The Republicans seized control of the House of Representatives, boosting their ability
to push through tax cuts and higher tariffs.
Shares of vaccine makers and pharmaceutical groups, particularly GSK, Sanofi, Moderna, Pfizer and Vertex Pharmaceuticals, slumped on news of Donald Trump’s nomination of vaccine sceptic Robert F Kennedy Jr as the top US health official.
UK
The FTSE 100 slid 0.1% over the week.
The UK economy grew just 0.1% over the third quarter.
Rachel Reeves announced plans to develop eight pension “mega funds” from the sprawling Local Government Pension Scheme in order to enhance their ability to invest in private market assets, such as infrastructure.
The Chancellor and Bank of England governor Andrew Bailey also called jointly for the UK to rebuild ties with the EU, amid fears of a possible transatlantic trade war with Donald Trump.
Shell won an appeal against a landmark order for it to cut greenhouse gas emissions.
US
The S&P 500 and Nasdaq both fell 2.1% over the week.
The president elect, Donald Trump, chose some controversial appointees, including vaccine-sceptic Robert F Kennedy Junior as the top health official and Mark Gaetz, who is battling allegations of ethics breaches including sexual misconduct, drug use and the acceptance of gifts, as attorney general – Mr Gaetz has called for both the FBI and Department of Justice to be abolished. His proposed defence secretary pick Pete Hegseth denies a sexual assault allegation.
Additionally, Marco Rubio, who is known for his tough stance on China and Iran, will become Secretary of State, while shale boss Chris Wright has been picked as energy secretary.
US retail sales rose by a stronger-than-expected 0.4% in October, while September’s data was revised up to 0.8% growth from an initial estimate of 0.4%. The data underlines the strength of US consumer growth and may hinder the Federal Reserve’s (Fed) ability to cut rates.
US inflation rose 2.6% on an annual basis in October, from 2.4% in September. Core inflation held flat at 3.3% for the third month in a row.
Fed chair Jay Pow¬ell backed a gradual approach to reducing interest rates, say¬ing the US cent¬ral bank does not need to be “in a hurry” as the eco¬nomy remained strong.
Europe
The Eurofirst 300 eased 0.6% over the week, proving more resilient than US shares thanks in part to upbeat earnings from ASML and Siemens.
Olaf Scholz is facing calls for his replacement by defence minister Boris Pistorius as the SPD party’s candidate for chancellor in February’s snap elections.
Minutes of the latest European Central Bank (ECB) meeting show that rates were cut in October to avert unnecessary damage to the economy, with policymakers taking the view they could pause a December cut if activity picked up.
Japan
The Nikkei 225 declined 2.2% over the week.
Pacific Basin ex Japan
Chinese retail sales rose 4.8% year on year in October, the highest rise in eight months. Consumer spending was buoyed by to government policies that encouraged consumers to trade in old goods such as household appliances for newer ones, and by a week-long holiday in October.
Industrial production rose 5.3% from a year earlier, compared with September’s 5.4% increase, amid weaker auto sales. Fixed asset investment remained steady at 3.4% in the January to October period.
New home prices in China dropped 5.9% year on year, the most since 2015, while the slump in real estate investment deepened, dropping 10.3% in the 10 months to the end of October.
Emerging Markets
The MSCI EM Index dropped 4.9% over the week.
The Mexican central bank reduced rates from 10.50% to 10.25%. The news comes as Mexico’s government announced plans to run a larger deficit than previously expected next year. In its budget, the government announced sharp cuts to spending across many areas including security, healthcare and defence but increased spending on social programmes and passenger rail. It also included more than $6bn in debt payments for struggling state oil company Pemex.
Argentina left the COP29 meeting early, stoking fears it would walk away from the Paris agreement to cut greenhouse gases.
Bonds
The yield on the 10-year US Treasury rose 15 bps over the week to close at 4.46%, having briefly touched a post-election high of 4.5%. Two-year yields rose 9 bps to 4.32%.
US corporate bond spreads continued to narrow. Spreads on investment-grade bond spreads have fallen to 80 bps, their lowest level since 1998, while high-yield spreads have tightened to 260 bps, their narrowest point since before the start of the financial crisis in 2007.
The yield on the 10-year German Bund closed the week 2 bps lower at 2.35%, while 10-year JGB yields rose 7 bps to 1.07%.
China has borrowed almost as cheaply as the US after selling $1.25 bn of three-year US dollar-denominated bonds at 4.274%, just 0.01% more than the equivalent dated US Treasury.
Commodities
European gas prices hit fresh highs for the year after Aus¬trian group OMW said Rus¬sian sup¬plier Gazprom would stop send¬ing pipeline gas.
Gold suffered its worst week in three years as a strong dollar and higher inflation expectations weigh on the precious metal.
Currencies
The euro slumped to its lowest level against the US dollar in a year amid expectations that US tariffs on European exports will weigh on growth and mean the ECB will be more likely to cut rates, while the US growth outlook is boosted by hopes of tax cuts.
