Another ‘magnificent’ week for investment markets

As anticipated, headline CPI rose to an annual rate of 2.7% for November, up from October’s 2.6% reading. Investors began to price in a rate cut due to an absence of any surprises in the data. The Nasdaq closed above 20,000 for the first time, while Tesla, Meta, and Alphabet all set their own record highs.

However, long-dated treasury bond yields (which move inversely to price) were on the rise last week, reflecting the fading confidence of further rate cuts in 2025.

Nvidia shares finished the week down more than 3% after China announced they would be launching an anti-trust probe into the company.

The Bank of Canada lowered rates by a half-point last week, marking its fifth cut since June. The European Central Bank (ECB) decided to reduce interest rates by 25-bps on Thursday, and their statement also implied a more dovish outlook. The cut was in-line with expectations, resulting in a muted reaction that saw the DAX 40 and Euro Stoxx 50 finishing the week relatively flat.

The Euro was on the defensive last week, touching a December low against the dollar. The Swiss National Bank also cut their main rate by 50-bps to 0.5%.

In the UK, GDP figures were released on Friday that showed the economy had unexpectedly shrunk for the second month running in October. The chancellor, Rachel Reeves, expressed her disappointment but stressed that the new government’s policies are more focused on “long-term economic growth”. The data sparked recession fears, and 10-year gilt yields finished the week higher.

Top leaders in China announced they would be shifting their monetary policy to “moderately loose” for the first time in 14 years on Monday. Chinese government bond prices continued to push higher as investors looked to lock in higher yields with expected rate cuts on the horizon.

Equities

Global stocks were down last week finishing at -0.3% in euro terms and -1.0% in local terms. Year-to-date global markets are up by 28.6% in euro terms and by 22.1% in local terms. The US market, the largest in the world, finished at 0.0% in euro terms and -0.7% local terms.

Fixed Income & FX

The US 10-year yield finished at 4.4% last week. The German equivalent finished at 2.3%. The Irish 10-year bond yield finished at 2.5%. The Euro/US Dollar exchange rate finished at 1.05, whilst Euro/GBP finished at 0.83.

Commodities

Oil finished the week at $67 per barrel and is down -2.0% year-to date in euro terms. Gold finished the week at $2,633 per troy ounce and is up 33.3% year-to-date in euro terms. Copper finished the week at $9,012 per tonne.

The week ahead

Monday 16^th December

Japan, German, UK, and US PMI all go to print.

Wednesday 18^th December

The Fed rate decision and UK CPI figures are announced.

Thursday 19^th December

Bank of Japan and Bank of England announce their rate decisions.