Last Friday, US markets rebounded on the back of lower bond yields. Despite initial concerns from hawkish Fed remarks and a weak bond auction, the S&P 500 and Nasdaq Composite marked their second consecutive week of gains, reaching near two-and-a-half-month highs. Tech and communication sectors led the rally.  Oil prices rose, but still recorded their third consecutive weekly decline.  The 10-year bond yield at 4.61% played a crucial role, with its inverse relationship with shares in focus.  Small-cap equities continued to trail larger counterparts.  Investors now await this week’s CPI and PPI reports for further market insights.  European markets, including the German DAX and Stoxx 50, fell on Friday due to warnings from Powell and Lagarde on potential interest rate increases. 

Summary for 13.11.2023 

  • Asian equity markets mostly fell on Monday as caution prevailed ahead of key economic data and the high-stakes meeting between US President Biden and Chinese President Xi Jinping. Moody’s downgrade of the US government’s ratings outlook added to concerns. While Japanese equities rose, shares in Australia, South Korea, Hong Kong, and mainland China declined, with tech companies standing out amid stable US Treasury yields. 
  • European shares are set to increase slightly at the open, following a tech-driven rally on Wall Street. In the US, equity futures are expected to open lower on Monday, after Moody’s downgraded the country’s credit rating outlook. 
  • Oil prices decline this morning due to concerns over weakening demand in the US and China. Prices were impacted by factors such as reduced Chinese requests for Saudi supply, weaker economic data, and receding worries about potential supply disruptions from the Israel-Hamas conflict. 
  • Moody’s has downgraded its outlook on the United States credit rating to “negative” from “stable” last Friday while maintaining the Aaa rating, citing a notable increase in debt servicing costs and deepening political polarisation.  The agency highlighted the surge in Treasury yields this year, which has intensified pressure on US debt affordability.  In contrast, Standard & Poor’s and Fitch maintain AA+ ratings with stable outlooks for the United States.  
  • In November, US consumer sentiment, as measured by the University of Michigan, dropped to 60., the lowest in six months, reflecting concerns about high-interest rates and ongoing conflicts in Gaza and Ukraine.  Additionally, inflation expectations for the year ahead increased to 4.4%, the highest since April, while expectations for the five-year outlook rose to 3.2%, a level not seen since March 2011. 
  • The British economy unexpectedly stalled in Q3, avoiding a forecasted 0.1% contraction, with a 0.1% fall in the services sector offsetting modest gains in construction and production.  Amid high inflation and interest rates, the Bank of England anticipates a meagre 0.1% growth in the last quarter of the year. 
  • China is reportedly considering resuming purchases of Boeing’s 737 Max aircraft during the APEC summit, with President Xi Jinping expected to discuss potential commitments rather than formal orders. Boeing has faced a halt in deliveries of the 737 Max to Chinese airlines for over four years amid political and trade tensions, and the terms of any agreement remain under discussion. 
  • Diageo faced a 13.7% price decline last Friday as investors reacted to expectations of slower growth in the second half of its fiscal 2023, particularly due to weaker performance in Latin America and the Caribbean, following disappointing earnings reports. 
  • In the clean energy sector, Plug Power experienced a significant 34% plunge on Friday, hitting a new 52-week low after its third-quarter results failed to meet market expectations, prompting a negative market reaction. 
  • In the weak ahead, attention in the US will turn to inflation data, retail sales, Fed speeches, and earnings reports from Home Depot, Cisco, Walmart, and Applied Materials.  The UK’s special focus will be on inflation developments, retail sales, and unemployment.  China highlights include new yuan loans, industrial production, retail sales, and fixed asset investment.  Q3 GDP updates for Japan and Germany’s ZEW Economic Sentiment Index are also on the radar.