Week ending 8th November 2024.

As you can see from the accompanying table it was a mixed week for global stock markets, whose performance was dominated by the US election result announced on Wednesday and somewhat overshadowed key central bank decisions. On Friday, China also kicked off a fresh round of fiscal support for its economy.

US shares hit record highs week, and the dollar posted its biggest intraday gain in eight years as Republican Donald Trump was re-elected to the White House backed up by Republican majorities in the Senate and likely the House of Representatives. Investors are optimistic that a Trump presidency will mean faster earnings growth, reduced regulations and lower corporate taxes. The S&P 500 marked its best performance in nearly a year, closing the week out with a 4.66% gain.

Given Trump’s tariff-heavy stance, global markets digested the potential implications on trade dynamics when Trump takes office in the new year. While tariffs as high as 60% for Chinese goods have been floated during campaigns, Chinese markets were somewhat cautious this week. However, investors also digested the implications of high tariffs on inflation, and led to U.S. government bonds, an important indicator for the global financial system, climbing on Wednesday though the expected rate cut from the Federal Reserve helped bring them back down by Thursday evening.

In the U.S., the Fed reduced the federal funds target range by 25 basis points to between 4.5% and 4.75%. Fed Chair, Jerome Powell, emphasised the Fed’s commitment to data-driven decision-making, stating that any future rate adjustments would be assessed “meeting by meeting”. Powell said the board believes the U.S. “economy is strong overall” and noted that the election result would have “no effect” on decisions in the near term and acting based on speculation about policy would be inappropriate.

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Across the Atlantic, the Bank of England also implemented 25-basis-point reduction, bringing its base rate down to 4.75%, a positive step for mortgage holders. The move aligns with recent data showing slower inflationary pressure, as UK inflation dipped to a three-year low of 1.7% in September. The Bank’s Monetary Policy Committee (MPC) forecast that Rachel Reeves’s first budget as chancellor would push up inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Outside the US, market performance was more subdued, with both UK and European markets closing the week lower. Investors appeared to be weighing the potential trade implications of President Trump’s re-election while also reacting to China’s stimulus announcement on Friday. The National People’s Congress Standing Committee unveiled a 10 trillion-yuan debt package aimed at easing local government financing strains and stabilizing slowing economic growth. Although China’s Finance Minister indicated that more stimulus measures are on the way, some analysts speculated that Beijing may be holding back its full economic arsenal until Trump officially takes office in January.

Coming up next week, UK unemployment rate, industrial production and GDP.  US inflation and PPI data. Chinese industrial production, retail sales and unemployment rate.

Kate Mimnagh, Portfolio Economist