Building Gains On Lost Ground

Historically, the stock market has shown positive performance following Thanksgiving. In the last three decades, December has typically yielded an average return of approximately 1 per cent in US equities, and the market has experienced post-holiday gains in about 75 per cent of cases. 

In the past fortnight, global equities closed higher during a subdued, holiday-shortened trading week due to Thanksgiving festivities and had an early closure on Friday. The most notable event was the closely watched third-quarter earnings report from NVIDIA, the artificial intelligence chipmaker and currently the world's sixth-largest company by market capitalization. Despite beating earnings and revenue estimates, NVIDIA's shares fell due to cautious guidance related to export restrictions to China. This weakness in NVIDIA contributed to the underperformance of the Nasdaq Composite Index, although growth stocks, in general, outperformed value stocks. 

S&P Global released its estimates for business activity growth in November, indicating a pickup in the services sector, the fastest in four months, which offset a larger-than-expected slowdown in manufacturing. However, S&P also noted that subdued demand conditions and diminishing backlogs led firms to reduce their workforce numbers for the first time since June 2020. 

Tracking the European market, the pan-European STOXX Europe 600 Index closed the week 0.91 per cent higher, fueled by hopes that central banks would initiate interest rate cuts in the first half of the next year. In the last fortnight, major European stock indices closed with mixed results, with France's CAC 40 Index rising 0.81 per cent, Germany's DAX gaining 0.69 per cent, Italy's FTSE MIB falling 0.22 per cent, and the UK's FTSE 100 Index losing 0.21 per cent. 

"In the UK, the OBR forecasted a 0.6 per cent rise in the economy for the current year but reduced growth projections for 2024 and 2025 to 0.7 per cent and 1.4 per cent. "

European government bond yields increased slightly, with Germany's 10-year government bond yield rising from a more than two-month low. Despite the economic challenges, ECB policymakers emphasised the ongoing effort to curb inflation and dispelled expectations of imminent interest rate cuts. A survey from S&P Global revealed that eurozone business activity had declined for the sixth consecutive month in November, signalling a potential recession. In the UK, the Office for Budget Responsibility (OBR) forecasted a 0.6 per cent expansion in the economy for the current year but significantly reduced growth projections for 2024 and 2025 to 0.7 per cent and 1.4 per cent, respectively 

In Japan, stock markets experienced muted returns in the last two weeks, with the Nikkei 225 Index gaining 0.1 per cent and the broader TOPIX Index remaining flat. The Nikkei had risen to its highest level since 1990 earlier in the week, driven by strong domestic corporate earnings and expectations that U.S. interest rates had peaked. However, concerns about further monetary policy normalisation by the Bank of Japan (BoJ) arose following a hot October consumer inflation print. 

Meanwhile, Chinese stocks faced declines, despite news of potential fresh stimulus measures for the property sector in Beijing. The Shanghai Composite Index lost 0.44 per cent, and the blue-chip CSI 300 declined by 0.84 per cent. In Hong Kong, the benchmark Hang Seng Index gained 0.6 per cent. In a major development, Chinese regulators formulated a funding plan for property developers to address the ongoing property crisis.