Key Developments in Global Markets
Last week, central banks dominated market attention, with notable moves from the Bank of Canada and the European Central Bank. The Bank of Canada delivered a sharper-than-expected 50-basis-point rate cut, while the ECB opted for a more measured 25-basis-point reduction, reflecting subdued growth and inflation prospects in Europe. Despite these policy shifts and some indices touching record highs, overall market performance was largely flat.
As the week closed, investor focus shifted to the Federal Reserve’s upcoming rate decision, expected to set the tone for 2025, along with announcements from the Bank of England and Bank of Japan.
Equity Markets
Equity markets demonstrated resilience, with the Nasdaq crossing the 20,000 mark, reflecting solid investor confidence. The year’s performance has been underpinned by a supportive mix of robust economic growth, improving corporate earnings, moderating inflation, and central bank easing. However, as inflation progress slows, central banks, particularly the Fed, are expected to adopt a more cautious stance on rate cuts in 2025, balancing stability with the need to maintain momentum.
Diverging Monetary Policies
Diverging monetary policies across regions have strengthened the US dollar, boosting the appeal of American equities compared to global counterparts. While higher borrowing costs could limit valuation growth, strong fundamentals such as rising wages, robust corporate performance, and enthusiasm for innovation-driven sectors like artificial intelligence continue to support markets.
Looking ahead, increased macroeconomic uncertainty may lead to volatility, but diversified portfolios remain well-positioned for moderate returns amid resilient economic conditions.
Latest Market Updates
Asian Markets
Asian markets mostly fell on Monday as investors remained cautious ahead of the U.S. Federal Reserve’s interest rate decision, with weak Chinese retail sales data raising concerns about the pace of recovery in the world’s second-largest economy.
Chinese shares declined, with the Shanghai Composite down 0.1% and the CSI 300 dropping 0.4%, despite industrial production meeting expectations.
US Equity Futures
US equity futures were largely unchanged on Monday, with investors awaiting the Federal Reserve’s policy decision and forward guidance on interest rates. Market focus was also on upcoming purchasing managers’ index data and the potential impact of MicroStrategy’s inclusion in the Nasdaq 100 Index.
On Friday, the S&P 500 closed flat, while the Nasdaq gained 0.1%, and the Dow fell 86 points, extending its losing streak to seven sessions. Key market movers included losses in major tech companies like Nvidia and Meta, while Tesla surged 4.3%, and Broadcom saw a 24.4% jump after reporting strong AI-related revenue growth, boosting semiconductor equities like Marvell and Taiwan Semiconductor.
European Equities
European equities extended their losses on Friday, weighed down by the ECB’s rate cuts and lowered growth and inflation forecasts. LVMH, Sanofi, and Siemens saw declines, while insurers Allianz, AXA, and Munich rebounded strongly, as markets remained cautious amid political developments in France and uncertainty over future economic support from China.
Currency and Bitcoin Performance
The dollar eased to around 106.8 this morning, remaining near its highest levels in three weeks ahead of the Federal Reserve’s policy decision, with markets anticipating a 25-basis-point rate cut. Meanwhile, the euro traded at 1.0516 against the dollar, reflecting ongoing uncertainty over global inflation and central bank policies.
Bitcoin surged to a record high above $106,000 on Monday, driven by optimism over President-elect Donald Trump’s proposal for a U.S. bitcoin strategic reserve, pro-crypto regulatory signals, and continued whale trading reducing supply on exchanges. Additional momentum came from MicroStrategy’s inclusion in the Nasdaq 100, further boosting investor sentiment.
Oil Prices
Oil prices edged lower on Monday as markets awaited the U.S. Federal Reserve’s policy decision and assessed weak Chinese retail sales, fueling demand concerns. Despite recent gains driven by potential U.S. sanctions on Russia, fears of oversupply and sluggish global demand continued to weigh on sentiment.
China’s Economic Data
China’s economic data for November 2024 showed weaker-than-expected retail sales growth of 3%, particularly in sectors like clothing and petroleum, while industrial production rose by 5.4%, supported by strong manufacturing gains. Fixed-asset investment increased by 3.3%, but real estate investment dropped by 10.4%, and the unemployment rate remained stable at 5%.
France Credit Downgrade
Moody’s downgraded France’s credit rating to “Aa3” from “Aa2,” citing concerns over political fragmentation and its potential to hinder efforts to reduce large fiscal deficits in the coming years. Despite this downgrade, France’s sovereign outlook was revised to stable from negative as President Macron named the centrist ally François Bayrou as the new Prime Minister on Friday.
Equities on the Move
Several companies experienced notable changes in share prices:
- Palantir Technologies, MicroStrategy, and Axon Enterprise will join the Nasdaq 100 index on December 23, following impressive gains in 2024.
- Moderna, Super Micro Computer, and Illumina are set to be removed due to poor performance or declining market capitalization.
- Super Micro Computer is exploring fundraising options to stabilize its finances and avoid delisting.
- Porsche SE warned of potential write-downs of up to €22 billion.
- Eli Lilly’s Manjaro outpaced Wegovy in clinical trials, gaining popularity in the UK.
- Munich Reinsurance projected strong net profits for 2025.
- Ferrovial sold a 37.62% stake in Heathrow Airport Holdings for a €2.5 billion profit.
- CNOOC sold its U.S. oil and gas assets in the Gulf of Mexico to INEOS for nearly $2 billion.
Upcoming Data and Events
This week brings key economic data and events:
- PMI updates, US retail sales, Germany’s Ifo index, and November PCE prices.
- Monetary policy decisions from the UK, Japan, and the US.
- Quarterly earnings reports from H&M, Nike, FedEx, Micron, and Accenture.
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