Weekly Comment: Global Markets Continue to Climb

Market overview – Richard Carter, Head of Fixed Interest Research

Last week, the MSCI All Country World Index (MSCI ACWI) rose by 1.3%, bringing its year-to-date gain to 22.5%. This positive performance was driven by gains across major global markets, reflecting investor optimism.

United States

US stocks continued to hit new record highs, with tech-heavy markets up 3.4% (33.2% YTD) and large-cap stocks up 1.0% (29.3% YTD). However, mid-cap stocks declined after two weeks of outperformance versus their larger-cap peers. Growth shares outperformed value stocks by 5.5%—the largest margin since March 2023—returning 3.6% (37.0% YTD).

Sector performance was varied. Consumer discretionary, communication services, and information technology shares all gained over 3% for the week, while energy, utilities, and materials stocks—typically more value-oriented—fell by over 3%.

Europe Excluding the UK

In France, prime minister Michel Barnier’s minority government collapsed after parliament backed a no-confidence motion tabled by the National Rally (NR) and left-wing New Popular Front to block the proposed deficit-reducing budget for 2025. This led to a widening of the yield spread between German 10-year bunds and French 10-year OATS—a measure of political and financial risk in the eurozone—to 90bps, the highest since 2012. However, the gap narrowed to below 80bps after President Emmanuel Macron announced plans to appoint a new prime minister and form a new “government of general interest.”

These developments alleviated investor concerns about political instability, helping the MSCI Europe ex UK Index end the week 2.5% higher (9.9% YTD). Major stock indices advanced, with Germany’s large-cap stocks surging 3.9% (21.7% YTD), France’s large-cap stocks climbing 2.8% (1.5% YTD), and Italy’s large-cap stocks jumping 4.0% (20.9% YTD). The euro was little changed versus the US dollar, ending the week at US$1.06.

United Kingdom

Bank of England (BoE) governor Andrew Bailey signalled the potential for four interest rate cuts next year if the economy develops in line with the central bank’s outlook. Reacting to the news, UK large-cap stocks rose 0.3% (11.3% YTD) and mid-cap stocks gained 1.4% (10.3% YTD). The British pound remained stable versus the US dollar, ending the week at US$1.27.

Economic Reports and Fed Comments

Last week, the Labor Department reported that the US added a seasonally adjusted 227,000 jobs in November, slightly higher than consensus estimates and a sharp rebound from October’s disappointing data. Major US stock indices opened higher on Friday as investors celebrated the final major labour market update ahead of the Federal Reserve’s December meeting.

Earlier in the week, the Labor Department also reported that the number of job openings in October increased to 7.74m, up from September’s revised 7.37m. Layoffs were little changed, but the number of Americans quitting jobs voluntarily—increasing to 3.3m—was seen as a better measure of labour market conditions.

Other headlines centered around comments from Fed officials. On Monday, Fed Governor Christopher Waller noted that despite some recent data indicating that progress on inflation may be stalling, he supports a rate cut at the Fed’s December meeting, absent any surprising economic data. Fed chair Jerome Powell took a more neutral tone, stating, “The US economy is in very good shape, and there’s no reason for that not to continue…. So, the good news is that we can afford to be a little more cautious as we try to find neutral.”

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