Highlights
U.S. equity markets declined over the week, breaking a three-week stretch of gains as heightened concerns over lofty valuations and tighter oversight of artificial intelligence (AI) spending weighed heavily on growth-oriented technology shares. The tech-focused Nasdaq Composite led the major indexes lower, while the Russell 1000 Growth Index underperformed its value counterpart by 288 basis points — the widest disparity since February. The prolonged federal government shutdown, which has now become the longest in U.S. history, also appeared to dampen investor sentiment. While previous political gridlock had done little to rattle markets, attention turned to the real-world impact of the shutdown, especially following reports that the Federal Aviation Administration (FAA) would require airlines to cut flight volumes due to air traffic controller shortages. Concerns also grew around the absence of government data releases and the potential drag on GDP growth. With most federal data releases halted by the shutdown, investors relied on private-sector reports for labour market insight. According to ADP’s October employment report, private employers added 42,000 jobs—a modest rebound after two months of declines. Wage growth also remained flat. Meanwhile, the Institute for Supply Management (ISM) reported that U.S. services activity returned to growth in October, with the Services PMI rising to 52.4% from 50.0% in September (readings above 50 signal expansion). Conversely, the manufacturing sector shrank for the eighth straight month, as the ISM Manufacturing PMI slipped to 48.7% from 49.1% in September, weighed down by declines in production and inventories. On a separate note, the University of Michigan’s preliminary November Consumer Sentiment Index fell 3.3 points to 50.3, its lowest level since the record trough in June 2022. Over in Europe, the pan-European STOXX Europe 600 Index fell 1.64% for the week, as renewed doubts about stretched AI-related valuations weighed on sentiment. Eurozone retail sales fell 0.1% month over month in September, marking the third consecutive monthly decline and missing expectations for a 0.3% increase. Year-on-year retail growth slowed to 1.0% from 1.6%. Moreover, the Bank of England (BoE) kept its key policy rate unchanged at 4.0%, with a narrow five-to-four vote in favour of holding. Governor Andrew Bailey reinforced expectations for a December rate cut, remarking that current market pricing—implying a terminal rate near 3.5% within three years—reasonably reflected his position. In Asia, Japanese equities retreated from record highs reached in late October, with the Nikkei 225 Index down 4.07% and the TOPIX Index lower by 0.99%. Heavy selling in AI-related technology and semiconductor stocks led investors to lock in profits after the recent rally. The 10-year Japanese government bond yield climbed to 1.68% from 1.65%, reflecting expectations that the Bank of Japan (BoJ) may continue policy tightening. Finally, Chinese equities ended higher for the week-with the CSI 300 index gaining 0.82%-as easing U.S.–China trade tensions improved investor sentiment. Optimism was fuelled by news that the U.S. and China had agreed to a one-year trade truce following the APEC summit in South Korea. Long term, however, competition between the two superpowers is expected to persist across multiple domains beyond trade.
Data Highlights
Canada’s unemployment rate eased to 6.9%, improving from the previous 7.1%. The Bank of England held its benchmark rate steady at 4.0%, matching both forecasts and the prior level. Eurozone retail sales growth slowed to 1.0%, in line with expectations but down from the previous 1.6%. The Reserve Bank of Australia maintained its policy rate at 3.6%, in line with analysts’ forecast. In New Zealand, the unemployment rate edged higher to 5.3%, matching market expectations but up from the prior 5.2%.
Week Ahead
U.K Unemployment Rate-– Tuesday |– Wednesday |Australia Unemployment Rate, U.K GDP Rate YoY – Thursday| China Unemployment Rate, Eurozone Employment Change YoY – Friday
