Weekly Wrap – Week ending 01 December 2023
United States: The major U.S. stock indexes recorded their fifth positive week in a row, although the upward momentum slowed a bit in this week of trading. The Dow added more than 2% and the S&P posted a fractional gain, with both reaching year-to-date highs.
Prices of U.S. government bonds surged, sending yields lower, as investors appeared to focus on the prospect of potential interest-rate cuts in coming months rather than any further rate hikes. The yield of the 10-year U.S. Treasury bond fell on Friday to around 4.22% – the lowest in more than three months and down sharply from its recent peak in October.
The U.S. Federal Reserve’s preferred method for tracking inflation showed that consumer prices continued to rise at a slower pace in October. The PCE Price Index rose at a 3% annual rate, down from 3.4% in September. Excluding food and energy prices, core inflation climbed 3.5% in October.
Weekly jobless claims decreased, but continuing claims surged to 1.93 million, the highest since November 2021.
The government reported on Thursday that spending by U.S. consumers rose in October at an annual rate of 0.2%, the slowest pace in five months. The latest monthly result also marks a sharp slowdown from September’s 0.7% figure. Personal incomes also rose at roughly the same pace.
China: The Hang Seng Index in Hong Kong fell significantly by 4.15% while the Shanghai Composite Index only declined by 0.31%.
The manufacturing PMI for November contracted to 49.4, the second consecutive monthly decline while the nonmanufacturing PMI softened to 50.2. The private Caixin/S&P Global manufacturing survey increased to 50.7 in November, exceeding market expectations.
The value of new home sales by the top 100 developers fell 29.6% in November, following a 27.5% decline in October. Industrial profits report increased concerns about China’s economic recovery due to a prolonged property sector slowdown. Chinese authorities announced a 25-point plan to enhance financial support for the private sector.
Eurozone: Major stock indexes in Germany (DAX), Italy (FTSE MIB), and France (CAC 40) saw gains of 2.30%, 1.69%, and 0.73%, respectively.
European government bond yields declined, driven by lower-than-expected inflation. Expectations of potential interest rate cuts by the European Central Bank (ECB) next year influenced market sentiment. In Germany, the 10-year government bond yield approached its lowest level in over four months.
Annual consumer price growth in November for the Eurozone slowed to 2.4% from 2.9% in October. Core inflation, excluding food and energy costs, decreased to 3.6% from 4.2%. The jobless rate in the Eurozone held steady at a record low of 6.5%.
Policymakers maintained a hawkish stance before the inflation data release. The ECB President emphasised the need to keep rates higher to contain inflation, citing strong wage growth and an uncertain outlook.
The South African Rand continued to be weak relative to the US Dollar and ended the week at R18.66/USD.
The South African Index of government bonds gained 1.16% in the week and has returned just over 8% year to date. Cash continues to outperform, as the Stefi Composite Index is up 7.35% year to date.
The FTSE/JSE Africa All Share Index gained 3 basis points as resources increased 4.32% while industrials lost 1.89%.
The National Association of Automobile Manufacturers of South Africa (NAAMSA) vehicle sales year-on-year number was down 9.8% versus market expectations of 5.6%.
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