Weekly comment: Stocks extend gains despite tariff talk

Market overview – Richard Carter, Head of Fixed Interest Research

Global equities chalked up another weekly gain last time out, with the MSCI All Country World index rising 1.0% (20.9% YTD). Trade tariffs remain at the forefront of investors’ minds, as president-elect Trump posted on social media plans for 25% levies on imports from Mexico and Canada and an additional 10% tariff on China. While markets initially reacted negatively to the news, the weakness was short-lived, and stocks ended the week back near their highs.

United States

In a holiday-shortened week due to Thanksgiving, US equities continued to outperform, posting a 1.1% weekly gain (28.1% YTD). This meant a 5.9% increase in November and saw a new intraday record high for US benchmarks. Growth stocks outperformed their value counterparts.

Economic data was relatively light, with Scott Bessent’s nomination for Treasury secretary and speculation on tariffs the main events. Shares of Automakers responded negatively to Trump’s tariff comments due to their reliance on cross-border trade with Canada and Mexico.

United Kingdom

Although UK stocks rose last week, the 0.4% increase (11.0% YTD) was less than global peers. Some of this underperformance could be explained by currency moves as the pound rose to US$1.27 from US$1.25.

There was a notable fall in the UK government borrowing costs, as the 10-year gilt yield declined 14 basis points to 4.24%. That marks a 20 basis point fall for November, although the market remains 71 basis points higher YTD.

Europe ex UK

European markets remain sensitive to speculation on US trade tariffs, possible counter measures and its own political uncertainty, with the MSCI Europe ex UK benchmark rising 0.3% (7.3% YTD). Although this means this benchmark just about managed to eke out a positive return for November, 0.1%, there has been a notable underperformance over the month.

German equities posted a 1.6% return (2.9% in November, 17.2% YTD) while French (-0.2% on the week, -1.5% November, -1.2% YTD) and Italian (-0.2% on the week, -1.3% in November, 16.2%) stocks continued to lag.

UK house prices jump

A 3.7% increase in the Nationwide house price index for November topped analyst expectations and marked the fastest pace of growth in two years. The average house now costs £268,144, within 1% of its all-time high in 2022. Mortgage approvals also support the pick-up, rising to their highest levels since August 2022, according to the Bank of England.

A stabilisation in gilt markets is seen as supportive for borrowing costs and UK gilt yields at the 2-, 10-, and 30-year mark are now lower than they were the day before the UK budget. Declining mortgage rates from a Summer 2023 peak has been one of the main factors underpinning house prices, with the Bank of England cutting interest rates twice this year, by 25 basis points each time, to the current 4.75%.

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