All The Major Highlights From The Global Markets You Need Heading Into The Week Of December 11th, 2023

Highlights Of US Markets

In the last week, U.S. stock markets exhibited mixed performances, with major indexes ending with slight gains. The US benchmarks, the S&P 500 and Dow Jones, ended the week with +0.21% and +0.01%, respectively. The technology-heavy Nasdaq Composite gained 0.69%, while the Nasdaq 100 closed at +0.54% for the week.

In the labor market, the nonfarm payrolls report for November showed an addition of 199,000 jobs, exceeding the anticipated 180,000. This led to a decrease in the unemployment rate to 3.7%, down from 3.9% in October. Average hourly earnings rose by 0.4%, maintaining a yearly increase rate of 4.0%.

Consumer sentiment improved significantly, reaching its highest level since August due to reduced inflation concerns. The University of Michigan’s preliminary consumer sentiment index reflected this optimism, with price increase expectations for the coming year falling to 3.1%, the lowest since March 2021.

Economic data for the week were varied. The services sector showed modest growth in November, but October's job openings dropped significantly to 8.73 million, the lowest since March 2021. October also saw a larger-than-expected decline in factory orders.

European Markets Highlights

During the recent week, European stock markets witnessed positive growth, with the STOXX Europe 600 Index rising by 1.30%. This uptick marked the fourth consecutive week of gains, buoyed by investor expectations of potential interest rate cuts by central banks in the coming year. These expectations stemmed from slowing inflation and signs of economic struggles in Europe. Major European stock indexes also experienced growth: France's CAC 40 increased by 2.46%, Germany's DAX by 2.21%, Italy's FTSE MIB by 1.59%, and the UK's FTSE 100 by 0.33%.

In the bond market, European government bond yields generally decreased. This decline was influenced by comments from European Central Bank (ECB) policymakers, who hinted at possible rate reductions as early as the first half of 2024.

The yield on Germany's benchmark 10-year bond approached its lowest level this year, and Italian bond yields followed a similar trend. In the UK, the yield on the 10-year government bond dropped below 4% for the first time since mid-May, reflecting anticipations that the Bank of England would potentially lower borrowing costs around mid-2024.

ECB Executive Board member Isabel Schnabel indicated a more dovish position, suggesting that recent inflation trends made further rate increases unlikely. Inflation in the Eurozone has decreased for three consecutive months, hovering just above the ECB's 2% target. Schnabel's comments marked a significant shift from her previously hawkish stance. Additionally, ECB Governing Council member Francois Villeroy de Galhau noted that disinflation was occurring faster than expected, raising the possibility of rate cuts in 2024.

The German economy showed signs of struggle, with industrial output falling 0.4% in October, marking the fifth consecutive month of decline. This decrease was more significant than the anticipated 0.2% increase. Additionally, factory orders in Germany unexpectedly dropped by 3.7%. The country's unemployment rate increased to 5.9% in November, the highest since May 2021.

In the UK, the construction sector, particularly homebuilding, continued to weaken. According to a Purchasing Managers’ Index, activity in the construction sector declined sharply for the third consecutive month in November, indicating ongoing challenges in the UK housing market.

Asian Markets Highlights

In the past week, Japan's stock market witnessed a decline, with the Nikkei 225 Index decreasing by 3.36% and the TOPIX Index dropping by 2.44%. This downturn was partly attributed to the Bank of Japan (BoJ) officials' remarks, which led to speculation about an earlier-than-expected shift away from the negative interest rate policy. Compounding this were reports that Japan’s economy had contracted more significantly in the third quarter than initially believed.

The yield on the 10-year Japanese government bond rose to 0.77%, up from 0.71%, influenced by a weaker 30-year bond auction and speculation about BoJ policy changes.

The Japanese yen strengthened against the U.S. dollar, reaching its highest level in almost four months, partly due to expectations of diminishing interest rate differentials with the United States, where the Federal Reserve is perceived to be pausing its rate hikes.

BoJ Deputy Governor Ryozo Himino hinted at the possible benefits of Japan moving away from its ultra-loose monetary policy, although he emphasized a cautious approach. BoJ Governor Kazuo Ueda also acknowledged the increasing complexity of managing monetary policy, stressing the need to monitor the interplay of rising wages and prices.

Japan's GDP showed a more significant contraction than previously reported, with an annualized decrease of 2.9% in the third quarter, mainly due to a larger decline in private inventories and a slight decrease in private consumption.

In China, the stock market also saw declines after Moody’s downgraded China’s sovereign debt outlook to "negative." The Shanghai Composite Index fell by 2.05%, and the CSI 300 Index dropped by 2.4%, reaching a nearly five-year low. Hong Kong's Hang Seng Index decreased by 2.95%. Moody's cited concerns about the debt burden of local governments and state firms in China. Despite Beijing's pro-growth measures, analysts question their efficacy in revitalizing the economy.

China's economic indicators presented a mixed picture. The Caixin/S&P Global services activity survey showed an increase to 51.5 in November, indicating expansion. This contrasted with the contraction shown in the official nonmanufacturing Purchasing Managers' Index. China’s trade performance was mixed in November, with exports rising 0.5% year-over-year, marking the first increase in six months, but imports unexpectedly declined by 0.6%. The overall trade surplus rose to USD 68.39 billion, up from October's USD 56.5 billion.

Major News/ Catalyst Events That Were Market Movers

The Russell 2000 Index, representing small-cap stocks, surpassed the S&P 500 for the third week in the past month, reducing its year-to-date underperformance.

Growth stocks continued to outperform value stocks, with technology stocks, in particular, gaining traction. The enthusiasm for generative artificial intelligence (AI) significantly influenced this trend.

Notably, Alphabet's GOOGL shares surged over 5% last Thursday following the announcement of its new AI model, Gemini. Advanced Micro Devices AMD also saw a nearly 10% rise in share price the same day after introducing new AI chips.

Bond Market Changes

The U.S. 10-year Treasury Yield closed higher at 4.229% for the week, while the U.S. 2-year Bond Yield ended higher at 4.723%.

Commodity Market Changes

Gold closed lower for the week at $2,003.60 per ounce, while silver closed lower at $23.0045 per ounce.

The Crude Oil WTI Futures - Jan 24 (CLF4) closed lower for the week at $71.26.  

Last Week And Upcoming Geopolitical Events

30 Nov - 12 Dec 2023- Conference of the Parties to the UN Framework Convention on Climate Change (COP28).

December 2023- Brazil takes over the G20 presidency.

8 Dec 2023- EU Finance Ministers meeting.

10 Dec 2023- 75th anniversary of the UN Declaration of Human Rights.

10-12 Dec 2023- Presidential election of Egypt.  

Upcoming Economic Calendar For The Week

Monday, Dec 11- None scheduled

Tuesday, Dec 12- Consumer price index (Nov. & YoY), Core CPI (Nov. & YoY), and Monthly U.S. federal budget (Nov.).

Wednesday, Dec 13- Producer price index (Nov. & YoY), Core PPI (Nov. & YoY), FOMC interest-rate decision, and Fed Chairman Jerome Powell press conference.

Thursday, Dec 14- Initial jobless claims (Dec./9), Import price index (Nov.), Import price index minus fuel (Nov.), U.S. retail sales (Nov.), Retail sales minus autos (Nov.) and Business inventories (Nov.).

Friday, Dec 15- Empire State manufacturing survey (Dec.), Industrial production (Nov.) and Capacity utilization (Nov.)

This article is from an external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.