As we round out an outstanding year in the US Financial markets, I suspect 2025 will be different. Get my take on the markets in this weekly round-up.
Market Sound Bites:
d the week lower, although the technology-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. Growth stocks posted a 3rd consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12.08%) and Google (8.44%), the latter of which recorded its largest two-day gain since 2015 between Tuesday and Wednesday.
The highlight of the week’s economic calendar came on Wednesday with the Core CPI rising by 0.3% in November and was in line with consensus expectations. On a YoY basis, core prices increased 3.3% in November, unchanged from the prior month, while overall inflation accelerated modestly to 2.7%, up from 2.6% in October. Similarly, PPI we saw inflation accelerated a tick in November, to 0.4% from 0.3%. And on Thursday, the Labor Department also reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.
The week’s economic data releases appeared to be enough for markets to solidify expectations for a rate cut at the upcoming Federal Reserve meeting. According to the futures markets on Friday they were pricing in a 97.1% chance of the Fed cutting rates at its upcoming meeting on Dec 18th, up from 86.0% at the end of the prior week. U.S. Treasuries delivered negative returns heading into Friday as Treasury yields increased across most of the yield curve. The year ahead will mark Powell’s last full year at the helm of the Fed. His term as chair expires in May 2026. Most of the current research suggests that a neutral rate that balances the U.S. economy is somewhere in the neighborhood of 3.5%. But with the fed-funds rate still at 4.50% to 4.75%, policymakers have a way to go—even if inflation isn’t quite at the 2% target yet.
In Europe, the ECB lowered its key deposit rate by a quarter of a percentage point to 3.0%, the fourth reduction this year. The ECB appeared to leave the door open to ease monetary policy further. Meanwhile, in the UK, their economy has slowed significantly after a strong start to the year. GDP in October unexpectedly shrank 0.1% sequentially, as production output weakened. The BOE is widely expected to hold interest rates steady at its upcoming policy meeting. UK industrial production fell by 0.6% sequentially in October, a second monthly decline that defied expectations for a 0.3% increase while Manufacturing output also contracted 0.6% over the period.
In Japan, the expectations for the timing of the BoJ’s next interest rate hike had been finely balanced between December and January; -investors now appear to have converged around the view that a 25-bps hike at the central bank’s first meeting in the new year is more likely. Final GDP data showed that Japan’s economy grew 0.3% quarter on quarter in the three months through September, exceeding the 0.2% expected by consensus.
China pledged to implement a more proactive fiscal policy and increase the budget deficit in 2025 at the annual Central Economic Work Conference, a high-level meeting in which top officials plan the economic agenda for the next year. Inflation data released earlier in the week showed that China’s economy remained stuck in deflation. On the trade front, exports rose a weaker-than-expected 6.7% in November from a year earlier, slowing from 12.7% in October, and expanded for the eighth straight month.
Enjoy this week’s round-up;
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
