Highlights
U.S. equities were mixed during the week, with some indices reaching record highs, buoyed by the Federal Reserve’s third straight rate cut and remarks from officials that investors viewed as less restrictive than expected. However, technology shares lagged as renewed worries about valuations and doubts over the payoff from heavy artificial intelligence (AI) investment weighed on sentiment. The Nasdaq Composite fell 1.93% for the week while small-cap stocks led the gains, with the Russell 2000 climbing 1.19%, followed by a 1.05% increase in the Dow Jones Industrial Average. At its final meeting of the year, the Federal Reserve lowered the federal funds target range by 25 basis points to 3.50%–3.75%, in line with expectations. The decision saw rare dissent, with three policymakers split between holding rates steady and opting for a larger cut. The policy statement included language often associated with a pause, emphasizing careful evaluation of incoming data to determine future moves. Chair Jerome Powell’s press conference struck a mixed tone but was ultimately less hawkish than anticipated. While he noted that rates are near estimates of a neutral level and that the Fed can afford to wait for more clarity, he also highlighted “meaningful downside risks” to the labour market. Labour market data released affirmed this sentiment, as weekly jobless claims jumped to 236,000 for the week ending December 6, the highest since early September, adding to labour market concerns. Continuing claims, however, fell to their lowest level since mid-April. Separately, job openings edged up in October to a five-month high, while layoffs increased, hiring slowed, and the quits rate dropped to its lowest since 2020—suggesting workers may be less confident about switching jobs. Meanwhile, across the Atlantic Pond, the pan-European Euro STOXX 600 ended largely unchanged, with mixed performance across major markets. ECB officials signalled caution on future policy moves. Executive Board member Isabel Schnabel said markets were justified in expecting a potential rate increase rather than a cut, though any change would depend on data while President Christine Lagarde noted economic resilience and suggested growth forecasts could be revised higher. Other policymakers emphasized keeping rates steady, and a Reuters survey showed economists broadly expect no change in the deposit rate through at least 2026. In the UK, economic data surprised to the downside. GDP contracted again in October, missing expectations for growth, with weakness in construction and services. Housing market activity also cooled, with demand at a two-year low. Meanwhile, the Swiss National Bank left rates unchanged at 0.0%, citing low inflation and subdued growth. Japanese equities advanced, with the Nikkei and TOPIX both posting gains. The yen was largely stable against the dollar as markets increasingly anticipate a Bank of Japan rate hike at its December meeting, reflecting clearer central bank communication. Economists polled expect the BoJ to raise rates by 25 basis points to 0.75%.
Data Highlights
The US Interest Rate Decision was long awaited with heavy expectations weighing a 25 bp cut, the actual figure came in exactly as estimated, reducing the rate to 3.75% from the previous 4%. The Canada Interest Rate Decision also remained stable on the 2.25% mark, exactly in line with expectations. Swiss Interest Rate Decision remained on the 0% mark and was expected to remain at 0%, holding at that level since November. U.K. GDP MoM was forecast to improve from the previous lows of -0.1% to 0.1%, but remained stagnant and below expectations, sitting stiff at the 0.1% mark. In China, Inflation Rates MoM, expectations were set to remain at the same level but decreased from the previous lows of 0.2%, to -0.1%. The Australian Unemployment Rate remained held fixated on 4.3%, against consensus estimates that estimated a 10bp increase.
Week Ahead
China Unemployment Rate, Canada Inflation Rate YoY – Monday | US Non-Farm Payrolls, US Unemployment Rate, UK Unemployment Rate – Tuesday | UK Inflation Rate YoY, Eurozone CPI – Wednesday | U.K BOE Interest Rate Decision, US CPI, US Inflation Rate YoY, Eurozone Interest Rate Decision – Thursday | Japan Inflation Rate YoY, Japan Interest Rate Decision – Friday
