Weekly Market Commentary: Markets cap another good week as the global equity market “Santa rally” continues

Markets cap another good week as the global equity market “Santa rally” continues

The US S&P500 equity index on Friday set its 57th record closing high of 2024, up +0.25% (up +0.96% on the week), while the pan-European STOXX600 equity index was up +0.18% (up +2.00% on the week), both indices up for the third week in a row, in local currency price return terms. The latest catalyst for the apparent “Santa Rally” was a US non-farm payrolls jobs report which saw a slightly-bigger-than-expected hiring pick-up in November alongside a positive revision to October (with data skewed by hurricane weather impacts and the recent Boeing strike). Also in the data, a pick-up in the US unemployment rate (to 4.246% vs 4.1% expected, so just shy of being rounded up to 4.3%) looks to have done enough to keep US central bank interest rate cut hopes alive for next week.

Latest US consumer inflation tops the list for investors of what to look for this week

The highlight for investors this week will be the US Consumer Price Index (CPI) inflation report which is due to land on Wednesday – consensus is looking for a headline ‘all items’ CPI year-on-year rate of +2.7%, with the core CPI annual rate (excluding energy and food prices) at +3.3%. The US CPI data will be the last piece of significant data ahead of the US Federal Reserve (Fed) interest rate decision due on 18 December next week. Elsewhere, economic data of note includes China’s inflation (which earlier this morning saw the annual CPI rate land barely positive at just +0.2%), China’s trade data (Tuesday), Japan’s quarterly Tankan business sentiment survey (Friday), and the latest UK monthly Gross Domestic Product (GDP) data for October (Friday).

Central banks have a busy run-up into the holiday season, with Europe in focus

December’s big central bank event does not take place until next week when we hear from the Fed. Ahead of that, the focus for markets this week is probably the European Central Bank (ECB) which will be setting rates on Thursday, and where markets are expecting another 25-basis points rate cut as the most likely outcome (which would bring the ECB Deposit interest rate to 3%). Also in the mix this week, central banks in Australia (Tuesday), Canada (Wednesday) and Switzerland (Thursday) will also be meeting to set out their latest interest rate policy settings.

Middle East geopolitics sees Assad’s regime in Syria fall with broader implications

To geopolitics and over the weekend, we saw the fall of Bashar al-Assad’s regime in Syria. As Assad was backed by Russia and Iran, his fall from power is being seen by some as an indication of the current limitations of Russia and Iran’s sphere of influence in the region, and potentially a sign of stretched resources and focus of those two states more broadly given what’s happening regarding Ukraine and Israel, respectively. Whether that suggests Russia might be more willing to agree to a possible US-brokered peace-deal over its invasion of Ukraine when US president-elect Trump takes office next year, remains to be seen.