The significant events in the global economy over the past week – London Business News | Londonlovesbusiness.com

The U.S. stock market delivered mixed results last week, as growth stocks stole the spotlight. The S&P 500 and Nasdaq reached record highs, while the Dow Jones Industrial Average posted a slight decline.

The Russell 2000, representing smaller-cap companies, faced back-to-back weekly losses after previously outperforming its larger-cap peers.

Growth stocks, as measured by the Russell 1000 Growth Index, outperformed value stocks by an impressive 5.53 percentage points—marking the largest margin since March 2023. Consumer discretionary, information technology, and communication services sectors each posted gains of over 3%, while energy, utilities, and materials sectors saw similar-sized declines.

U.S. labor market data provided a positive surprise. The Labor Department reported the addition of 227,000 jobs in November, exceeding expectations and reversing October’s weak performance, which had been impacted by hurricanes and a significant labor strike at Boeing.

The unemployment rate ticked up to 4.2%, while job openings climbed to 7.74 million in October from 7.37 million the previous month. Additionally, 3.3 million Americans voluntarily quit their jobs, a sign of worker confidence in job prospects. ADP’s report on private payrolls revealed that 146,000 jobs were added in November, with annual pay increasing by 4.8%.

Investor attention is now focused on the Federal Reserve’s December meeting. Fed Governor Christopher Waller hinted at the possibility of a 0.25% rate cut, provided economic data remains steady. Comments from Fed Chair Jerome Powell suggested a balanced approach, with the potential for cautious rate adjustments. Treasury yields fell across the curve, lifting bond prices and supporting tax-exempt municipal bonds, which outperformed Treasuries. Corporate bonds also experienced strong demand, with half of new issues being oversubscribed.

The European stock market ended on a strong note, with the pan-European STOXX 600 rising by 2%. Germany’s DAX led the charge with a 3.86% increase, followed by Italy’s FTSE MIB, which rose 4%, and France’s CAC 40, which posted a 2.65% gain. The UK’s FTSE 100 saw a modest 0.26% rise.

European stocks benefited from easing concerns about political unrest in France and growing expectations of a policy shift at the European Central Bank (ECB). Political turmoil in France briefly unsettled markets after Prime Minister Michel Barnier’s government collapsed. Parliament passed a no-confidence motion led by opposition parties challenging the 2025 deficit-cutting budget proposal.

The spread between French and German 10-year bond yields widened to 90 basis points, the largest margin since 2012, reflecting heightened financial risk. Investor sentiment improved after President Macron announced plans to form a “government of general interest” and meet with political leaders from across the spectrum.

Economic indicators painted a less optimistic picture for Europe. German industrial output fell by 1% month-over-month, and factory orders declined by 1.5%, signaling sluggishness in manufacturing. Retail sales in the eurozone dropped 0.5% in October after a 0.5% gain in September, driven by declines in non-food product and auto fuel sales. Meanwhile, ECB Chief Economist Philip Lane signaled a shift away from data dependency, indicating that future policy decisions would be more forward-looking. This shift suggests that rate adjustments will be based on anticipated risks rather than backward-looking data.

Bank of England (BoE) Governor Andrew Bailey hinted at the possibility of up to four interest rate cuts in 2024. This comes as the BoE anticipates that inflation will continue to fall, supporting rate cuts to revive economic growth. Markets reacted positively to the prospect of easier financial conditions in the UK, though uncertainties remain regarding the broader European economic outlook.

Japan’s stock market posted solid gains, with the Nikkei 225 increasing 2.3% and the broader TOPIX rising 1.7%. Export-heavy sectors benefited from the depreciation of the yen, which fell to the mid-150 range against the U.S. dollar. The weaker yen boosts the competitiveness of Japanese exports, driving profitability for export-oriented firms. In the fixed income market, Japanese government bond yields remained stable, with the 10-year yield closing flat at 1.06% amid uncertainty surrounding the Bank of Japan’s (BoJ) next rate decision.

The BoJ is expected to deliver its next monetary policy decision on December 19, with market participants split on whether the next rate hike will come in December or January. Toyoaki Nakamura, a member of the BoJ board, suggested that incoming data on wages and economic growth would shape the decision. Governor Kazuo Ueda indicated the bank would also wait for clarity on U.S. trade policy before committing to a rate hike, signaling a more cautious approach.

Chinese markets also saw a strong week, with the Shanghai Composite Index rising 2.33% and the CSI 300 up 1.44%. Investors anticipate additional government support from the Central Economic Work Conference, a major policy-setting event beginning on December 11.

During this meeting, China’s leaders are expected to outline new stimulus measures, as well as next year’s economic growth targets. China’s official manufacturing Purchasing Managers’ Index (PMI) rose to 50.3 in November from 50.1 in October, remaining above the 50-point growth threshold. Meanwhile, the private Caixin/S&P Global manufacturing survey showed an increase to 51.5 in November from 50.3 the prior month.

While Japan’s currency-driven market strength and China’s potential stimulus supported risk-on sentiment, European political risks were a reminder of underlying vulnerabilities. Nevertheless, with the U.S. job market showing strength and expectations for Federal Reserve rate cuts rising, the broader market mood was optimistic heading into December.