Market Briefing: 25th November

Global stock markets rose by just over 2% last week, with US and UK shares doing the heavy lifting. Within the US, we had the much-anticipated earnings report from Nvidia: with the company posting some very strong numbers. Alongside that there was some decent economic data out of the US and some good corporate data out of the UK; in spite of the pick-up in inflation which saw UK CPI jump to 2.3% from the 1.7% level it had been previously. This week is quiet in terms of scheduled data, with US markets closed on Thursday for the Thanksgiving holidays.

Last week

• Global stocks rose strongly, powered by US and UK share markets.
• Nvidia posted strong earnings numbers.
• UK inflation rose to 2.3% (driven higher by energy prices).
• US economic data remained strong.
• Bond markets posted modest gains.

This week

• It’s a fairly quiet week in terms of scheduled data, with the US Thanksgiving holiday towards the end of the week (with US markets closed on Thursday).
• US PCE inflation is released on Wednesday.
• Eurozone inflation is released on Friday.
• There’s a smattering of UK companies reporting earnings, with Compass Group and Halfords on Wednesday, Easyjet and Pets at Home on Thursday and Tullow Oil on Thursday.

Equity returns are in GBP, Oil is in USD. Gold is shown in GBP. Bond returns are all shown in GBP. Source Bloomberg.

More detail:

• Global share markets rose by just over 2% last week, with the US and UK markets powering the gains. AI chip maker Nvidia’s earnings were the key event for markets last week. Nvidia is the biggest company in the US share market (at a c7% weighting) and shares have nearly tripled this year. Hence its earnings were very keenly watched and are key market moving events. Nvidia’s numbers strongly surpassed expectations (more on that below) and that, combined with other strong US data, allowed other stocks in the index to rally. Nvidia itself was actually fairly flat on the week (up just 0.74%) but it had rallied hard (up 16% since end September) on indicated demand from its key customers.
• Why are Nvidia’s earnings so important? Quite simply, Nvidia is the biggest company in the global share market (at a 5.1% weighting), so as Nvidia’s stock price moves so does the market. For context, Japan is the 2^nd biggest country in the Global share index (at a 5.2% weighting), so if Nvidia were to be a country, it would be the 3^rd biggest one in the World! Nvidia’s earnings came out on Wednesday night and they did not disappoint, beating expectations for both earnings and revenues. Earnings grew by 101% on a year-over-year basis, whilst revenues grew by 94% on the same basis; with $35.08 billion of revenue generated in the 3^rd
• Earnings season in the US is now nearly finished, with 95% of companies in the S&P 500 having reported their numbers (according to Factset). The earnings growth rate has been 5.8% which is better than the 4.2% rate that had been expected back in September and marks the 5^th straight quarter of positive year-over-year earnings growth.
• UK share markets also put in a good showing last week, with the FTSE All Share index up by 2.2%. Within the index, the gains were powered by the larger companies in the FTSE 100, with Sage group, Imperial Brands and Astrazeneca being strong performers. Sage group rose by 20.8% on the week following strong profit numbers and the announcement of a £350 million share buyback program. Imperial Brands (up 47% YTD) continues to benefit from its pricing power (increasing prices in a declining market), whilst Atrazeneca enjoyed a bump (up 5% on the week) following some positive broker research.
• UK inflation (CPI) rose to 2.3% last week from the 1.7% level it had been at previously. Clearly this is a decent sized jump, but it was only 0.1% more than had been expected (per surveyed Bloomberg economists). Energy prices were the biggest driver of the increase, with the quarterly energy price cap having risen by 10% in October. At the margins, this decreased the chances of an interest rate cut in December (but this had already been largely priced out post the Budget), with the next interest rate cut being priced (by bond futures markets) for January 2025.
• US economic data was a mixed bag, but on balance, positive. On the positive side, Initial jobless claims fell to 213k (the lowest number since April 2024), existing home sales rose year-over-year (by 3.4%) for the first time since July 2021 and the S&P composite PMI reading surprised to the upside with a reading of 55.3 (anything over “50” is viewed as “expansionary”). These positives outweighed the negative sign shown by the continuing jobless claims number which came in at a 3-year high of 1.91 million. Taken in combination (and married with the 4.2% unemployment rate), these jobs numbers suggest that whilst the environment is undoubtedly tough, employees are not being let go, which in turn helps keep consumer spending on track.
• Bond markets ticked higher last week, with UK gilts rising by 0.7% and UK Corporate bonds rising by 0.3%. UK 10-year gilt yields closed out the week at 4.38%.

The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.

The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.