Stock Markets
All major stock indexes advanced during the week. The 30-stock Dow Jones Industrial Average (DJIA) gained 1.96% while the Total Stock Market Index climbed by 2.17%. The broad S&P 500 Index went up by 1.68% and the technology-tracking Nasdaq Stock Market Composite added 1.73%. The NYSE Composite Index climbed by 2.43%. The CBOE Volatility Index (VIX), the gauge for investor risk perception, fell by 5.58%.
Stocks are on track to finish the year on a strong note. Solid fundamentals will continue to support equities all the way to the start of 2025. However, even with the current optimism, prudence is enjoined to anticipate potential curveballs and for investors to plan the positions to best take advantage of the growing potential. Tariffs and how the incoming administration may choose to use them are a source of uncertainty. The technology sector also appears to be proceeding through a period of consolidation to digest its disproportionate gains over the last two years.
In order to strengthen portfolios against potential risks, investors may seek to attain an appropriate allocation to value-style investments and balance small- and mid-cap companies that tend to generate a greater share of their revenue in the U.S. They will tend to relatively benefit from stronger domestic growth and lower tax rates which the incoming administration promised to implement.
U.S. Economy
The Department of Labor reported on Wednesday that initial jobless claims unexpectedly dropped for the week ended November 16, 2024. This appeared to have driven positive market sentiment toward the end of the week. Applications for unemployment benefits fell to 213,000. This is the lowest reading since April 2024 and constituted a decline of 6,000 from the prior week. The number of continuing claims reached a three-year high of 1.91 trillion, however, some of this increase was due to secondary effects of the aircraft machinist strike at Boeing, a matter which has since been resolved.
Investors also appear to have been encouraged by the National Association of Realtors’ report of existing home sales in October. For the first time since July 2021, existing home sales rose year-over-year for the first time. Factors leading to the growth in housing demand are continued economic growth, additional job gains, and stabilizing mortgage rates, as cited by the upbeat report.
As investors look for clues around the pace of interest rate cuts, much of the macroeconomic focus remained on the Federal Reserve’s final meeting of the year in December. Federal Reserve Governor Lisa Cook stated in a speech on Wednesday that “the disinflationary process is continuing” and that she perceives the path of short-term interest rates would appropriately be downward although the magnitude and timing of rate cuts should be driven by inflation and labor market data.
Metals and Mining
Over the past year, the gold market has been on a rally with shallow dips that caused many cautious investors to await a correction to the support at $2,100 per ounce. However, the U.S. election and its decisive results created the opportunity for many on the sidelines to jump back in. Markets experienced fresh momentum in the U.S. dollar and rising bond yields. A significant headwind for gold was created by investors who zeroed in on Trump’s America-first policies. Gold prices fell by more than 9% from its peak at $2,800 per ounce three weeks ago. With its nearly 6% surge this week, it appears that the correction is over, as gold once again demonstrated that it is much bigger than the U.S. market. Its role as a necessary global financial asset continues to grow. Gold’s attractiveness to a significant safe-haven bid as the war in Ukraine escalates. In the Middle East and Asia, meanwhile, geopolitical tensions remain high with China striving to assert its dominance.
Spot prices of precious metals surged for the week. Gold shot up 5.97% from its previous weekly close at $2,563.25 to end this week at $2,716.19 per troy ounce. Silver closed at $31.35 per troy ounce, which is 3.57% higher than its last weekly close at $30.27. Platinum, which closed last week at $941.80 and ended this week at $966.30 per troy ounce for a 2.60% gain. Palladium, priced last week at $953.58, rose by 6.11% to close this week at $1,011.87 per troy ounce. The three-month LME prices of industrial metals ended mixed for the week. Copper closed this week at $9,008.50 per metric ton appreciated by 0.07% from its close last week at $9,002.50. Aluminum came from its last weekly close at $2,649.50 to settle at $2,631.50 per metric ton for a modest decline of -0.68%. Zinc ended this week at $2,990.00 per metric ton, 1.44% higher than last week’s close of $2,947.50. Tin, which settled last week at $28,742.00, ended this week at $28,750.00 per metric ton for a modest gain of 0.03%.
Energy and Oil
Brent futures have been trading within a narrow range of $73-74 per barrel. However, the return of geopolitical risk has caused oil prices to climb and in effect recover most of November’s losses to date. Russia’s launch of hypersonic missiles into Ukraine keeps the markets distracted for now. Meanwhile, the possible outcome of an OPEC+ meeting taking place next week looms large for oil. In the coming week, expect plenty of OPEC+ policy speculation. Responding to geopolitical worries, the International Atomic Energy Agency passed a resolution urging Iran to enhance cooperation with the global nuclear community. The IAEA further requests for a comprehensive assessment of Iran’s arsenal. Tehran defies compliance, however, and instead suggests capping its stock of uranium.
Natural Gas
For the report week from Wednesday, November 13 to Wednesday, November 20, 2024, the Henry Hub spot price rose by $0.24 from $2.10 per million British thermal units (MMBtu) to $2.34/MMBtu. Regarding Henry Hub futures, the price of the December 2024 NYMEX contract increased by $0.21, from $2.983/MMBtu at the start of the report week to $3.193/MMBtu at the week’s end. The price of the 12-month strip averaging December 2024 to November 2025 futures contracts rose by $0.13 to $3.227/MMBtu. Natural spot prices rose at all major pricing locations for the report week. Price changes ranged from an increase of $0.03 at a Houston Ship Channer to an increase of $2.45 at the Waha Hub.
International natural gas futures prices increased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased $0.63 to a weekly average of $14.17/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.90 to a weekly average of $14.38/MMBtu. In the week last year corresponding to this report week (beginning November 15 to November 22, 2023), the prices were $16.83/MMBtu in East Asia and $14.41/MMBtu at the TTF.
World Markets
the pan-European STOXX Europe 600 Index closed the week 1.06% higher in local currency terms. Investors were hopeful that the European Central Bank (ECB) could lower borrowing costs in December after a deterioration in the economic outlook was signaled by the purchasing managers’ surveys. Notwithstanding the pan-European index performance, most major stock indexes fell, but they were overall mixed. Italy’s FTSE MIB dipped by 2.04%, France’s CAC 40 Index declined slightly by 0.20%, and Germany’s DAX rose by 0.58%. The UK’s FTSE 100 Index surged by 2.46%. In the euro area, business activity unexpectedly contracted in November, which, according to purchasing managers’ surveys, underscore the uncertain economic outlook. The HCOB Flash Eurozone Composite PMI Output Index fell unexpectedly to a 10-month low. The manufacturing sector plunged deeper into recession and the services sector began to struggle after two months of marginal growth. The PMIs for France and Germany, the bloc’s largest economies, also shrank, while the UK’s business activity ended a 12-month period of sustained expansion and moved into contractionary territory. Expectations that the ECB could further ease monetary policy in December appeared to be bolstered by the Weak PMI data. This may be offset, however, by a pickup in negotiated wage growth which may reinforce the case for continued policy caution. Negotiated wage growth is a measure monitored by the ECB for signals of underlying inflationary pressures.
Japan’s equities markets pulled back during the week, albeit modestly, with the Nikkei 225 Index dropping by 0.93% and the broader TOPIX Index sliding by 0.56%. Impacting investors were heightened geopolitical tensions that dented risk appetite and drove demand for assets perceived to be safer. These safer assets include the Japanese yen which traded mostly within the JPY 154 range against the U.S. dollar. Consumer inflation remained above the Bank of Japan’s (BoJ’s) 2% target in October. The headline consumer price index fell to 2.3% year-on-year, this however remained aligned with expectations given the return of electricity and gas subsidies. BoJ Governor Kazuo Ueda said that if the economy and prices move as expected, the bank will keep raising rates. On the economic front, service providers recorded a slight expansion in activity within Japan’s private sector, according to the November Flash Purchasing Managers’ Index (PMI) data. On the other hand, manufacturers saw a sustained reduction in output. Across the private sector, price pressures remained elevated and firms increasingly sought to pass on higher cost burdens to consumers. On Friday, Japan’s government approved an economic package to ease the pain of inflation on households and businesses. The package is also designed to revitalize the struggling regional economies. It is estimated to add JPY 39 trillion (US$250 billion) to the economy, combined with expected spending from the private sector. Measures adopted include subsidies to curb rising energy costs and cash handouts to low-income households. Another measure in the package involves an increase in the tax-free salary threshold to boost disposal incomes.
A light economic calendar and concerns about the incoming Trump administration curbed risk appetites and caused equities to decline. The Shanghai Composite Index dropped by 1.91% and the blue-chip CSI 300 declined by 2.6%. The Hong Kong benchmark Hang Seng Index gave up 1.01%. The country’s banks left their one- and five-year loan prime rates unchanged at 3.1% and 3.6% respectively, a move largely anticipated after banks slashed the benchmark lending rates by 25 basis points in October, which was greater than expected. This makes it cheaper for consumers to take out mortgages and other loans. A slew of stimulus measures was unveiled by the government in late September to revive consumer demand and boost the ailing housing sector. Officials have signaled further easing measures in the near term. Potentially cutting the reserve requirement ratio for domestic banks is among these measures. Some analysts point out, however, that policymakers will wait until the new U.S. administration takes over in January and U.S. policies are clarified. In other developments, China’s youth unemployment rate eased for the second straight month since August when it hit its highest level this year. Excluding students, the jobless rate for 16- to 24-year-olds came in at 17.1% in October, down from 17.6% in September.
The Week Ahead
The PCE inflation data, consumer confidence, and the minutes of the Fed’s November FOMC meeting are among the important economic releases scheduled for this week.
Key Topics to Watch
- S&P Case-Shiller home price index (20 cities) for Sept.
- Consumer confidence for Nov.
- New home sales for Oct.
- Minutes of Fed’s November FOMC meeting
- Initial jobless claims for Nov. 23
- Durable-goods orders for Oct.
- Durable-goods minus transportation for Oct.
- Advanced U.S. trade balance in goods for Oct.
- Advanced retail inventories for Oct.
- Advanced wholesale inventories for Oct.
- GDP (first revision) for Q3
- Chicago Business Barometer (PMI) for Nov.
- Personal income (nominal) for Oct.
- Personal spending (nominal) for Oct.
- PCE index for Oct.
- PCE (year-over-year)
- Core PCE index for Oct.
- Core PCE (year-over-year)
- Pending home sales for Oct.
Market Index Wrap-up
