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Archinomics Monthly - November 2023

2 months ago



Global equities surged, with the MSCI World Index returning 9.2% (local currency). Overall, the rally marked one of the strongest months since November 2020, when news broke of an effective vaccine against Covid-19. US shares soared 8.9% (S&P 500 Index), while European stocks rallied 7.9% (EuroStoxx 50 Index) and Japanese shares gained 5.4% (TOPIX). UK shares lagged (FTSE 100 +1.8%) due to the market’s heavy weighting to energy stocks, which suffered amid declining oil prices. Chinese equities also trailed the global average, with the MSCI China Index rising 2.3%, amid ongoing concerns over the property sector and the outlook for domestic growth.


Global bonds rallied strongly, as expectations grew that US and European interest rates could be cut as early as the spring of 2024. US bonds were among the strongest (10 year Treasury +4.9%; investment grade corporate bonds +6.0%) with the Bloomberg US Aggregate Index, a key measure of overall US bond performance, recording its strongest monthly gain in almost 40 years. European bonds also rose. Germany’s 10 year Bund returned 2.7% while the Spanish 10 year bond gained 3.3%.


The US dollar weakened over November, falling 2.9% and 2.3% against the euro and the Japanese yen, respectively, as expectations that US rates would stay higher for longer were dashed by soft economic data and weaker-than-expected inflation. The euro strengthened slightly against the Japanese yen.


Oil prices weakened as the outlook for demand was hit by soft economic data. The postponement of an OPEC+ meeting also added to the weaker sentiment and gave raise to speculation that members were struggling to agree on further production cuts. Overall, Brent crude dropped 5.2% to close at $82.8 a barrel. Gold breached $2,000 a troy ounce, closing the month 2.6% higher, helped by a weaker tone to the US dollar.

Market Volatility

Market volatility

Volatilty slumped 28.8% in November, with the Vix Index closing at 12.9,  helped by a temporary truce in the Middle East conflict. As hopes of a return to the ‘Goldlilocks’ scenario (with growth not too hot, not too cold) grew, the Vix Index remained below the 20 level which is usually viewed to be an indicator of market stability. 

Responsible investing

The UN Climate Change Conference, or COP28, started in Dubai. In a surprise announcement on the first day of the conference, delegates agreed to launch a long awaited fund to pay for damage from climate-driven change. The EU, UK and US were among countries that announced contributions totalling around $400 million for the fund. 


Inflation surprised on the downside. US inflation fell to 3.2% in October while early estimates showed eurozone inflation declined to 2.4% in November. UK inflation, recently stickier than most, slowed sharply to 4.6% in October, while the Chinese economy fell back into deflation with prices falling 0.2% year on year.

With economic data continuing to soften and inflation falling, investors pivoted on their expectations for further interest rate movements. Markets now expect that rates have peaked in the US and Europe, with rate cuts forecast as likely in the first half of 2024.   

Japan’s government announced a stimulus package worth around 3% of the country’s GDP. The package includes measures to address higher costs of living, including tax cuts and cash handouts, as well as additional subsidies for businesses to offset rising energy costs and support for companies that raise wages.


on the

Having kept rates on hold at its November meeting, the US Federal Reserve is widely expected to do the same when policymakers meet in December. However, the ‘dot plot’ of interest rate forecasts will be closely scrutinised for clues as to when rates could start to fall. 

The European Central Bank (ECB) will also meet in mid December. As in the US, rates are expected to remain on hold, but hopes are growing of a more dovish stance as headline inflation nears the ECB’s target while eurozone economic activity remains flat at best.

China has recently introduced support measures for its embattled property developers. A pick up in the real estate market would be a clear sign that the Chinese economy is starting to recover from its disappointing performance so far this year.  


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