EU member states reached agreement on a $60 per barrel price cap on global purchases of Russian oil after Poland dropped its objections. The cap, which will prohibit the provision of insurance and shipping services for Russian oil unless it is sold at or less than the upper price, is set to be adopted by all G7 countries plus some others. Russia has said it will not sell oil to any country participating in the cap, and India and China have so far not said they will implement it. Russia is expected to rely on tankers prepared to operate without western insurance. The EU is set to bar seaborne Russian oil imports from 5 December.

UK

The FTSE 100 rallied 0.9% over the week.

US

The S&P 500 rose 0.7% over the week. US equities ended December in the black, marking the first back-to-back monthly gains since mid-2021.

Federal Reserve (Fed) chair Jay Powell has sent a strong signal that the Fed will slow the pace of interest rate rises next month, suggesting that the Fed is preparing to raise rates by 50 bps following four consecutive 75 bps increases. However, he reiterated that the end point of the tightening cycle would probably need to be higher than previously forecast. Strong US employment data later potentially jeopardised the Fed’s less aggressive rate stance.

Non-farm payrolls rose by a far stronger-than-expected 263,000 in November. Data for September and October were revised upwards to 269,000 and 284,000, respectively. The unemployment rate held steady at 3.7%.

Average hourly earnings increased by a rate of 5.1% on an annual basis in November, compared to 4.9% in October.

US third-quarter GDP growth was revised up to an annualised rate of 2.9%, from an initial estimate of 2.6%.

The US core personal consumption expenditures index, the Fed’s preferred inflation gauge, eased to an annual rate of 5.0% in October from 5.2% in September.

The ISM manufacturing index declined to 49 in November from 50.2 in October, while cost pressures cooled at the fastest pace since 2020.

Europe

The FTSEurofirst 300 gained 0.7% over the week.

The annual rate of eurozone inflation fell for the first time in 17 months in November, declining to 10.0% from 10.6% in October. The data increased expectations that the European Central Bank (ECB) will raise rates by 50 bps at its December meeting, a lower hike than the 75-bps increase seen in the previous rate-setting meeting.

Meanwhile, ECB president Christine Lagarde has warned that the ECB “is not done” raising interest rates, saying inflation “still has a way to go”.

Japan

The Nikkei 225 fell 1.8% over the week.

The au Jibun Bank Japan manufacturing PMI fell to 49 in November from 50.7 in October, contracting for the first time since January 2021 and at the steepest pace in two years.

Pacific ex Japan

Chinese equities soared amid hopes that Beijing would ease its zero-COVID approach following civil unrest and weakening economic data. Although daily infection levels remain near record highs, the cities of Shenzhen and Shanghai scrapped the requirement for commuters to present PCR test results to travel on public transport, following similar moves by Tianjin, Chengdu and Chongqing. In Beijing, some residents were told they could quarantine at home rather than at a centralised quarantine facility.

Macau gaming stocks were boosted by news the Chinese government planned to award new licences to the city’s existing casinos.

In China, the Caixin manufacturing PMI unexpectedly edged up to 49.4 in November from 49.2 in October, but the Caixin services PMI fell to the lowest reading since May, dropping from 49.3 in September to 48.4 in October.

Emerging Markets

Emerging market stocks recorded their strongest monthly gains since 2009 in November, boosted by hopes that China will loosen its zero-COVID policy and a sell-off in the US dollar.

In South Africa, Cyril Ramaphosa came under mounting pressure to resign as president after a report concluded he had stollen $500,000.

Bonds

The yield on the 10-year US Treasury bond closed the week down 14 bps at 3.58%.

The yield on the 10-year German Bund ended the week at 1.85%, a drop of 12 bps over the week.

JPMorgan’s index of US dollar-denominated EMD recorded its best month since 1998 in November.