This weekly financial market update provides a snapshot analysis of the shifting economic landscape, from a thriving U.S. market to emerging signs of a slowdown in key sectors such as manufacturing and housing.
As corporate earnings, particularly in the S&P 500, show resilience amidst tech industry challenges, notably Nvidia’s recent struggles, global equity and bond markets reflect the complex economic sentiment and policy expectations.
Key Takeaway
- Understanding the sustained rally in U.S. equity markets during the Thanksgiving week.
- Insights into the downturn in U.S. manufacturing and housing sectors.
- Overview of S&P 500 corporate earnings growth and Nvidia’s challenges.
- Analysis of mixed performances in global equity markets.
- Examination of shifting trends in U.S. and European bond markets.
U.S. Markets Advance Amid Holiday Cheer and Falling Volatility
Global equity markets continued their strong rally during the week, a holiday-shortened week for U.S. markets, as they observed Thanksgiving celebrations on Thursday.
Volatility continued to fall, and bond yields increased as U.S. equities rose for the fourth week.
Manufacturing and Housing Sectors Signal Caution Amid Economic Slowdown
Business growth forecasts in the U.S. suggested a larger-than-expected decline in activity for manufacturing firms, whilst U.S. homes sold in October fell almost 15% from the same month a year ago to the lowest total in 13 years.
With interest rates staying high, economists expect 2023’s existing home sales total to be the weakest since 2011.
With signs of weakness in the U.S. economy starting to appear, next week’s estimates for third-quarter GDP will be closely watched.
Corporate Earnings Show Resilience Amid Nvidia Challenges
On the corporate front, with nearly all third-quarter results in as of Friday, companies in the S&P 500 are expected to post an average earnings gain of 4.3% over the same quarter a year earlier, the first period of earnings growth since quarter three of 2022.
Nvidia made headlines again as the company shares closed over 3% lower weekly. The chip designer warned that U.S. export restrictions could lead to a steep drop in sales in China despite projecting better-than-expected revenue for the fourth quarter.
It was also reported that their new chip was delayed due to server manufacturers’ issues integrating the semiconductor into their products.
Mixed Global Equity Performance Reflects Diverse Economic Sentiments
U.S. equities posted gains of 1% for the week as growth stocks continued their outperformance of value equivalents.
European equities ended the week 0.9% higher amid hopes that central banks would start cutting interest rates in the first half of next year, with U.K. equities also losing 0.2%.
Japan’s stock markets registered muted returns for the week, gaining 0.1%, whilst Chinese equities fell 0.4% as economic concerns continued to unsettle investors.
Bond Market Dynamics Shift Amid Treasury Demand and Central Bank Signals
Strong demand at U.S. Treasury auctions helped drive down the U.S. 10-year Treasury yield to its lowest level in over two months at 4.37%.
However, yields widened before the week was out. European government bond yields increased, with Germany’s 10-year government bond yield climbing from a more than two-month low of 2.5% earlier this week.
The U.K. 10-year gilt yield rose to 4.3% following further comments from central bank officials aimed at dampening hopes of interest rate cuts.
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