Market Updates

Last week’s key macro data reinforced expectations that the Federal Reserve (Fed) will continue cutting rates in 2026. Inflation eased more than anticipated to 2.7% year-on-year, while unemployment rose to 4.6%, confirming a softer labour market. So far, markets have welcomed this slowdown as it gives the Fed room to ease further. As long as unemployment does not rise sharply, we remain confident that markets can absorb a gradual softening in labour market conditions. 

As expected, the US Federal Reserve (Fed) cut interest rates for the third time this year, lowering its target range by 25 basis points to 3.50-3.75%. Chair Jerome Powell cited a softening labour market, noting that payroll growth may be overstated. Inflation pressures also appear slightly weaker than anticipated.

After a volatile start of November, equity markets resumed their uptrend last week with the S&P 500 index now almost back at its all-time high. Earlier weakness reflected concerns over tech valuations and uncertainty around a December rate cut by the Federal Reserve (Fed).

It wasn’t just the first snowflakes that fell in parts of Europe last week; markets too. The posterchild of the AI rally, Nvidia, posted strong earnings, with revenue guidance exceeding expectations. But investors are questioning whether the AI trade has run too far, too fast.

The US government shutdown has finally ended after a record 43 days. Markets initially reacted positively to the news, with Treasury yields declining, equities recovering and the dollar stabilising. However, the positive mood didn’t last, especially in the US where equities finished the week lower, while bond yields and the dollar also weakened.

Trump turned his Asia tour into a series of trade deals. Four ASEAN countries (Malaysia, Cambodia, Thailand, and Vietnam) will see lower tariffs, mostly in exchange for better access to critical minerals. South Korea pledged USD 350 billion in US investments for lower tariffs too. And with China, Trump struck a framework deal. He traded tariff cuts for two key concessions: a one-year postponement of China’s rare-earth export restrictions and commitments to purchase US agricultural products.