USA
U.S. equity markets faced a downturn this week, with the S&P 500 declining by 2.48%, the Dow Jones Industrial Average by 3.31%, and the Nasdaq Composite by 2.41%. This retreat followed a period of post-election momentum, which waned amid investors reassessing economic policies under the re-elected administration.
Federal Reserve Chair Jerome Powell's remarks indicated a cautious approach to future rate cuts, emphasizing the economy's robustness and reducing expectations for imminent monetary easing. This rhetoric lowered market expectations for a December rate cut, with probabilities dropping from 82.5% to 61%. Treasury yields remained stable, while equities came under pressure.
Economic indicators released during the week presented a mixed picture. Retail sales data met expectations, suggesting steady consumer spending, while industrial production figures were less robust, highlighting potential headwinds in the manufacturing sector.
Europe
Major European indices had a mixed week, with the Stoxx 600 down 0.69%, the FTSE 100 down 0.11%, Germany’s DAX 40 down 0.02%, Spain’s IBEX 35 up 0.73%, and France’s CAC 40 down 0.94%. Investor sentiment was dampened by concerns over potential U.S. tariffs on European exports, particularly in the automotive and luxury goods sectors. The euro weakened, reaching its lowest level in a year at $1.05, amid expectations of aggressive interest rate cuts by the European Central Bank (ECB). Political uncertainties, including the collapse of the German government and the call for a confidence vote by Chancellor Olaf Scholz, further contributed to market volatility. Economic data releases were mixed: while some indicators pointed to stagnation, others suggested resilience in certain sectors. The ECB's cautious stance on monetary policy, coupled with geopolitical uncertainties, kept investors on edge.
Japan
Japanese stock markets experienced declines, with the Nikkei 225 Index falling by 2.17% and the broader TOPIX Index declining by 1.11%. The yen's appreciation, driven by expectations of potential interest rate hikes by the Bank of Japan (BOJ), weighed on export-heavy industries. BOJ Governor Kazuo Ueda's speech offered few hints about future rate hikes, leaving investors uncertain about the central bank's policy direction. Economic data showed a slight decline in real wages and household spending, indicating potential challenges for domestic consumption. Geopolitical concerns, particularly regarding U.S. trade policies under the re-elected administration, added to market apprehensions, given Japan's significant export ties to the U.S.
China
The Chinese stock market experienced negative performance, with the Shanghai Composite Index decreasing by 6.28% and the Hong Kong Hang Seng Index declining by 3.52%. These declines were despite Beijing's unveiling of fresh stimulus measures aimed at offsetting concerns about potential U.S. tariff hikes. However, the announced $1.4 trillion fiscal stimulus package, which focuses on restructuring local government debts, failed to excite investors due to its lack of direct support for consumers amid the ongoing property market crisis. Economic data revealed continued deflationary pressures, with consumer prices increasing by only 0.3% over the past year and producer prices dropping by 2.9%. These figures suggest that the Chinese economy faces significant challenges in achieving its growth targets.