The Pinnacle: November 2023
NOVEMBER 2 0 2 3 • I S S U E 35
World Market Review: November 2023 Edition
As 2023 draws to close, global markets around the world have shown resilience. Markets have seen a strong rally in equities, with November being a particularly noteworthy month in terms of equity gains.
Bond market performance was equally resilient following a decline in oil prices and the easing impact of the Israel-Hamas war. Brent crude prices declined by 5% following decreasing demand even as OPEC countries decided to reduce production.
According to MSCI ACWI, besides energy, many sectors ended the month in positive territory.
US Market:
The US market exhibited robust performance in November, with major indices like the S&P 500, Dow Jones, and NASDAQ posting significant gains. The S&P 500 advanced by 8.92%, while the NASDAQ surged 10.80%, indicating bullish sentiment among investors. Despite the energy sector’s slight decline, technology, and financial sectors led the charge with double-digit gains.
Economic data revealed a mixed bag, with existing home sales declining for the fifth consecutive month, even with mortgage rates retreating from their 7.0% peak. Inflation showed signs of deceleration with the Consumer Price Index (CPI) declining more than expected year-on-year (YOY). Treasury yields witnessed a notable drop as investors shifted their focus back to equities, reflecting a growing confidence in the market’s stability.
Source: S&P Global
Eurozone Market:
The Eurozone echoed the positive trends observed in the US, with a strong rebound in equities and government bonds. Economic resilience continued, bolstered by slowing inflation and a pause in major central bank activities.
The Euro area’s inflation rates declined, with both headline and core inflation showing a downward trend. Eurostat’s Flash CPI stated that headline inflation was 2.4% YOY while core inflation stood at 3.6% YOY. The European Central Bank maintained a vigilant stance, despite easing inflation, highlighting the delicate balance policymakers must strike.
UK Market:
The UK market presented a scenario of cautious optimism. The economy avoided a contraction in the third quarter, and retail sales, although falling, did not dampen the overall market sentiment. Manufacturing contracted as the Purchasing Managers Index (PMI) was still in contracting territory below 50 in November. The Services PMI improved, returning to expansionary territory.
Inflation rates in the UK experienced a significant drop, influenced by the energy price reduction. Headline inflation fell to 4.6% YOY from 6.7% in the previous month. The Bank of England held its base rate steady, reflecting a strategic approach to navigating the economic landscape.
Asia:
Emerging Asian economies showcased a promising recovery amid mixed market sentiments. While China is likely to meet growth targets, its manufacturing activity dipped for a second straight month. China's Manufacturing PMI fell to 49.4 in November, while staying lower than 50 points (break-even point) for two consecutive months. The property sector remained a concern, but Beijing’s potential plan to offer unsecured loans to developers signaled a proactive approach to address the issue.
Japan’s economy contracted in the third quarter, even with the government’s stimulus package aiming to provide a boost through tax cuts and subsidies. While the economic contraction was 0.5% in September, the annualised contraction comes in at 2.1%. This has significantly decreased the market's expectations of any aggressive rate increases by the Bank of Japan.
Amid these mixed market sentiments, Singapore showed strong growth in its manufacturing sector. The manufacturing sector grew by 7.4% YOY in October, after a complete year of negative growth. Singapore’s non-oil exports to China grew by 38.5% YOY while overall Real GDP also grew at a higher rate than the last quarter.
Conclusion:
Global markets painted a picture of cautious optimism this November, with signs of economic moderation and falling inflation fostering a positive environment for equities and fixed income. The US market’s strong performance, coupled with the Eurozone’s resilience and the UK’s surprising stability, contributed to the overall positive sentiment.
Emerging Asian economies, particularly China and Japan, demonstrated their ability to navigate through economic headwinds with strategic measures. As we look ahead, the world markets appear well-positioned to face the challenges that 2024 will likely bring.