November witnessed a broadly positive market performance, with inflation moderating further across developed markets and softened expectations for further policy tightening. However, some risks persisted, including signs of cooling US growth, volatile oil prices linked to Middle East tensions and the associated uncertainty to the inflation outlook in the short term.
Global equities produced strong returns with declining inflation and resilient economic data, especially in growth stocks and the technology sector. Corporate earnings remain resilient and market expectations for future earnings are still generally positive.
US inflation eased, with the headline and core inflation rate decelerating more than expected, which supported equity prices and eased the upward pressure on bond yields. Softer inflation, primarily driven by falling energy and gasoline prices, led to reduced expectations of a final interest rate hike by the Federal Reserve. However, there were signs of cooling growth, with modest rises in jobless claims, uptick in credit card delinquencies, and a slight fall in retail spending in October, which could be a sign of further moderation to follow in household consumption.
Japanese equities have experienced significant growth in November. Increased foreign inflows, improved corporate earnings, expectations of an end to the negative interest rate policy, and reforms in corporate governance have contributed to the rally. The bullish outlook is influenced by Warren Buffett’s Berkshire Hathaway’s strategy to invest heavily in Japanese stocks. European equities also produced strong returns, propelled by sharp rises in miners and as Euro Zone bond yields continued to fall amid growing expectations of interest rate cuts.
Emerging market equities showed positive trends. Despite the persistent weakness in the domestic economy, Chinese equities produced mild positive returns, helped by the announcement of various fiscal stimulus measures by the Chinese government aimed at reviving economic activity.
Government bonds retraced some of the recent losses, bolstered by hopes of central banks nearing the end of their tightening cycles and eased concerns over a potential US government shutdown. US government bond yields fell sharply, and the high-yield bond spreads tightened over the month. The entire fixed income market benefited from these developments.
Commodity prices have been volatile since the start of the Israel/Hamas conflict. In November, Brent crude oil prices fell to below $80 per barrel, influenced by increased US supply and OPEC+ members’ doubts over OPEC+ announced voluntary supply cuts.
The Australian dollar appreciated against the US dollar in November. The AUD/USD pair likely benefitted from a reduced interest rate differential following the RBA’s rate increase in November, and potentially China’s announcement of stimulus measures.
Listed property and infrastructure produced large positive returns in November, along with broader equity markets. Australian residential property prices continued to increase and reversed previous falls.