United States

On the week ended November 18th, stocks continued their post-election rally. Investors appear optimistic of President-Elect Donald Trump’s proposed expansionary fiscal policies. The Dow Jones Industrial Average ended a seven-trading-day post-election rally on Wednesday, during which it gained more than 5.7% reaching a new all-time high. The S&P 500 index gained 0.6% to reach 2,181.90, while Nasdaq gained 1.5% to reach 5,321.51. The S&P 500 volatility index (VIX) ended the week at 12.85, declining 15%, showing investor ease after turbulent pre-election trading. The US Aggregate Bond ETF declined 0.56%, while the 10Y US Treasury yield rose 9.3 basis points to 2.3548%.

In testimony before Congress on Thursday, Federal Reserve Chair Janet Yellen appeared to confirm that recent economic signals have been strong enough to prompt the Fed to raise rates at its December 13–14 meeting, noting an increase might come “relatively soon”.

Next week, existing home sales data will be reported on Tuesday and the Federal Reserve’s November meeting minutes will be released on Wednesday. US markets will be closed for Thanksgiving on Thursday.

Eurozone

During the week, the German DAX index declined 0.27% to 10,664.56. The French CAC 40 declined 0.84% to 4,504.35, while the Italian stock index (FTSE MIB) declined 2.5% to 16,265.90. The European stock index Stoxx 50 declined 0.62% to 3,020.83. The strengthening of the US dollar caused the euro to depreciate 2.17% against it to $1.0588, while the ounce of gold declined 1.1% to 1207.89.

European bonds sold off, following expectations that fixed income returns will be hurt by global inflation. Notably, Italian yields surged due to the upcoming constitutional reform vote that could see Prime Minister Renzi out. The Italian 10Y government bond yield rose 1.4 basis points to 2.093%, while the German bund yield declined 4.7 basis points to 0.272%.

Bundesbank, the German central bank, issued a financial stability report in which it found that, while the country’s banks are robust, they suffer from weak profitability and may be underestimating the risks of falling asset prices.

Germany will report Q3 gross domestic product data on Thursday.

UK

UK stocks fell on Friday, with commodity shares feeling the weight of dollar strength, but the benchmark FTSE 100 still achieved a weekly rise. In fact, it finished the week slightly increasing to 6,775.77 which represents a rise of 0.7% for the week, a second straight week of gains.

GBPUSD hit a high of $1.2505 on Thursday, after the strong U.K. retail sales figures. But with Yellen reinforcing the market’s expectations for an interest-rate increase next month, the U.S. Dollar Index traded at 13-year highs against its rivals. Overall, GBPUSD experienced depreciation, moving from 1.249 to 1.2342 during the week. On the other hand, GBPEUR slightly appreciated (from 1.1633 to 1.1656).

The government bond benchmark, 10Y Gilt, recorded an increase of 12bps, moving from 1.37% to 1.49%.

The U.K.’s unemployment rate fell to 4.8%, the lowest in more than a decade, the Office for National Statistics said on Wednesday. Analysts had expected the rate to stay at 4.9%. Furthermore, Consumer Price Index (YoY) (OCT) was published and it was below expectations of 1.1%, hitting 0.9%.

German Minister of finance Mr. Wolfgang Schäuble said that until the UK’s exit is completed, Britain will have to fulfil its commitments. He also said that there might be commitments that last beyond the exit, and that UK would not receive special treatment on migration, because freedom of movement is a core element of the internal market.

Next week the data for the third quarter GDP will be published: previous quarter growth was 2.3%.

Rest of the World

Japan’s economy grew by 2.2% in the third quarter, well above analysts’ expectations of 0.8%, as the country’s exporters overcame the strength of the yen. In addition, Nikkei entered bull market territory on Friday, with a weaker yen helping drive gains across key Asian markets as strong U.S. economic data has increased expectations of an interest rate increase next month. The Nikkei 225 closed at 17,967.41, up 20% from its recent low in June and having hit a ten-month high earlier in the session.

The MSCI Asia Pacific Index retreated 0.5% to 134.12, taking its loss this week to 0.9%. Asian equity markets have been whipsawed since Republican candidate Donald Trump’s shock election victory on the 8th of November.

December West Texas Intermediate crude-oil futures finished down, at $48.70 a barrel. For the week, oil closed off about 4%, marking its first weekly decline after booking weekly gains for five straight weeks. The price was mostly driven as uncertainty surrounded a weekend meeting of major oil producers who are expected to discuss a proposal to cut oil production.

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