Global markets ended significantly lower this week as global markets digested the hawkish statement by Federal Reserve Chair Jerome Powell as officials indicated the end of the low interest rate driven growth strategy. Markets now anticipate the Fed to implement only a 25 bps rate cut, due to favorable inflation and unemployment numbers. Canada’s Prime Minister Justin Trudeau downplayed the discontent and calls of resignation from his party this week, following the high-profile resignations of his housing and finance ministers. Capitol Hill continued to negotiate on a new stopgap budget and extension of the farm bill, even as a government shutdown looms on Friday. The U.S. congress is unlikely to allocate further aid to Ukraine in its new budget. Newly appointed French Prime Minister François Bayrou faces an uphill task to uplift the French economy. In Asia, South Korea’s constitutional court began the review of President Yoon’s impeachment. Germany announced plans to hold federal elections on February 23, 2025 following the dismissal of German chancellor Olaf Scholz’s government.

Global Updates
  • The MSCI All Country World Index dropped significantly this week due to global headwinds driving stock markets to profit taking. Uncertainties in the global economy and polity, as well as the U.S. monetary policy declarations played into the performance of the global markets. Central banks around the world will tread cautiously in light of unanticipated consequences of the international moves by the new government under Donald Trump.
  • The Eurozone reported a drop in its year-on-year trade surplus, recorded at €6.8 billion in October, compared to €9.4 billion in the same month in 2023. 
  • The Bank of England held policy rates steady at 4.75% due to a higher-than anticipated inflation in November. Inflation in the U.K. came in at an eight-month high of 2.6% in November, in line with expectations.
  • Retail sales growth in November in the United Kingdom came in at 0.2% falling short of the anticipated growth of 0.5%.
  • The Bank of Japan kept interest rates the same amid geopolitical uncertainties in the region. The People’s Bank of China also chose to keep its key lending rates unchanged.
  • Chinese retail sales grew by 3% in November, weaker than the expected 4.6%. 
  • Canada will be removing the 30% stake limit for pension funds to invest in Canadian businesses. The government will also be lending $15 billion to AI data centers.
  • The Canadian Dollar depreciated to its lowest level since the COVID pandemic due to the possibility of tariffs and political instability. November Inflation in Canada came in at 1.9% in November which was lower than expected.
  • Japanese automakers Nissan and Honda’s stocks gained during the week, following the news of the two companies holding merger talks was made public.
U.S. Equity
  • The S&P 500, Dow Jones index & Nasdaq indices dipped sharply this week. The Fed announced a 25bps easing in policy rates and has pencilled in only two further rate cuts in 2025.
  • Existing home sales rose to 4.15 million units in November, the highest in eight months.
  • Bitcoin company MicroStrategy’s stock initially gained and later dipped, following the announcement of the company’s inclusion in the Nasdaq 100. Palantir Technologies, MicroStrategy and Axon Enterprise will be replacing Moderna, Super Micro Computer and Illumina in the Nasdaq 100 index on December 23rd.
  • SoftBank CEO Masayoshi Son announced a $100 billion investment over a period of five years, during his visit to meet President-elect Donald Trump. He plans to invest in artificial intelligence adjacent industries in the U.S.
  • Nvidia stock initially gained this week driven by the news of progress in its Blackwell chip. The company’s stock later cooled following Microsoft CEO Satya Nadella’s comments concerning the cooling demand for Nvidia’s chips.
  • Micron Technology shares lagged due to a lackluster short-term revenue outlook despite strong first-quarter earnings. The company is bullish on the long-term prospects of capturing 20% of the $100 billion High Bandwidth Memory market by 2030.
  • Palantir’s stock gained after the company signed a continuing army contract of $619 million.
  • UnitedHealth stocks stabilized after steadily declining, since the killing of its CEO.
  • FedEx stock gained with the announcement of the company’s plans of a freight business spinoff as a separate public company.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dragged this week.
  • The U.S. 10-year Treasury yield rose to 4.554% and the yield on the 2-year note rose up to 4.306% over the week. Treasury yields and U.S. Dollar rose as markets digested the Federal Reserve’s comments on the trajectory of future rate cuts in 2025.
  • The U.S. Dollar Index (DXY) rose to 108.4 this week.

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