Global stocks extended their rise into record territory, boosted by hopes that a vaccine will unlock pent-up savings and spur recovery. Meanwhile, bonds, particularly in the US, weakened.

UK

The FTSE 100 rallied 2.9% over the week, lifted by its high concentration in oil companies and miners.

The UK became the first nation to approve the Pfizer/BioNTech vaccine. The vaccine will be rolled out in early December, with health and care staff and care home residents the first to receive the jab.

Negotiations between the UK and EU remained deadlocked. While the two sides continue to meet, the chance of a deal appears to be slipping away, given the deadline of a long-scheduled summit meeting of EU leaders in Brussels on Thursday and Friday. In addition, the UK parliament will today vote for the second time on the controversial internal markets bill.

The IHS Markit composite purchasing managers’ index was revised up to 49.0 in November, from an initial estimate of 47.4. Manufacturing activity rose to 55.6, boosted by buying ahead of the end of the Brexit transition period. While services sector activity fell to 47.6 from 51.4 in October, reflecting the tightening in restrictions during the month, it beat initial estimates and was well above April’s record low of 13.4. The IHS Markit survey also showed businesses across both manufacturing and services reporting the strongest sentiment for the year ahead since March 2015, with respondents citing the news of a Covid-19 vaccine and hopes for a recovery in the global economy.

US

The S&P 500 rose 1.5% over the week, boosted by rising hopes of a second stimulus package. Senior Democrats gave their backing to a $908bn stimulus proposal that also has the support of some Republican lawmakers.

US non-farm payrolls rose 245,000 jobs in November, well below expectations. The unemployment rate dropped to 6.7%, from 6.9% in October.

Pfizer cut in half the number of Covid-19 vaccines it had hoped to ship this year due to supply chain issues.

Europe

The FTSEurofirst 300 rose by 0.3% over the week.

The final reading of the IHS Markit composite eurozone purchasing managers’ index fell to 45.3 in November, sharply down on October’s reading of 50 and its lowest since May. Services sector activity was hit by the reimposition of lockdown measures in many countries, with Spain and Italy’s services sector activity hitting a six-month low.

Eurozone inflation held steady at -0.3% in November.

The EU budget commissioner warned Poland and Hungary that Brussels may cut them out of the €750bn recovery fund if they continue to block the region’s upcoming budget.

Japan

The Nikkei 225 gained 0.4% over the week.

Pacific Basin

Australia exited its first recession in almost three decades, with the economy growing by a better than expected 3.3% in the third quarter.

China’s official manufacturing purchasing managers’ index jumped to 52.1 in November from 51.4 in October. The Caixin index rose to a decade-high 54.9 in November from 53.6 in October.

Emerging Markets

The Reserve Bank of India left its benchmark interest rate unchanged at 4% after consumer inflation rose to a six-year high of 7.6% in October. Inflation has remained above the 6% upper limit of the RBI’s target since March.

Brazil’s economy grew 7.7% over the third quarter, helped by distribution of cash payments to people during the coronavirus crisis. The country is now expected to see an annual GDP decline of about 5%, better than many of its Latin American neighbours.

Turkey’s economy expanded 15.6% in the third quarter.

Bonds

The yield on the 10-year US Treasury bond closed the week at 0.97%, equal to the intra-day high reached in November. Yields have risen on concerns that further fiscal stimulus would also feed through to higher inflation. Meanwhile, the two-to-10-year yield spread widened to 82bps, its widest since 2017, as shorter dated yields remained anchored by ultra-low interest rates.

Demand for US Treasury Inflation-Protected Securities has soared, with record inflows of $1.8bn over the past week, as investors move to safeguard their portfolios against a potential rise in inflation.US inflation expectations have risen to an 18-month high of more than 1.8%.

The yield on the 10-year German Bund ended at -0.55%.

Currencies

Sterling and the euro rallied while the US dollar touched its lowest level since the spring of 2018.

Commodities

Oil prices rose to a nine-month high, with Brent crude topping $49 a barrel after an agreement between Opec and Russia eased fears of oversupply.

Copper hit its highest point since March 2013. Iron-ore prices also hit a seven-year high after Vale lowered its output forecasts.

Gold lost almost 6% in November, its worst monthly performance in four years.

Please email us if you would like to receive our weekly newsletter direct to your inbox.

Image by Gerd Altmann from Pixabay