Expectations regarding the future path of US interest rates took another turn last week after the latest Consumer Price Index (CPI) reading showed inflation back on the upwards march. Investors were still trying to assess the possible policy impacts of the second Trump administration when he re-enters the White House in January when the release of the inflation print muddied the waters further. Headline CPI accelerated by 20 basis points (bps) to 2.6%[1] last month, the first rise since March this year with the index moving off the three year low set back in September. And whilst the move probably won’t be enough to deter the Federal Reserve (Fed) from trimming rates again at next month’s policy meeting, the speed of future policy easing has become more uncertain due to the events of the past few weeks. The S&P 500 declined by -2.1% (local currency) whilst treasury yields edged higher, the closely followed 10-year adding fifteen basis points (bps) to 4.45%.

Moving back across the Atlantic, European equities retreated for a fourth consecutive week with nervousness around possible trade policies from the incoming Trump administration continuing to weigh on sentiment. The MSCI Europe ex UK shed -0.7% (local currency) with ongoing political upheaval in Germany compounding the negativity on the Continent. In the UK, FTSE 100 and FTSE 250 had largely uneventful weeks, the former easing by -0.1% and the latter by -0.2% despite a third quarter GDP miss. Jumping to Asia, sharp declines were seen in both China and Japan with the fallout from Trump’s election victory continuing to be felt heavily. The Shanghai Composite dropped by -3.5% (local currency) with the combination of tariff nervousness and deflation worries (CPI slowed to 0.3% last month[2]) both key influences. As for the Nikkei 225 in Japan, it slumped by -2.2% (local currency).

Concluding with commodities, oil prices lost ground with expectations of softer demand from China and strength in the US dollar both notable headwinds. Brent Crude declined by -2.0% to $72.19 with the American focused West Texas Intermediate (WTI) benchmark seeing a weekly decline of -2.6% to $68.42 a barrel. Elsewhere, gold recorded its sharpest weekly decline since 2021 with a weekly loss of -4.2% to $2,573 an ounce. The precious metal posted losses for six consecutive days as investors continue to reassess the likely path for future Fed interest rates; lower borrowing costs tend to support gold given it doesn’t pay any interest.

Week Ahead

Source: Workspace DataStream, 18/11/24

[1] Bureau of Labor Statistics – Consumer Price Index October 2024

[2] National Bureau of Statistics of China – CPI Inflation October 2024

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