Commentary
Global equity markets saw strong performance last week, as S&P 500 breached the 4,500 barrier. The rally was broad-based, with S&P 500 equal weight outperforming its market cap-weighted peer by 1 percentage point. Meanwhile, the US small-caps also delivered strong gains, as Russell 2000 jumped 5.4% over the week.
The major catalyst of last week’s rally was the US inflation, which declined by a stronger-than-expected pace in October, primarily helped by reduced gasoline prices. In light of falling inflation, markets are now pricing in a near-100% probability of no rate change by Fed on the December meeting.
As a consequence, yields on global fixed income have fallen to multiple month lows. The US 10-year treasury yield now stands at 4.45% (down from October’s peak of 4.99%), while the 10-year German Bund yield (a European benchmark) has reached 2.59% (down from September’s peak of 2.98%).
