Share prices generally rebounded during November amid mounting optimism that interest rates might have peaked, underpinned by encouraging US and eurozone inflation data.
- The Fed and the ECB held interest rates
- US inflation eased to 3.2% YoY
- US Q3 growth was revised upward to 5.2%
Equities bounce back: share prices generally rebounded during November amid mounting optimism that interest rates might have peaked, underpinned by encouraging inflation data from the US and the eurozone . Global economic growth is expected to slow to 2.7% in 2024 and then pick up to 3% in 2025, according to updated forecasts from the Organisation for Economic Cooperation & Development (OECD).
“Heightened geopolitical tensions have further increased the uncertainty and risks clouding the outlook” (European Commission)
US inflation continues to moderate: the Federal Reserve (Fed) held its federal funds rate at a range of 5.25% to 5.5%. The annualised rate of inflation in the US eased from 3.7% in September to 3.2% in October as lower fuel prices took effect, strengthening hopes that the Fed might not feel the need to implement another rise in borrowing costs.
Stronger-than-expected growth: the US economy expanded even more robustly than first thought during the third quarter, as initial estimates of 4.9% of annualised growth were revised upward to 5.2%. Growth was boosted by strong business investment and government spending. The Dow Jones Industrial Average Index rose by 8.8% over November.
ECB holds rates: the eurozone’s rate of inflation fell from 2.9% year on year in October to 2.4% in November, compared with the European Central Bank’s (ECB’s) target rate of 2%, fuelling hopes that policymakers might start to shift to a more dovish stance in 2024. The ECB left its key interest rate unchanged at 4% during November.
Clouded outlook for Europe: the European Commission downgraded its forecast for economic growth in the eurozone from 0.8% to 0.6% in 2023 and from 1.3% to 1.2% in 2024, warning: “Heightened geopolitical tensions have further increased the uncertainty and risks clouding the outlook”. Having grown by 0.2% during the second quarter of 2023, the eurozone’s economy shrank by 0.1% over the third quarter. During the third quarter, Germany’s economy contracted by 0.1% while Italy flatlined and France expanded by 0.1%. Over November, the Dax Index rose by 9.5%.
The end of deflation? In Japan, speculation continued that the central bank might be approaching the end of its protracted period of ultra-loose monetary policy. The country’s economy contracted by 2.1% during the third quarter, dampened by slower export growth and inflationary pressures that curbed domestic demand. The OECD expects Japan’s economy to expand by 1% in 2024 and 1.2% in 2025. The Nikkei 225 Index rose by 8.5% over November.
To view the series of market updates through November, click here
