Equity markets: a significant increase in prices outside the United States
In November, the MSCI AC World Index rose 3.3% in euro terms. Behind this performance are significant regional differences. Emerging market equities outperformed with +9.9% in euro terms, followed by Eurozone equities (+8.3%), while U.S. equities significantly underperformed other world regions (only +0.9% in euro terms). In U.S. markets, cyclical sectors such as materials, industrials, financials, and consumer electronics were among the best performers this month. In contrast, the energy and healthcare sectors underperformed during the month. Among major U.S. companies, Meta rose 26%, while Amazon and Apple ended the month lower, Apple due to disruption in Chinese manufacturing. Semiconductors ended vastly higher (+18%). U.S.-listed Chinese stocks rose sharply (although many still suffer significant losses this year). On the losing side of the month, Tesla (-14.4%) was a big drag, while Disney (-8.1%) weighed on the entertainment sector.
The Fed remained the market's main focus last month. While the central bank's November 2 meeting resulted in another (expected) 75bp rate hike, market expectations focused on the idea that the Fed might start slowing its pace of increases in December. Economic data pointed to a slowdown in Fed rate hikes. Inflation in October was lower than consensus expectations, although the service sector, especially housing, remained a concern. In addition, some regional manufacturing indices showed some relief in price components. As for employment, private ADP figures for November showed a sharp slowdown in job growth. The number of job openings (according to the JOLTS report) also declined. At the same time, the U.S. consumer remained resilient, with a notable increase in retail sales in October and robust reports of Thanksgiving and Black Friday purchases.
Developments in China always retained sight of the market. China's strict "zero covid" approach remained a concern, mitigated by the government's announcement that its measures would be "optimized". However, this announcement was followed by a fresh wave of new covid cases that raised the specter of further tightening restrictive measures (and triggered a series of national protests). Nevertheless, by the end of the month, investors seemed to believe that normalization would happen no matter what. This idea was reinforced by optimism about the government's plans to support the country's ailing housing sector.
During the third quarter earnings season, S&P500 companies posted combined earnings growth of 2.4%, slightly below the 2.8% expected at the end of the quarter, on average sales growth of 10.9%. While U.S. business leaders continued to comment on the deteriorating economic environment and inflationary pressures, corporate results also provided further evidence of healthy consumer spending.
|MSCI EMU NR||7.9%||-4.0%||-16.2%||-15.0%|
|MSCI EUROPE NR||6.2%||-5.3%||-12.2%||-9.7%|
|MSCI USA NR||7.0%||-3.0%||-7.0%||-2.7%|
|MSCI JAPAN NR||2.1%||-7.2%||-12.8%||-11.8%|
|MSCI EM. MARKETS NR||-4.0%||-11.4%||-18.8%||-19.2%|
|MSCI AC WORLD NR||5.1%||-4.7%||-9.3%||-6.3%|
Bond markets: easing of long rates
Government bonds rose significantly at the long end of the curve, with U.S. 30-year yields rising above 4.30% at the beginning of the month before falling below 3.70% at one point in the last week of November. Essential credit spreads continued to reverse sharply, reaching new lows; the spread between the three-month and 10-year rates ended the month at a negative 0.70%. Long-term interest rates also followed the same trend in the eurozone. German 10-year rates fell from 2.15% at the end of October to 1.94% at the end of November. The interest rate differential between Italy, Spain, and Germany narrowed in November. Eurozone government bonds rose 2.3% in November. Corporate bonds rose more strongly (+2.8%), partly due to the narrowing of credit spreads.
Central banks: a slowdown in the pace of interest rate hikes in sight
As expected, the Fed raised its key interest rate by 0.75% in early November. However, during the month, some central bank members suggested that the Fed might slow the pace of rate hikes at its December meeting. Federal Reserve Chairman J. Powell said the delayed impact of higher rates adopted in 2022, the shrinking of the Fed's balance sheet through quantitative tightening, means that "it makes sense to moderate the pace of interest rate increases as we approach the level of restraint that will be sufficient to bring inflation down." As for the ECB, some members favor a 0.75% increase in December, while others prefer a 0.50% increase.
|Fed funds||3.75-4.00%||+0.75%||Nov. 2022|
|ECB deposit rate||1.5%||+0.75%||Oct. 2022|
Currencies: the dollar depreciating
The dollar fell for the second consecutive month, with the DXY (-5.1%) experiencing its weakest month since September 2010. Against the euro, the dollar lost 5%, and the greenback's depreciation was more significant against the yen (-7%).
Commodities: oil suffers from fears of China's covid situation
The gold price rose 7.3% in dollar terms last month, recording its best month since May 2021. The increase was mainly due to lower long-term interest rates and a falling dollar. On the other hand, oil fell for the fifth time in the past six months, with WTI losing 6.9% (in dollar terms) due to concerns about Chinese demand. However, industrial metals rebounded 14% in November following announcements of Chinese government support for the real estate sector.