Weekly market recap

Your weekly global financial market newsletter

  • Donald Trump's enthusiasm for stocks has waned after a week; gold has experienced its biggest weekly drop since June 2021, and the dollar has reached a two-year high.

Indices

The stock market’s excitement over the election of Donald Trump as the new president lasted exactly one week. As a result, the major stock indices hit new all-time highs on Monday. However, on a weekly basis, they recorded their worst performance since early September. For the rest of the week, investors were already focusing on macroeconomic data, particularly the Federal Reserve’s statement, which indicated it was unlikely to rush into further interest rate cuts. This sentiment clearly had a negative impact on the markets. Technology stocks and pharmaceutical sector shares were the biggest losers.

European stock markets also faced pressure from macroeconomic data in both the US and Europe. Moreover, uncertainty remains about the potential impact of the new US president’s measures on international trade. The pan-European STOXX Europe 600 closed 0.69% lower, Germany’s DAX was little changed, France’s CAC 40 declined 0.94%, and the UK’s FTSE 100 experienced a modest drop.

US30
-1.24%
US100
-3.42%
US500
-2.08%
GER30
-0.02%

Commodities

Gold experienced its worst weekly performance since June 2021, following a significant boost to the US dollar driven by remarks from Federal Reserve Chair Jerome Powell. On Thursday, Powell indicated that the US economy is not in such a state as to require rapid rate cuts. Consequently, expectations for further rate cuts in the US are diminishing, which is providing support for the dollar. Additionally, investors still anticipate that Trump’s policies could have an inflationary effect on markets, further reducing the Fed’s need to continue cutting rates.

Oil also saw a significant decline, weighed down by market concerns over the situation in China. Firstly, the Chinese government surprised markets negatively with a lack of fiscal measures to support the economy. Secondly, there is the looming threat of a trade war with the US following Trump’s election as President. Furthermore, OPEC+ countries have reduced their demand outlook for 2024 for the fourth consecutive month, citing the ongoing challenges in China.

Gold
-4.54%
Silver
-3.37%
BRENT
-3.83%
NATGAS
+5.77%

Forex

The US dollar was also positively influenced by Jerome Powell’s speech and the potential limitation of the Fed’s interest rate cuts, climbing to two-year highs. Better-than-expected retail sales and inflation reports suggest a resilient economy and a strong labour market. Additionally, the new President’s actions have led investors to believe that the Fed will not cut rates by 100 basis points in 2025, but by a maximum of 75 basis points.

The Japanese yen weakened again during the week, although it posted a relatively strong gain on Friday, breaking below the ¥155 per dollar level. Markets reacted to comments from Finance Minister Katsunobu Kato, who hinted at the possibility of intervention if the Japanese currency were to weaken too quickly.

 

EUR/USD
-1.68%
USD/JPY
+1.10%
GBP/USD
-2.33%
USD/CAD
+1.29%

Macro

In the US, inflation was closely monitored last week, including both consumer and producer inflation. Consumer prices rose broadly in line with expectations, with the annual inflation rate increasing to 2.6% in October (up from 2.4% in September), mainly driven by persistently high housing costs. On a month-on-month basis, prices rose as expected by 0.2%. Producer prices also increased as anticipated.

Retail sales exceeded expectations in October, rising by 0.4% (versus the expected 0.3%), although the core figure came in slightly lower than markets had forecast (0.1% versus 0.3%).

Meanwhile, data on the second estimate of GDP in the European Union confirmed surprisingly strong growth of 0.4% for the third quarter, with a year-on-year increase of 0.9%.

In contrast, the British economy underperformed, expanding by only 0.1% in the third quarter compared to 0.5% growth in the second quarter. The economy also contracted by 0.1% in September, despite expectations of 0.2% growth.

What to watch out for this week

  • In the week ahead, we will be watching mainly news from the housing market, where we will see statistics on building permits, housing starts and existing homes sales. In addition, the markets will be watching the Philadelphia Fed's manufacturing activity index, the Kansas Fed's manufacturing activity index and the Michigan Fed's final consumer sentiment reading.
  • Later in the week we will see preliminary purchasing managers' indices, both in Europe, the UK and the US. In the US, the manufacturing sector is expected to continue to decline, while the services sector is expected to accelerate.
  • A similar scenario is also expected in the EU and UK, with the services PMIs expected to rise for the tenth month in a row, but the manufacturing sector still in contraction and falling sharply.
  • Inflation data will then be watched in both the UK and EU, with the UK expected to rise to 2.2% y/y and the EA to 2% after a surprise decline.

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