Market Commentary 25th November 2024 – from Will Binks

Posted by melaniebond
Market Commentary 25th November 2024
Equity Indices
UK
Major UK equity indices moved up last week, with the FTSE 100 and FTSE 250 indices gaining 2.46% and 0.51% respectively.

Inflation data showed that consumer prices rose by 2.3% year-on-year in September, with headline inflation rising from 1.7% the month before, with energy costs having the biggest contribution. The Bank of England’s target for inflation is 2%. Core inflation, which excludes energy and food prices, saw a small increase from 3.2% to 3.3% year on year.

The Office for National Statistics (ONS) also released data on retail sales, which showed a fall of 0.7% in October 2024, following a rise of 0.1% in September. This was below economist expectations of a 0.3% decline and ONS senior statistician Hannah Finselbach said “The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.”

Europe
European equity indices were mixed last week, with the broad FTSE All-World Index – Europe ex UK falling by 0.58%. The German DAX rose by 0.58%, whilst the French CAC 40 declined by 0.20%. The Swiss Market Index ended the week up by 0.77%.

Final inflation data for the Eurozone showed inflation rose by 2.00% year-on-year in October, up from 1.70% in September. Core inflation remained steady at 2.70% in October. A Purchasing Managers’ Index (PMI) for manufacturing and services showed that activity slipped into recessionary territory.

A business climate indicator for Germany decreased last month as economists weighed up political instability and the threat of trade tariffs from the upcoming Trump administration. According to an initial PMI release, the German manufacturing sector is in a deep contraction and industrial production is 10% below its pre-pandemic level.

US
Equity indices in the US rose last week with the S&P 500 ending the week up by 1.68%. The Dow Jones Industrial Average rose by 1.96% and the tech-heavy NASDAQ 100 posted a gain of 1.87%.

The number of individuals in the US filing for unemployment benefits fell last week to the lowest levels seen since April 2024. The data supports the view that the US labour market remains strong despite interest rate rises which have dented new hiring plans amongst firms.

The US PMI figures were mixed last week, with the services sector edging higher into expansionary territory, meanwhile, the manufacturing sector slumped again and is now in a recessionary position. The growth in services was the fastest rise since March 2022.

Asia
Equity indices in Asia fell last week as the FTSE All World Index – Asia Pacific ended the week down by 0.12%. China’s Shanghai Composite Index posted a loss of 1.91%, whilst Japan’s Nikkei 225 moved 0.93% lower.

The annual inflation rate in Japan slowed to 2.3% year-on-year in October, down from 2.5% the previous month, marking the lowest reading monthly reading since January 2024. Electricity prices in Japan saw the smallest increase in six months, whilst price rises for communication services and education also slowed.

China’s President Xi Jinping told US counterpart, Joe Biden, that Beijing was prepared to work with Donald Trump in an attempt to manage differences and minimise the impact of any trade tariffs. Meanwhile, President Xi met with UK Prime Minister Keir Starmer, promising to build relations between the two countries that are “consistent, durable, respectful”.

Bond Yields
UK
The 10-Year Gilt yield moved from 4.47% to 4.39% across the week as traders reacted to weaker than expected economic data.
Europe
The 10-Year German Bund yield declined from 2.35% to 2.26%.

The 10-Year Bund yield is sitting at a low point as investors hedge bets for further interest rate cuts by the ECB.

US
The 10-Year Treasury yield rose from 4.31% to 4.44%.

Comments from the Fed chair, Jerome Powell, appeared to contribute to US treasury yields rising last week, with Powell warning against cutting interest rates too quickly.

Currency
GBP / USD – Current 1.2531 Previous 1.2618

GBP / EUR – Current 1.2026 Previous 1.1974

The Pound declined by 0.69% against the US Dollar, with the Dollar becoming generally stronger against major currencies last week. Against the Euro, the Pound moved 0.43% higher.

Commodities
Gold
The Gold spot price rose by 5.97% last week to $2,716.33 per ounce as bond yields generally declined around the globe. The precious metal is a non interest bearing asset and therefore falling bond yields and interest rates can have a positive impact for sentiment on Gold.
Oil
The Brent Crude spot price rose by 5.81% to $75.17 per barrel. The escalation between Russia and Ukraine last week has raised tensions and edged the price of oil higher.