The Long and Short of it, week ending 01 Dec 2023

Publication Type: Market Commentaries
The Long and Short of it, week ending 01 Dec 2023

All 3 major stock market indexes moved higher last week with the Dow Jones Industrial Average strongly outperforming both the Nasdaq Composite and S&P 500 Indexes. The primary impetus for the move higher was increased expectations (driven by dovish Fed officials’ – especially from Jerome Powell – comments) of “peak rates” and a Fed pivot (rate cut) beginning early next year. 10-year Treasury rates, as a result, continued their move lower, finishing the week over 25bps lower, with almost all the move coming from falling 10-year real rates. A mixture of strong and weak economic data (e.g., greater-than-expected GDP growth, falling home sales and weaker manufacturing activity) combined with a better-than-expected PCE Price Index release (i.e., lower inflation than expected) seemed to bolster expectations of the soft-landing scenario adding to risk-on sentiment. For the week, the S&P 500 Index rose 0.8% to 4,594.63, the Nasdaq Composite Index increased 0.4% to 14,305.03, the Dow Jones Industrial Average gained 2.4% to 36,345.50, the 10-year U.S. Treasury rate fell 26bps to 4.21% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.1%.

European stock indexes finished higher as well last week with the STOXX 600 Index outperforming the FTSE 100 Index. Both indexes moved lower early in the week, pressured by hawkish comments from ECB President Lagarde and BoE Governor Bailey as well as by weak Chinese economic data (hurting luxury and mining stocks). Wednesday’s better-than-expected German inflation report and Thursday’s better-than-expected U.S. PCE Price Index release reversed negative rate sentiment, driving higher expectations of ECB and BoE rate cuts next year, propelling index levels off their mid-week lows. The performance of the FTSE 100 Index suffered (versus the STOXX 600 Index), once again, from falling energy prices as well as a stronger British pound. For the week, the FTSE 100 Index increased 0.6% to 7,529.35, the STOXX 600 Index rose 1.4% to 466.20, the 10-year Gilt rate fell 18bps to 4.14%, the 10-year Bund rate dropped 28bps to 2.36%, the British pound strengthened 0.8% and the euro weakened 0.5% both versus the U.S. dollar.

Top performing ETPs over the week

. 3x Long ETPs 3x Short ETPs
UK +3x Rolls Royce (3LRR) +48.6% -3x Shell (3SRD) +3.3%
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The Long and Short of it, week ending 01 Dec 2023

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