Home / Research / The Long and Short of it, week ending 15 Dec 2023

The Long and Short of it, week ending 15 Dec 2023

Posted: 19 December, 2023

Topic: Telecoms , Financials , Basic Materials , Energy , Industrials , Technology

Publication Type: Market Commentaries

The Long and Short of it, week ending 15 Dec 2023

Stock markets moved sharply higher last week with all 3 major indexes rising at least 2.5%. The drive higher came from stark indications of cooling inflation within the framework of a still-resilient economy. Tuesday’s CPI release set the stage for rallying stock markets, revealing lessening inflation pressure and boosting expectations of a Fed pivot early next year. Wednesday’s FOMC announcement along with Jerome Powell’s subsequent press conference significantly added to those expectations as the Fed held rates steady while indicating the tightening process had reached its end to be followed by rate cuts throughout next year. Reflecting that same sentiment, U.S. Treasury rates dropped over 30bps (all from lower 10-year real rates) and the U.S. dollar weakened nearly 1.5%. For the week, the S&P 500 Index rose 2.5% to 4,719.19, the Nasdaq Composite Index climbed 2.9% to 14,813.92, the Dow Jones Industrial Average gained 2.9% to close at 37,305.16, the 10-year U.S. Treasury rate fell 32bps to 3.91% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 1.4%.

European stock markets moved higher as well last week but not with the same forcefulness as U.S. markets. While both the FTSE 100 and STOXX 600 Indexes benefited from tame U.S. inflation and an FOMC announcement exciting expectations of rate cuts early next year, the less sanguine UK and euro zone central-bank policy outlooks worked to cap gains. Hawkish comments from ECB and BoE officials following as-expected “unchanged” rate decisions deflated market sentiment, limiting gains. The U.S. dollar-revenue heavy FTSE 100 Index also suffered from a noticeably stronger British pound adding to its underperformance relative to the STOXX 600 Index. For the week, the FTSE 100 Index increased 0.3% to 7,576.36, the STOXX 600 Index rose 0.9% to 476.60, the 10-year Gilt rate fell 35bps to 3.69%, the 10-year Bund rate dropped 26bps to 2.01% and the British pound and euro strengthened 1.1% and 1.2%, respectively, both versus the U.S. dollar.