Market Review

Global Markets Monthly Update
November 2021
Key Insights
  • Major equity markets ended the month lower on fears that the emergence of the omicron variant of the coronavirus could derail the economic recovery.
  • Inflationary pressures remained elevated in many major economies, raising questions about the growth outlook and pressuring central banks to rein in accommodative policies.
  • Chinese and European equities lagged during the month, reflecting concerns about coronavirus outbreaks. Property sector uncertainty was a headwind in China.


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Equities sold off late in the month on inflationary pressures and the emergence of the omicron variant of the coronavirus, both of which sparked concerns about the economy’s prospects. Most stock indexes pulled back. The small-cap Russell 2000 Index underperformed the large-cap Russell 1000 Index, although both benchmarks ended the month lower. Within the S&P 500 Index, the energy sector was among the worst performers, hit by a sharp decline in oil prices. Information technology and consumer discretionary stocks, on the other hand, gained ground.

After the 10-year U.S. Treasury yield increased on concerns about persistent inflation, the benchmark yield pulled back late in the month and ultimately ended lower. (Bond prices and yields move in opposite directions.) The resurgence in global coronavirus cases and the emergence of a new variant spurred a flight to asset classes that the market views as potential havens. High yield bonds lagged in this environment.

Emergence of Omicron Variant Spurs Fears

Late in November, scientists in South Africa identified a new variant of the coronavirus that appears to spread more quickly than the delta version that caused a wave of infections earlier in 2021. Although it is unclear if the new variant is more effective at evading the immune defenses triggered by current vaccines, the news spurred fears about the economic outlook and the potential that a resurgence in coronavirus cases could lead to further supply chain disruptions.

Inflation Remains Elevated; Congress Passes Bipartisan Infrastructure Bill

The consumer price index (CPI) jumped 0.9% sequentially in October, bringing the year-over-year CPI increase to 6.2%—the highest rate since December 1990. Higher energy prices accounted for much of this increase in headline CPI. Core inflation, a metric that excludes volatile energy and food prices, climbed 0.6% month over month to an annual rate of 4.6%. Key drivers of this increase included higher housing costs and vehicle prices. In November, the University of Michigan’s consumer sentiment index tumbled to its lowest level in a decade, with many respondents citing rising prices. Nevertheless, retail sales and sales of existing homes increased in October.

The House of Representatives passed and President Joe Biden signed into law the USD 1.2 trillion bipartisan infrastructure bill. The legislation authorizes about USD 550 billion in new spending that includes traditional surface transportation projects as well as investments that would expand broadband access and modernize the power grid. 

Powell Says Fed May Consider Tapering Bond Purchases at Faster Pace

After the Federal Reserve’s early-November policy meeting, the central bank announced it would begin to slow its monthly bond purchases by USD 15 billion through the end of December, while indicating that the pace could be adjusted in response to economic conditions. The policy statement and Fed Chair Jerome Powell’s post-meeting press conference reiterated expectations that inflation would moderate over time and that further labor market improvement would need to take place before the central bank would increase rates. Toward month-end, Powell acknowledged in testimony before Congress that inflationary pressures, while still expected to abate over the next year, had become broad enough and had remained elevated for long enough for the central bank to consider accelerating the pace of tapering.


Shares in Europe fell sharply on fears that the economic recovery might be derailed by the imposition of tight coronavirus restrictions and the spread of a new variant of the virus. In local currency terms, the pan-European STOXX Europe 600 Index ended the month more than 2.5% lower. The main indexes of Germany, France, Italy, the Netherlands, and Spain also dropped. The decline in the UK’s FTSE 100 Index was less pronounced, as the pound depreciated against the U.S. dollar. A weaker pound tends to support the benchmark because many of its companies are multinationals with overseas revenues.

COVID-19 Controls Tightened Amid Protests; UK, EU Impose Travel Ban on Southern Africa

A handful of European countries began imposing stricter social controls due to the spike in coronavirus infections, sparking large-scale protests in the Netherlands, Belgium, Austria, and Italy. However, apart from the Netherlands and Austria, most countries stopped short of imposing lockdowns. Some governments made booster injections that enhance vaccine effectiveness available to all adults. At the end of the month, the UK and the European Union (EU) banned travel from South Africa and its neighboring countries to contain the new strain of the virus.

Eurozone Inflation at Record High, but PMIs Show Recovery Is Slowing

Inflation in the eurozone accelerated to 4.9% in November, putting more pressure on the European Central Bank to rein in its accommodative policies. Purchasing Managers’ Indexes (PMI) showed that firms’ costs and average selling prices rose to record levels. Although the composite eurozone PMI ticked up from October levels, its readings in each of the past two months have come in below the third-quarter average, indicating that the economic recovery has slowed. German business confidence fell for a fifth successive month, the Ifo Institute said, adding that growth in Europe’s largest economy could stagnate in the last quarter of the year. Strengthening business confidence in France, as measured by the National Institute of Statistics and Economic Studies, was a bright spot during the month.  

New Governments in Germany and Sweden; Portugal Calls Snap Election

Social Democrat leader Olaf Scholz will succeed Angela Merkel as chancellor of Germany after clinching a deal with the Greens and the liberal Free Democrats (FDP) to form a coalition government. The alliance said its main aims are to upgrade infrastructure to modernize the economy, accelerate measures to combat climate change, and increase the minimum wage and social housing. In Sweden, the Social Democrat-led coalition collapsed after the opposition rejected its budget bill. As a result, the country’s first female prime minister, Magdalena Andersson, was forced to resign after being in power for less than a day. She then mustered enough support in parliament to regain the premiership as the leader of a minority Social Democrat government. In Portugal, President Marcelo Rebelo de Sousa dissolved parliament after lawmakers rejected a budget bill put forth by the minority Socialist government and called a snap election for January 30.


Japanese equities declined along with most developed market peers in November, with the Nikkei 225 Index down 3.68% and the broader TOPIX Index falling 3.64%. The sluggish performance was primarily due to sustained domestic market declines over the last four trading days of the month, as concerns about the global spread of the omicron variant of the coronavirus, and Japan’s subsequent closure of its borders to foreign nationals, weighed on sentiment. For much of the month, however, investors had been encouraged by expectations of policy continuity under newly elected Prime Minister Fumio Kishida, whose administration approved a larger-than-anticipated stimulus package to rebuild the country’s pandemic-hit economy and put it on a growth path as soon as possible. Japan’s gross domestic product contracted by 0.8% in the third quarter.


On the monetary policy front, the Bank of Japan (BoJ) reaffirmed its accommodative stance and reiterated that it is likely to keep interest rates lower for longer, given the much weaker price momentum in Japan than in other countries. The BoJ’s stance diverges markedly from that of the U.S. Federal Reserve, which is signaling faster tapering and earlier rate hikes to tame inflation. Against the backdrop of this policy divergence, the yen briefly hovered around its weakest levels in nearly five years before finishing the month at JPY 113.1 against the U.S. dollar, while the yield on the 10-year Japanese government bond fell to 0.07% from 0.09% at the end of October.

Japan Closes Its Borders to Foreign Nationals, Citing Emergence of Omicron Variant of Coronavirus

In a major reversal of policy, Japan closed its borders to foreign nationals—with the exception of foreigners with special permission to enter—citing the emergence of the omicron variant of the coronavirus. Prime Minister Kishida announced the border closure on November 29, and it came into effect the following day, which was when the first omicron infection in Japan was confirmed. Earlier in the month, Japan had eased its strict coronavirus-related entry rules by letting foreigners visit the country for short business trips, study abroad, and technical training, which had been welcomed by investors. Kishida’s cautious stance is in contrast to that of his predecessor Yoshihide Suga, who resigned in September in part due to public perceptions that his administration had been too slow to respond to the social and economic threats posed by the coronavirus.

Government Approves Larger-Than-Expected Stimulus Package

Kishida’s government approved a larger-than-expected stimulus package, with record fiscal support of JPY 55.7 trillion (USD 490 billion). By carrying out the stimulus package with a sense of urgency, Kishida hopes to rebuild Japan’s economy and put it on a growth path as soon as possible. In the fight against coronavirus, a sizable portion of the spending will go toward infection prevention and reinforcing medical systems. Other key measures include cash handouts of JPY 100,000 (approximately USD 880) to children aged 18 or younger in accordance with an income cap on households, as well as financial aid to struggling families, students, and small businesses. The “Go to Travel” subsidy program to promote domestic tourism will also be restarted. Furthermore, the government has committed to assisting in the building of semiconductor factories to ensure sufficient supplies of computer chips.


Chinese stocks slid in November on news of the omicron variant of the coronavirus and a surprisingly hawkish tone from the U.S. Federal Reserve. The MSCI China Index of offshore-listed companies fell nearly 6.0%. The yield on the 10-year Chinese government bond fell 11 basis points to 2.88%.

In its latest quarterly policy report, the People’s Bank of China struck some of its more hawkish phrases and indicated that it was open to somewhat higher credit growth from banks. The central bank also expressed concern about the recent strength of China’s currency. The renminbi advanced to a five-month high against the U.S. dollar in mid-November ahead of the Biden-Xi virtual summit amid expectations of a thaw in U.S.-China relations. 

New COVID-19 outbreaks across the mainland and a continuing property market slowdown stirred uncertainty in November and weighed on investor sentiment. China’s regulators offered some relief to the beleaguered property sector by allowing “high quality” companies to resume issuing asset-backed securities while relaxing rules on interbank bond issuance by developers. Regulators also asked banks to step up lending to property firms to keep credit flowing to the cash-strapped sector.

PMI Readings and Other Indicators Suggest Economy Is Improving

In economic news, the private Caixin manufacturing PMI unexpectedly rose to 50.6 in October from 50.0 in September, defying forecasts for power shortages and rising costs to weigh on output. However, the PMI series for new orders rose while delivery times dropped to the lowest level since March 2020, suggesting that manufacturing supply chain disruptions were easing. For services, the Caixin nonmanufacturing PMI rose to 53.8 in October from 53.4 in September, bolstered by increased new orders and employment gains. Official economic readings also showed improving conditions. October industrial output rose 3.5% year on year and retail sales climbed 4.9%, both coming in above estimates as energy shortages eased.

Trade Data Look Encouraging, but Inflation Remains a Challenge

On the trade front, China’s monthly trade surplus hit a new record in October. Exports in U.S. dollar terms rose 27.1% year over year—the 13th consecutive month of double-digit growth. Imports increased a less-than-expected 20.6%. News on inflation was less positive, however. The producer price index rose 13.5% in October year on year, its largest annual increase since 1995, as raw materials prices surged and factories dealt with higher energy prices. Consumer price inflation hit 1.5% in October, coming in slightly above expectations.

Other Key Markets

Turkish Markets Decline as Lira Plummets

Turkish stocks sold off and lagged the MSCI Emerging Markets Index, which also gave up ground. Early in November, the Turkish Statistical Institute (Turkstat) reported that month-over-month consumer price index inflation in October was 2.3%, while year-over-year inflation was 19.9%. Nevertheless, the central bank reduced its key interest rate, the one-week repo auction rate, from 16.0% to 15.0%. Toward the end of November, the lira plunged to all-time lows versus the U.S. dollar following comments from President Recep Tayyip Erdogan defending the central bank’s recent interest rate reductions. Shortly thereafter, the central bank issued a statement in which policymakers indicated that they have “no commitment to any exchange rate level” and that the central bank would only intervene in response to “excessive volatility” in the currency market.

Chilean Equities Outperform Broad Emerging Markets

The MSCI Chile Index gained ground in November, outperforming the broader MSCI Emerging Markets Index. Political developments were among the key upside catalysts, with Chilean equities surging after far-right candidate Jose Antonio Kast, who has spoken out in defense of the free market, garnered the most votes in the first round of the presidential election and fared slightly better than far-left candidate Gabriel Boric. However, neither candidate received more than 30% of the ballots cast; a second-round runoff will take place on December 19. In the legislative elections, right-leaning political parties performed better than expected, winning 70 out of 155 seats in the Chamber of Deputies and 25 out of 50 seats in the Senate. T. Rowe Price emerging markets sovereign analyst Aaron Gifford believes that these results could help to soften proposals from the left or the right, including the constitutional assembly.

Major Index Returns

Total returns unless noted

Major Index Returns Chart

Past performance is not a reliable indicator of future performance.

Note: Returns are for the periods ended November 30, 2021. The returns include dividends and interest income based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only.
Sources: Sources: Standard & Poor’s, LSE Group, Bloomberg Index Services Limited, MSCI, Credit Suisse, Dow Jones, and J.P. Morgan (see Additional Disclosures).


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