Weekly Market Pulse - Week ending November 29, 2024

Market developments

Equities: U.S. stocks experienced gains in a shortened trading session, with the S&P 500 rising over 1% for the second consecutive week and reaching new record highs. Conversely, there was a notable "extreme disconnect" between investor optimism in US assets and pessimism towards global markets, prompting Bank of America strategists to advocate for European stocks despite their underperformance relative to US equities this year.

Fixed Income: U.S. treasury yields fell, with the 10-year yield dropping below 4.2%. The dollar faced its largest weekly loss in three months, dropping more than 1% as speculation grew that President-elect Donald Trump would moderate his trade policies, particularly following his Treasury secretary appointment.

Commodities: Oil faced significant weekly losses due to easing geopolitical tensions following a cease-fire between Israel and Hezbollah. The OPEC+ meeting initially scheduled for Sunday has been postponed to December 5, raising uncertainty in the market regarding potential production increases.

Performance (price return)

Macro developments

Canada – Slower Canadian GDP Growth in Q3

The Canadian GDP grew by 0.3% in Q3 2024, the slowest pace this year and in line with market expectations. This growth was supported by household and government spending, which compensated for weaker inventory accumulation and reduced business investment. On an annualized basis, the economy expanded by 1%.

U.S. – Fed Balances Inflation Optimism with Cautious Rate Policy, Economy Maintains 2.8% Growth in Q3, PCE Inflation Trends Hold Steady in October

Federal Reserve officials noted signs of easing inflation and a resilient labour market during the November 6–7 meeting, supporting gradual interest rate cuts. They stressed that future decisions would depend on economic conditions, acknowledging challenges from data volatility and uncertainty about the neutral interest rate. Some advocated maintaining high rates if inflation persists, while others favoured quicker cuts if labour markets weaken.

The economy grew at an annualized rate of 2.8% in Q3, unchanged from earlier estimates but slower than the 3% seen in Q2. Personal spending rose at its fastest pace since Q1 2023, driven by goods and services, despite minor downward revisions. Fixed investment exceeded expectations, while private inventories and net trade slightly dragged growth. Government spending growth remained unchanged.

The personal consumption expenditure (PCE) price index rose 0.2% month-over-month in October, consistent with September's pace. Core PCE inflation, excluding food and energy, increased 0.3%. Annual PCE inflation rose to 2.3%, while core inflation reached 2.8%, driven partly by base effects. The Federal Reserve revised its 2024 inflation projections downward, reflecting ongoing disinflationary trends.

International – Eurozone Inflation Rises Slightly in November, Japan's Labour Market Tightens Amid Slight Rise in Unemployment

Eurozone annual inflation increased to 2.3% in November, up from 2% in October and in line with expectations. The rise was influenced by smaller declines in energy costs and higher prices for industrial goods, while inflation for services and food eased. Core inflation remained steady at 2.7%, defying forecasts of an increase.

Japan's unemployment rate increased to 2.5% in October from 2.4% in September as the labour force grew, and employment reached a record 67.98 million. The labour force participation rate rose year-over-year to 63.5%. The jobs-to-applicants ratio climbed to a six-month high of 1.25, indicating continued labour market tightness despite the unemployment uptick.

As of November 29, 2024