Global Markets Review

World markets ended November on a broadly mixed note, as Donald Trump’s victory in the US elections being seen as broadly positive for both US and world markets. The anticipation of further tax cuts in the US and deregulation as promised in the election campaign, was seen through sepia-coloured spectacles and providing a further fillip resulting in a stronger dollar, which may lead to higher inflation and interest rates.

US markets reached record highs in November, with the Dow ending the month up 7.5%, the S&P 500 higher by 5.7%, and the Nasdaq ending the month up 6.2%. On the economics front, US inflation printed higher, with headline inflation (CPI) for October coming in at 2.6% YoY vs the September reading of 2.4%, while Core CPI printed the same as September’s 3.3% YoY. The key gauge for inflation for the Federal Reserve, core personal consumption expenditure, edged higher, printing at 2.8% in October vs the September print of 2.7%, with core PCE coming in at 0.3%, the same as September. November 2024 saw growth expectations pushed to 2.7% for the year, while core PCE expectations remain at 2.7%, below the 3.2% longer term average.

Markets in the UK ended November reversing losses incurred during October, ending the month higher by 2.2%, while UK inflation printed at a six-month high of 2.3%, in contrast with the September print of 1.7% YoY, as energy bills increased with winter approaching. Core CPI printed at 3.3% YoY vs the September reading of 3.2% YoY. Similar to the US, the UK saw an upward trend in growth forecasts, from 0.3% in December 2023 to a more optimistic 0.9% in November 2024. This upward adjustment is largely driven by a significant decline in inflation, which is predicted to fall to 2.25% in 2024, from the 2022 level of 9.1%. The lowering of interest rates by the BoE which commenced in August 2024, should further boost consumption spending. In addition, the UK government’s commitment to ensure economic stability, as well as fostering collaborative relationships with business, has lifted the mood and outlook for business investment in the UK.

In Europe, headline inflation in the eurozone printed at 2.0% in October vs the September print of 1.8%, while core inflation was unchanged from September at 2.7% YoY. Growth forecasts in the eurozone were also adjusted upward from the 0.3% predicted for November 2023, to 0.8% in November 2024.

The largest economy in the eurozone, Germany, continues to struggle, however, due to underinvestment in technology and infrastructure, exacerbated by the ongoing energy crisis and weaker foreign and domestic demand which may lead to negative growth for the second consecutive year. The ECB is attempting to mitigate the situation by launching its rate cutting cycle ahead of the Fed, with expectations for further rate cuts in 2025. Markets in Europe were mixed in November, with the Dax up 2.9% for the month and the Cac lower by 1.9%.

Asia had a mixed month with Chinese markets taking strain with the expectation of tariff increases on Chinese exports following the Trump victory in the US elections. Markets strengthened towards to month end, however, with investors anticipating more forceful stimulus measures from the government at its next economic conference scheduled for December. The Shanghai composite closed higher by 1.4%, but the Hang Seng ended the month lower by 4.4%. On the economics front, Chinese inflation for October printed at 0.3% vs the September print of 0.4%, while core inflation printed at 0.2% in October compared to the September print of a 0.1% gain. Chinese manufacturing PMI remained positive in November, printing at 50.3 compared to the lower print in October of 50.1, while official non-manufacturing PMI declined to 50.0 vs the previous reading of 50.2 in September. Retail sales spending in China is expected to more than halve this year on the back of weaker consumer sentiment and the continuous depression in the housing market. In contrast to most countries that have experienced high inflation, China has undergone deflationary pressures over the last two years as factory prices continued to decline. We now anticipate inflation to average around 0.4% in 2024, down from the estimated 1.4% forecast in 2023.

The Japanese market also trended lower, with the Nikkei closing down 2.2% for the month. On the economics front, core inflation remained above the BoJ’s 2% target, adding pressure on it to raise interest rates at the December meeting. Consumption in Japan continues to stagnate on the back of weaker real wage growth, which has contributed to the softer economic outlook. Median inflation expectations have crept up from 2.2% to 2.5%, which indicates continued price pressure and heightens expectations that the BoJ will raise rates.

South Africa

The South Arican market trended lower for the second consecutive month, with the ALSI down by 1.0%. Losses in the mining sector negatively impacted the resources index, which was down close to 7% for the month, the property sector ended up 1.1% for the month, industrials were unchanged and financials were up marginally by 0.2%, with retailers outperforming on the back of the rate cuts, and indications that the SA Economy was entering an upward economic cycle. Outperformers included Supergroup (27.1%), We Buy Cars (26.2%), Pick n Pay (18.7%), Pepkor (17%), Spar (13.4%), and British American Tobacco (12%).

On the economics front, headline inflation declined sharply, printing at 2.8% YoY vs the 3.8% YoY reading in September, the lowest inflation number since June 2020. Declining fuel prices remain a key driver behind the lower number. On the back of this, the SARB maintained its cautious stance by lowering rates by a tepid 25 basis points to 7.75% at its November meeting. Structural issues of high unemployment, sluggish investment flows and logistical constraints continue to be impediments in the near term. Inflation is expected to continue to fall as median forecasts have been adjusted downward from 4.9% in December 2023 to 4.6% in November 2024, on the back of continued falling food and fuel prices, while further strengthening of the currency is expected to ease inflationary pressures. A caveat is the uncertainty regarding global economic policy by the US under the Trump administration which poses a potential risk.