Peace talks between Russia and Ukraine continued last week, though no significant progress has been made. Representatives from both the EU and US have continued to work towards a solution, despite accusations from Russian representatives’ that compromises are not being made.
US Equity Market:
US stocks experienced drawdowns last month as investor concerns around the sustainability of AI-related firms’ sky-high valuations, as well as related concerns regarding index concentration, induced selloffs over the month. Consequently, the NASDAQ index fell 1.5% in November.
However, an unexpected strong US jobs report released last Thursday raised markets. The S&P 500 index rose 0.2% in early trading, and the Russell 2000 index jumped nearly 2% across the day, moving close to an all-time high.
Elsewhere, shares in Meta Platforms, the parent company of Facebook, rallied c.4% last week as investors reacted positively to news that CEO Mark Zuckerberg intends to redirect budget away from his ‘Metaverse’ efforts and focus on avenues which investors see as more profitable.
Over the week to Friday’s close, the S&P 500 index has remained broadly flat, rising 0.35%, whereas the NASDAQ index is up 1.03%.
UK Equity Market:
According to a Bank of England survey, businesses in the UK cut jobs at 1.8% p.a. in November. This is the largest contraction in UK employment levels since July 2021. Experts have attributed the contraction to the uncertainty that spread throughout the UK economy ahead of the Autumn Budget, as well as the lingering impact of payroll tax reform in the 2024 Budget.
Last Wednesday, following signs of stronger economic activity and reduced uncertainty post-Budget, sterling pushed up 1.1% against the US Dollar and posted it largest daily gain since April. Sterling currently trades around 1.33% against the US Dollar.
Over the week to Friday, the FTSE 100 index has remained broadly flat, falling 0.53%.
Inflation, Interest Rates and Bond Markets:
In the UK, long-term gilt yield continued to gently fall last week after the Autumn Budget eased some concerns around the sustainability of UK public finances. The 20-year gilt yield has fallen to 5.1%, and the 30-year gilt yield to 5.2%, though these levels are still high relative to other G7 economies.
Last Tuesday, data released by the European Central Bank (‘ECB’) revealed a marginal rise in eurozone inflation to 2.2%, as measured by the EU Harmonised Index of Consumer Prices. This was marginally above analysts’ expectations and reinforces market expectations of fewer rate cuts by the ECB in the near future.
The stronger-than expected US jobs data released last Thursday provided positive news for US consumers regarding the state of the job market in the world’s largest economy. Despite this, markets continue to price in over an 85% chance of a rate cut at the Federal Open Market Committee (‘FOMC’) meeting taking place this week.
What’s on the horizon
On Wednesday, the final FOMC meeting of the US central bank in 2025 will take place. Investors from around the world will be watching closely to see whether the Committee will elect to cut rates. A decision to cut would be in line with market expectations, whereas an unexpected decision to hold rates steady will likely cause markets to move and securities to reprice.
The Cambridge Team
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Source of financial market data: MorningstarDirect.