US stock markets rose last week, recovering from previous week’s losses. The equal-weighted index of S&P 500 outpaced the traditional cap-weighted version. NVIDIA’s earnings drew attention midweek, with shares steady despite lighter-than-expected 4Q guidance. Optimism around AI-driven clean energy boosted utilities, while communication services weakened. Alphabet’s shares dropped after reports of a potential Department of Justice breakup proposal. Positive economic news also lifted sentiment. Existing home sales grew y/y for the first time since 2021, supported by job growth and stabilizing mortgage rates. Attention now shifts to the Fed’s December meeting, with policymakers signaling possible rate cuts but emphasizing data dependence. Bond markets had a strong week. Treasury prices rose, with long-term yields dropping and short-term yields rising.
In Europe, the STOXX Europe 600 Index rose 1.1%, as hopes grew that the ECB might lower borrowing costs in December after signs of a slowing economy. In the Eurozone, business activity contracted unexpectedly in November – manufacturing shrank further, and services began to weaken. While weak PMI data suggests the ECB might ease monetary policy soon, rising wages (+5.4% in 3Q) signal continued inflation risks, meaning the ECB could stay cautious. In the UK, inflation in October was stronger than expected, rising to 2.3% y/y, driven by higher energy costs. This reduced expectations for significant rate cuts by the BoE in 2025, with markets now predicting fewer reductions.
