Global equity markets were mixed over the week. Strong AI-related demand highlighted in the quarterly results of Oracle and Broadcom was tempered by investor concerns over the scale of capital expenditure required, which outweighed the positive impact of the Federal Reserve’s recent interest-rate cut.
While the rate cut provided some support to risk sentiment, it was more constructive for non-US markets. Lower US rate pressure typically improves global liquidity conditions, weakens the dollar, and supports borrowing and investment, particularly in export-oriented economies such as Japan and Europe. As a result, Asian and European equity markets responded more positively to the Fed’s pivot, helping lift regional indices despite a more cautious tone in US equities.
Last week
The Federal Reserve cut interest rates by 25 basis points to 3.50%–3.75% in a contentious 9–3 vote. The central bank also announced it will begin purchasing £40 billion of Treasury bills per month to ease money-market strains, after reserve balances fell to minimal levels.
China’s trade surplus topped £1 trillion for the first time, representing a 22% year-on-year increase, despite shipments to the US plunging by 20% last month. Exports to Europe, Africa, and Southeast Asia rose by 9%, 27%, and 15% respectively, led by electric vehicles and semiconductors.
The Trump administration approved the sale of Nvidia’s H200 semiconductor chips to China. The H200 is one generation behind Nvidia’s Blackwell chip, which remains banned. However, Chinese regulators have stated that potential buyers must explain why domestically produced chips cannot be used instead.
In corporate news, Paramount made a £108 billion offer to acquire Warner Bros. Discovery, just days after Netflix agreed to purchase WBD’s studio and streaming assets for $87 billion. Paramount’s bid is for the entire company and is backed by the Ellison family, Jared Kushner’s Affinity Partners, and Saudi and Qatari sovereign wealth funds.
Disney agreed to invest £1 billion in OpenAI and to license its characters for use in AI-generated video. The deal grants OpenAI the right to use more than 200 Disney, Marvel, Pixar, and Star Wars characters on its short-video platform. Disney will also use ChatGPT internally and deploy OpenAI technology to automate parts of its animation workflow, aiming to reduce production costs.
The week ahead
It is a data-heavy week for the US, with several key releases scheduled.
The Labor Department will publish nonfarm payrolls for both October and November. However, the unemployment rate will be released only for November, as October data were not collected due to the government funding lapse and will not be reconstructed.
November CPI is expected to show both headline and core inflation at 3.2%, remaining well above the Fed’s 2% target. October retail sales are forecast to rise 0.2% month-on-month, matching September’s increase, which was the slowest pace of growth since May.
On the earnings front, Micron Technology, Accenture, FedEx, and Nike are scheduled to report.
In Europe, monetary policy takes centre stage as both the European Central Bank and the Bank of England meet on Thursday. The ECB is widely expected to leave rates unchanged, with attention focused on updated staff projections and debate around the timing of the next policy move. By contrast, the Bank of England is expected to cut rates by 25bp to 3.75%, as easing inflation and softer domestic demand are likely to push the previously divided MPC toward further easing, despite inflation remaining above target.
| Equities and Oil | Last week (%) | YTD (%) |
|---|---|---|
| WTI Oil | -4.4 | -19.9 |
| Global | -0.4 | 14.7 |
| UK | -0.2 | 20.4 |
| US | -0.9 | 10.0 |
| Japan | 1.2 | 19.1 |
| Europe ex UK | 0.7 | 25.5 |
| Emerging | 0.0 | 17.5 |
| Bonds, Gold and Currencies | Last week (%) | YTD (%) |
|---|---|---|
| Sterling Corporates | 0.2 | 6.7 |
| GBP vs USD | 0.6 | 5.8 |
| High Yield | 0.3 | 6.8 |
| UK Government Bonds | -0.3 | 4.4 |
| GBP vs Japanese Yen | -0.1 | 9.3 |
Source: Bloomberg. Currency GBP.
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