All eyes on the Fed!

Key takeaways

Markets were calmer last week in the build up to the coming US interest rate decision, with mixed jobs data keeping investors in ‘wait and see’ mode. Meanwhile, signs of easing inflation helped spur the S&P 500 Index of leading US stocks to make modest gains, led by the Magnificent 7.

Mixed US jobs data leaves investors in ‘wait and see’ mode

In the US, stock prices rose on investor hopes of an interest rate cut at this week’s Federal Reserve (Fed) meeting. Last Tuesday, ADP unemployment data showed the US private sector cut 32,000 jobs in November. This briefly pushed US Treasury yields lower (meaning their prices rose) although this was tempered by Thursday’s initial jobless claims, which came in lower than expected. This reversed the gains and subsequently pushed yields higher, leaving US Treasuries with modest losses.

Delayed US inflation data help boost festive cheer

Investors hoping for a rate cut received more good news on Friday, with the release of delayed US inflation data for September. The headline rate for US personal consumption expenditure, or PCE (the Fed’s preferred index for evaluating inflation), came in at 2.8%, lower than the 2.9% forecast. The news added to confidence of a coming US rate cut which provided a boost for technology-heavy indices such as the S&P 500 and the Nasdaq.

Magnificent 7 stocks lead US market higher

Shares in Tesla jumped almost 7% last week thanks to a 33% year-on-year increase in its third quarter sales to China, the world’s biggest EV market. Meta (Facebook) gained 5.4% on reports it will radically slash investment into its Metaverse project to support its burgeoning AI proposition while Nvidia, the stock at the centre of the AI revolution, and now the world’s largest company, gained 4.3%.

Market moves

• Although the S&P and Nasdaq indices made gains over the course of the week, in the UK, the FTSE 100 and 250 indices both retreated to deliver modest losses for the week.

• Gold was slightly ahead while the price of silver jumped 7%.

• Bitcoin enjoyed an energetic week only to arrive back close to where it began.

What to look out for this week

• Although this week features delayed US jobs reports from September and October and fresh jobless claims data, such releases will be eclipsed by Wednesday’s interest rate decision from the US Federal Reserve.

• Friday sees the latest UK GDP print. The UK economy grew just 0.1% in the third quarter and shrank 0.1% in September when UK car production hit a 73-year low following the infamous cyber-attack on Jaguar Land Rover.

Important Information

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