WEEKLY SUMMARY: “Soft landing” hopes triggers an “everything” rally
The major US equity indexes ended higher for the week, with the S&P 500 Index and Nasdaq rounding out on Thursday their best monthly gains (8.9% and 10.7%, respectively) since July 2020. Falling Treasury yields seemed to continue to boost sentiment, and a broad index of the bond market recorded its best monthly gain since 1985. On the macro side, inflation continues to cool down. In the US, the core personal consumption expenditures (PCE) price index rose 0.2% in October, a slowdown from September. The yoy increase is down to 3.5% — the lowest level since April 2021. Other US data offered some evidence of “soft landing”: Personal spending rose 0.2% in September (its smallest increase in six months), housing starts surprised on the downside while weekly jobless claims continuing claims jumped much more than expected to 1.93 million, their highest level since November 2021. On Friday, Fed Chair Jerome Powell's speech was slightly less hawkish than expected as he acknowledged that interest rates were now “well into restrictive territory”. His comments pushed the US 10-year note down to 4.21%, a 3-month low. In the Eurozone, inflation rate continues to drop, although policymakers said it’s not time for rate cuts. The STOXX Europe 600 Index ended the week 1.35% higher while euro bond yields dropped. Chinese equities retreated as official indicators underscored concerns about the country’s fragile recovery. The dollar plummeted while Gold hit a new all-time high ($2,075). Bitcoin hit $39k.
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Major stock indexes finished the week higher, recovering some of the previous week’s losses despite some continuing uncertainty around the incoming Trump administration’s policies and escalating geopolitical tensions between Russia and Ukraine. Gains for the week were also relatively broad-based, with small caps outperforming large-caps and an equal-weighted version of the S&P 500 Index outpacing the main index. Shares of Nvidia ended the week little changed as investors appeared to be generally satisfied with the results, although the guidance for Q4 was lighter than some analysts expected. Solid US economic data sparked a rethink of Fed rate-cut expectations, with the curve now pricing in a 50-50 chance of 2 or 3 cuts by the end of 2025.