Global stocks experienced their strongest month in three years, nearly reversing the losses experienced over the summer. This rally was widespread, with cyclical sectors leading the gains. In contrast, bond yields saw a significant decrease, with the yield on the US 10-year note dropping by 60 basis points, marking its best monthly performance in over a decade. In international relations, there was a notable easing of tensions between the US and China, with both nations agreeing to resume high-level military communications during the meeting between President Biden and President Xi. Additionally, a temporary ceasefire in the Middle East facilitated a prisoner exchange. In the commodities market, despite further production cuts by OPEC+, Brent Crude oil prices dropped for the second consecutive month to $82.83 per barrel, while gold prices remained steady above $2,000.
In the United States, economic activity showed signs of slowing in October. Core retail sales saw a marginal increase of 0.1%, and industrial production fell by 0.6%. The ISM manufacturing PMI remained unchanged at 46.7 in November, although the New Orders index showed a slight improvement to 48.3. Inflation rates in October were more favorable than anticipated, with the headline rate falling to 3.2% and the core rate slightly reducing to 4%. The Federal Reserve maintained its target interest rate range at 5.25-5.50%, marking the second consecutive hold, although Chair Powell did not exclude the possibility of future rate increases. The US also narrowly avoided a government shutdown, extending funding until mid-January, though Moody's revised the country's top credit rating to a 'negative' outlook.
The UK economy showed no growth in the third quarter, contrary to expectations of a contraction. However, retail sales in the UK fell unexpectedly in October, while Composite PMIs in both the eurozone and the UK improved in November, with the UK index moving back into expansion territory. Inflation rates in the euro area and the UK decreased further in November, and the Bank of England kept its base rate steady at 5.25%. Politically, Pedro Sanchez continued as Spain's Prime Minister following a deal on Catalan amnesty, and the far-right PVV party unexpectedly became the largest party in the Dutch election. The UK's Autumn Budget introduced moderate stimulus measures, and Germany extended its suspension of the debt brake for the fourth year in a row.
In China, economic data exceeded expectations for the third month in a row, with retail sales and industrial production both increasing in October. However, the manufacturing PMI slightly declined in November, and the headline inflation rate dipped into deflation, reflecting a decrease in food prices. The property sector continued to impact overall output, but there were reports of Beijing considering unsecured loans for developers. In Japan, the economy shrank by 0.5% in the third quarter after a strong performance in the previous quarter. Prime Minister Kishida announced a stimulus package that included temporary tax cuts and subsidies for low-income households and energy costs.