Watch The Weekly Close

Watch The Weekly Close – European stocks fell slightly, influenced by a drop in Asian markets, as traders were disappointed by the readout from a Chinese economic conference and showed less risk appetite ahead of next week’s Federal Reserve meeting. The Stoxx 600 index in Europe decreased by 0.1%, while a global stock measure was on track for the worst week in almost a month. US futures, particularly Nasdaq contracts, showed slight gains, indicating a potential rebound following Thursday’s downturn on Wall Street, triggered by unexpectedly high US jobless claims and mixed signals regarding producer prices.

In Asia, stocks in China and Hong Kong were the main contributors to the region’s declines after the Central Economic Work Conference in China concluded without specific policies on fiscal stimulus, despite officials expressing intentions to stimulate consumption. Additionally, their commitment to lowering policy rates and banks’ reserve ratios caused the yield on Chinese 10-year government bonds to drop below 1.8% for the first time ever.

SPX Rally on Hold 

On Thursday, the S&P 500 experienced a 0.5% decline, marking a brief halt to this year’s 27% rally. Recent trading has revealed a worrying trend among some Wall Street strategists: the number of stocks contributing to the rise is decreasing. 

The US benchmark concluded its ninth straight day where more constituents declined than advanced. This is the longest stretch of such occurrences since Bloomberg began recording this data in 2004.

UK Economy Experiences Unforeseen Contraction 

Britain’s economy contracted for the second month in a row in October, as consumers braced for a tough budget, putting the Labour government’s goal of stimulating growth at risk just months after taking office. 

The Office for National Statistics reported a 0.1% decline in gross domestic product (GDP), following a similar 0.1% drop the previous month. Analysts, who had anticipated a 0.1% rise, are now cautioning that the economy may shrink in the fourth quarter. 

This trend reflects a disappointing trajectory of growth figures under Prime Minister Keir Starmer, with only one month of growth recorded since Labour came to power. Growth has significantly slowed since Starmer took over, despite a strong start where the country outperformed its Group of Seven peers with a 1.2% increase in the first half of the year. The Labour party faced a rocky beginning, with overall GDP decreasing by 0.1% since the July 4 election. 

In light of these developments, the British pound weakened, falling 0.3% against the dollar to $1.2631, while traders have slightly raised their expectations for interest rate cuts from the Bank of England in the upcoming year.

ECB to Cut Rates Further

The European Central Bank is expected to gradually lower borrowing costs further in 2025, and investor expectations for over 100 basis points of cuts seem reasonable, as noted by Governing Council member Francois Villeroy de Galhau. He mentioned during an interview on BFM Business television that more rate reductions are on the horizon for next year.

Villeroy emphasized that while the central bank isn’t committed to a specific rate path, it is generally aligned with the financial markets’ forecasts. Currently, the swap market anticipates around 120 basis points of cuts by the end of next year.

According to officials familiar with the central bank’s discussions, policymakers anticipate a quarter-point cut at their upcoming meeting in January, with a similar move likely in March. They also indicated that a more significant half-point cut could be considered in case of an emergency.

Although the Euro dropped after yesterday’s decision, it continues to hover near 1.05. Additionally, the ECB’s lack of commitment to any further actions and its data-dependent stance are not expected to significantly pressure the Euro. The weekly close is crucial; as long as the Euro stays above 1.05, the chances of revisiting 1.06 are considerably increased.

Gold Recovering

Gold is inching upwards following mixed economic reports from the US, as investors turn their attention to the Federal Reserve’s upcoming final policy meeting of the year. The price of gold hovered around $2,687 per ounce after a 1.4% drop on Thursday, triggered by unexpected increases in US wholesale inflation for November, along with a rise in jobless benefit applications to a two-month high.

Despite this, gold is set to achieve a weekly gain, with growing optimism that the Federal Reserve will implement a 25 basis point rate cut in their next meeting. Market participants are also considering the possibility that the Fed may pause further policy easing early next year. Typically, lower borrowing costs benefit gold, as it does not yield interest.

Looking ahead, the World Gold Council noted in a report on Thursday that prices are anticipated to rise more gradually in 2025. Concerns surrounding economic growth and inflation under a potential Donald Trump presidency are likely to dampen significant gains amid a complex landscape for US interest rates.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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