Oil prices declined for a third straight week, reflective of a combination of growing demand worries and reduced concerns relating to a conflict escalation in the Middle East. Brent Crude fell by -4.7% to $81.56 a barrel as investors weighed the impact that a likely global economic slowdown would have on demand in addition to a slump in Chinese refining margins, which could also be indicative of demand weakness over the coming months. As for the conflict between Israel and Hamas, for now it appears to be contained within Gaza although clearly the situation remains highly fragile.

Global equity markets were generally positive last week. In the US, the S&P 500 and NASDAQ both rose again, the former by +1.3% and the latter by +2.4% with several strong earnings reports from companies in the technology sector providing support. The Japanese Nikkei 225 also enjoyed a strong week with it gaining by +1.9% thanks to solid corporate earnings and the announcement of additional government stimulus to help fight inflation[1]. The stimulus package is equative to $113.0bn and includes additional subsidies to help lower utility bills alongside certain tax cuts. Chinese equities also concluded the week in positive territory, the Shanghai Composite rising by +0.3%.

Elsewhere, the FTSE 100 fell by -0.8% despite GDP data modestly beating expectations during the third quarter. Comments from Bank of England (BoE) Governor Andrew Bailey may have taken the wind out the domestic market’s sails as he sought to dampen down expectations of interest rate cuts next year. Bond markets certainly took Bailey’s comments in their stride with little change seen across the yield curve next week. The mid-cap centric FTSE 250 fell by a comparable amount to its large cap counterpart (-0.7%). Across the Channel, the MSCI Europe ex UK index rose by a modest +0.2% despite an uptick in sovereign yields on the back of hawkish comments from European Central Bank (ECB) President Christine Lagarde.

Week Ahead

Source: Refinitiv Workspace, 13/11/23

[1] T. Rowe Price – Global Markets Weekly Update 10/11/23

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