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Momentum has been ebbing a little both in the weeks leading into Christmas and coming out the other side. Last week, the US S&P500 equity index dropped -0.48%, while the pan-European STOXX600 equity index eked out a small +0.20% gain. That said, keep in mind some context: for the year 2024 as a whole, it was a good one for global equities, led by the US with the S&P500 equity index up over +23% and buoyed by tech stocks in particular, while the STOXX 600 was up around +6%, all in local currency price return terms.
China woes
Chinese equities have not had a good start to the new year. Over the past week, China’s Shanghai Composite saw its biggest weekly decline since February last year, falling -5.55% in local currency price return terms. Despite promises of stimulus by Beijing in recent months, China’s equity market rally has stalled. Investors have not had the scale of stimulus that they have been hoping for, the country’s heavily indebted property market bubble is still deflating amid high youth unemployment, and abroad the incoming US Trump administration looks set to heap more pressure on China’s economy by way of higher trade tariffs. Investors are likely now looking forward to China’s National People’s Congress meeting in March for the latest formal economic growth target as well as any next material and detailed plans to try to boost Chinese domestic consumption in particular.
Canada the latest to suffer political uncertainty
Alongside France and Germany witnessing their embattled leaders fight for political survival in recent months, Canada is the latest country to suffer political uncertainty. Local Canadian newspaper ‘The Globe and Mail’ has reported that the country’s Prime Minister Justin Trudeau is likely to announce his resignation later this week. The speculation follow’s the resignation of Trudeau’s finance minister before Christmas, citing differences on budget spending as well as how to respond to the risk of US tariffs on Canada-US trade.
What does Brooks Macdonald think
It might be a new year, but it seems that central bankers are still worried about the risks of a resurgence in inflation, including in the world’s biggest economy, the US. On Friday, the Federal Reserve (Fed) bank of Richmond President Thomas Barkin said he was “in the camp of wanting to stay restricted for longer”, while over the weekend, San Francisco Fed President Mary Daly said that inflation was still “uncomfortably above our target”. US bond markets have been paying attention to this Fed-speak, with US 30-year government bond yields at 4.83% earlier this morning, which would be its highest closing level since November 2023.
Source: Brooks Macdonald
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