Equity markets strengthened last week as expectations of a December Federal Reserve (Fed) rate cut continued to build, improving overall risk sentiment. US indices were particularly strong in the holiday-shortened Thanksgiving week, with the NASDAQ and S&P500 gaining +4.9% and +3.7% (in dollars), and small caps posting even larger advances. The previous week’s worries over stretched AI-related valuations and heavy capex plans eased notably, with the rebound almost fully reversing earlier losses. Dovish commentary from several Fed officials further supported the upswing. Fed Board of Governors member Chris Waller was especially influential, signalling openness to a December rate cut on the basis of a deterioration in the labour market. In fixed income, Treasury yields drifted lower across the curve, reflecting the shift in policy expectations. The 10-year yield declined by 4 basis points (bps) to 4.00%, providing an additional tailwind to equity performance.

European markets followed the positive lead from the US, with all major indices posting weekly gains. The MSCI Europe ex UK rose +2.5% in local currency terms, supported by particularly strong momentum in Germany. Across the Channel, mid-cap equities outperformed their large peers with the FTSE250 recording a weekly gain of +3.8% against the FTSE100’s +1.9% with investors taking the announcements contained within the much anticipated budget in their stride. Moving to Asia, performance was similarly robust. Japan’s Nikkei 225 climbed +3.4% in yen terms, extending what has already been a standout year for Japanese equities. Technology shares recovered from the previous week’s weakness, echoing the rebound seen in US markets. As for China, the Shanghai Composite gained +1.4% for the week (local currency), with the technology sector once again driving much of the upward momentum amid selective signs of stabilisation in investor sentiment.

Gold prices were notably strong last week, rising +3.3% to around $4,200 an ounce and securing a fourth consecutive monthly gain. Much like equities, the precious metal benefited from growing expectations of a more dovish Fed, and the decline in Treasury yields. Oil prices also delivered modest gains after briefly touching a one-month low early in the week; Brent Crude rose by +1.1% to $63 a barrel. While clear catalysts were limited, a combination of tighter-than-expected inventories and renewed optimism around potential progress in peace talks between Ukraine and Russia helped stabilise sentiment. The absence of fresh supply pressures from major producers further contributed to the gentle rebound, leaving crude prices slightly firmer by the week’s end.

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