Market overview
Last week, the MSCI All Country World Index (MSCI ACWI) fell by 0.8%, bringing its year-to-date gain to 21.4%. The week was marked by significant economic data releases and market movements across various regions.
United States
The highlight of the week was Wednesday's Labor Department report on headline and core consumer price inflation (CPI), both rising by 0.3% in November and matching consensus expectations. Despite this, most major US stock indexes ended the week lower. However, technology-heavy stocks advanced, clearing the 20,000 mark for the first time and rallying 7.4% (33.2% YTD).
Large-cap stocks outperformed their smaller-cap peers, while growth stocks outpaced value stocks. Gains in Tesla (12.1%) and Google parent Alphabet (8.4%) contributed significantly, with Alphabet recording its largest two-day gain since 2015.
Europe
In Europe, the MSCI Europe ex UK Index ended the week down 0.9% (9.0% YTD). Germany’s large-cap stocks edged up 0.1% (21.8% YTD), France’s fell by 0.2% (1.3% YTD), and Italy’s advanced 0.4% (21.4% YTD). The euro fell against the US dollar, ending the week at USD 1.05 for EUR.
The European Central Bank (ECB) lowered its key deposit rate by a quarter of a percentage point to 3.0%, marking the fourth reduction this year. The ECB hinted at further easing by dropping a reference to keeping rates “sufficiently restrictive for as long as necessary” from its statement.
Meanwhile, the Swiss National Bank (SNB) surprised markets with a larger-than-expected half-percentage-point reduction, its biggest rate cut since January 2015. The SNB aimed to counter lower inflationary pressure and keep consumer price growth within its defined range for price stability of 0% to 2%. The SNB also lowered its inflation forecast to 0.3% in 2025, half of its previous projection.
In France, President Emmanuel Macron appointed former justice minister and centrist politician François Bayrou as prime minister to replace the ousted Michel Barnier.
United Kingdom
In the UK, real gross domestic product (GDP) in October unexpectedly shrank by 0.1% sequentially, as production output weakened. Output in the services sector, which dominates the economy, was flat. However, the Office for National Statistics estimated that the economy grew by 0.1% in the three months through October, compared with the three months through July, amid expansion in the services and construction sectors. The Bank of England is expected to hold interest rates steady at its upcoming policy meeting and proceed cautiously next year due to persistently high services inflation.
UK large-cap stocks fell by 0.1% (11.2% YTD) and mid-cap stocks were down 0.7% (9.5% YTD). The British pound fell against the US dollar, ending the week at USD 1.26 for GBP.
Labor Department reports & Fed rate cut expectations
On Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000. While some of the increase was attributed to the Thanksgiving holiday, continuing claims also rose and remained near three-year highs, indicating it is taking longer for some unemployed individuals to find a job. This data added to signs of a softening labour market following the prior week’s report of an uptick in the unemployment rate in November.
The week’s economic data releases solidified market expectations for a US rate cut at the upcoming Federal Reserve (Fed) meeting. By Friday, futures markets were pricing in over a 90% chance of the Fed cutting rates at its upcoming meeting, up from around 85% the previous week.
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