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Most major equity indices gave back some of the previous week’s strong gains and closed slightly lower. Growth stocks lagged value-oriented shares, which were supported by gains in the consumer staples sector. The energy sector underperformed, however, as European oil and natural gas inventories reached near-peak levels. Dispelled reports of a Russian missile strike on Polish territory sparked a brief sell-off on Tuesday.
U.S. stock indexes rallied on Tuesday after a report showed the prices that suppliers charge goods producers rose at a slower pace in October than economists had forecast. The government’s Producer Price Index was the second recent piece of positive news on inflation, coming after the previous week’s better-than-expected report on the Consumer Price Index.
Counteracting this news and on the heels of a flat result the previous month, U.S. retail sales picked up in October, rising a seasonally adjusted 1.3% from September. That’s the strongest monthly retail gain since February 2022, despite negative factors such as inflation and rising interest rates.
US equities fell 0.6% over the week, with US technology stocks falling by -1.5%. European equities outperformed their US equivalents posting a gain of 0.7% whilst UK stocks rose by 0.92%. UK finance minister Jeremy Hunt unveiled tax increases, spending cuts, and new fiscal rules in his Autumn Statement, with an eye toward repairing the public finances and restoring Britain’s credibility in international markets. Chinese markets showed further optimism after positive talks between US and Chinese leaders along with hopes of a post Covid recovery, with a weekly return of 4.2%, with the broader EM market +0.8% for the week.
The U.S. Treasury yield curve inverted further during the week, driving the inversion in the two-year/10-year curve segment—historically, a typical but not conclusive indicator of a coming recession—to its deepest level in over 40 years. Short-term U.S. Treasuries repriced to higher yields, particularly after suggestions that the Fed’s terminal policy rate should reach a minimum level of 5% and may need to go as high as 7% to achieve the central bank’s inflation objectives. The US 10-year treasury yield ended the week at 3.83% whilst the 2 year equivalent closed at 4.5%
Oil fell 9.8% for the week as European inventories reached peak levels and investors fear a supply glut in the face of a slower period of economic growth. WTI crude oil ending the week at $80.24 per barrel.
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