. Since the election was expected to be close, few anticipated such a decisive outcome, and the markets reacted almost immediately. However, the actual impact of the presidency on the U.S. economy and global events remains uncertain.
  • While Trump’s victory is viewed as a positive signal for equity investors, not all companies are pleased with his plans to raise tariffs on Chinese goods to between 60% and 100%, and on other imports to between 10% and 20%. Many businesses, which rely heavily on supply chains outside the U.S. or directly in China, now face challenges in reducing their dependence on Chinese imports.
  • Additionally, measures to restrict immigration and increase tariffs may contribute to inflation, though this could be tempered by the strong dollar. Ultimately, the impact will depend on how quickly Trump can implement his proposed measures.

Indices

U.S. stocks reached new all-time highs during the week as investors reacted positively to the election results. The S&P 500 index posted its best weekly performance since early November last year, breaking the 6,000-point mark for the first time. Meanwhile, the DJIA recorded its 41st and 42nd record closes of the year, surpassing the 44,000-point milestone.

In contrast, European stocks reacted less favorably to Donald Trump’s election and its potential impact on international trade, losing ground. The pan-European STOXX Europe 600 ended 0.84% lower, France’s CAC 40 fell 0.95%, Germany’s DAX dropped 0.21%, and the UK’s FTSE 100 Index declined 1.28%.

US30
+4.61%
US100
+5.41%
US500
+4.66%
GER30
-0.21%

Commodities

One of the assets that did not react positively to the U.S. election results was precious metals, including gold. Gold had been declining since the end of the previous week, and its drop accelerated once it became clear that the election would be dominated by Republicans led by Trump. The U.S. Fed’s rate cut, which signaled a cautious approach to further monetary easing, did little to support gold prices. After falling below $2,650 per ounce, there was a slight upward correction, but the decline resumed on Friday.

Crude oil prices strengthened significantly at the beginning of the week, primarily due to OPEC+’s decision to postpone the planned increase in oil production by 180,000 barrels per day by one month, citing falling prices and weak demand. Another factor contributing to the price increase was rising geopolitical risks, including potential attacks by Iran on Israel, which heightened concerns about oil supply disruptions. Despite a price drop on Friday, as fears of supply disruptions from Hurricane Rafael in the Gulf of Mexico eased, oil posted a weekly gain. However, investors were disappointed by the scale of China’s stimulus measures, which they deemed insufficient.

Gold
-1.89%
Silver
-3.52%
BRENT
+1.05%
NATGAS
+0.23%

Forex

The U.S. dollar experienced a turbulent week, ending on a positive note due to election results, which markets believe favor the U.S. currency. Against the euro, the dollar posted its largest one-day appreciation since 2018 on Wednesday, only to weaken on Thursday after the central bank, following a planned rate cut, stated unequivocally that Trump’s election would not influence the Fed’s decision-making.

The euro, meanwhile, weakened over the past week, reaching its lowest level against the U.S. dollar since June. Investors are concerned about the potential impact of Trump’s proposed measures on European economies, despite the possibility that these effects may take longer to materialize than some optimists anticipate. If tariffs were to significantly impact the European economy, it could prompt the ECB to accelerate rate cuts, further weighing on the euro.

EUR/USD
-1.05%
USD/JPY
-0.22%
GBP/USD
+0.01%
USD/CAD
+0.66%

Macro

The top news of last week was the American elections, with the surprising result that Republicans secured control of both the presidency and Congress.

On Thursday, the spotlight shifted to central banks in the UK and the US, where monetary policy decisions were announced. The BoE cut rates by 0.25% for the second time this year, with the policy committee voting 8-1. According to BoE Governor Andrew Bailey, if the economy performs as expected, rates may continue to decline gradually.

The US Fed also cut interest rates by 0.25%, as anticipated, citing solid economic growth and slightly elevated inflation. The Fed reiterated its commitment to supporting maximum employment and achieving its 2% inflation target. Fed Chair Jerome Powell emphasized that the election results would not influence the Fed’s decision-making.

Meanwhile, investors paid less attention to final PMI results for the EU manufacturing sector (a slight increase but still below 50) and the services sector (faster-than-expected growth to 51.6). UK services PMI rose to 52, while US services PMI, reported by S&P Global, showed weaker-than-expected growth at 55. In contrast, ISM services PMI reported stronger-than-expected growth at 56, the highest since August 2022.

What to watch out for this week

  • In the week ahead, the election results and their potential impact on markets will remain the focus of investors' attention.
  • Additionally, U.S. inflation data will take center stage, with consumer prices expected to rise at the same rate as in September, while producer price growth is forecasted to accelerate slightly compared to September. Retail sales, on the other hand, are projected to decline slightly from September.
  • In Europe, key events include the second estimate of third-quarter GDP growth, German inflation data, and the ZEW sentiment index. In the UK, GDP growth is expected to slow in Q3, while unemployment is anticipated to rise slightly to 4.1%.

Disclaimer

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