Weekly Market Recap

UK Chancellor of the Exchequer Rachel Reeves announced plans to raise taxes by an estimated GBP 26 billion in the government’s 2025 autumn budget, the second consecutive year of tax hikes amid efforts to bolster public finances. The wide-ranging measures include extending a freeze on personal tax thresholds, a tax surcharge on high-value properties, and higher taxes on investment income, among others.

In response to the new budget, the Office for Budget Responsibility (OBR), which inadvertently published details of the budget before Reeves’ statement on Wednesday, lowered its economic growth forecasts and noted that it expects the total tax burden to reach 38% of GDP by 2030–2031, up from about 35% in 2024–2025. The OBR also noted that it expects government borrowing as a share of GDP to fall over the next five years, with “around three-quarters of the planned reduction in borrowing” coming from the tax increases.

The Commerce Department reported that US retail sales increased by 0.2% in September, down from 0.6% in August and below estimates for around a 0.4% increase (the October retail sales data release was delayed due to the federal government shutdown). The September report also showed that, excluding auto and gas purchases, sales rose just 0.1% for the month. Control group sales—which exclude several categories and feed into the gross domestic product (GDP) calculation—declined 0.1% month over month (MoM).

Other delayed data releases during the week included September producer price index (PPI) data from the Bureau of Labor Statistics (BLS). On Tuesday, the BLS reported that the PPI—which measures wholesale-level price inflation—rose 0.3% in September, broadly in line with consensus estimates. Core PPI, which excludes volatile food and energy costs, increased by a lower-than-expected 0.1% during the month.

Elsewhere, the Labor Department reported that initial claims for US unemployment benefits came in at 216,000 for the week ended 22 November, down from the prior week’s upwardly revised figure of 222,000 and marking the lowest reading since April. However, continuing claims increased by 7,000 to 1.960 million, just shy of the year-to-date high of 1.968 million reached in late July.

Meanwhile, the Conference Board reported that consumer confidence fell sharply in November, with its Consumer Confidence Index dropping 6.8 points to 88.7, the lowest level since April. According to Dana Peterson, chief economist at The Conference Board, “all five components of the overall index flagged or remained weak,” with consumers’ write-in responses citing “prices and inflation, tariffs and trade, and politics” as the leading causes of the more negative outlook.

On Wednesday, the Federal Reserve released its Beige Book—a report published eight times per year, in which each of the Fed’s 12 regional banks gathers information and data about economic conditions in its district. The report noted that Fed officials saw little change in overall economic activity across most of the 12 districts. At the same time, “employment declined slightly” and prices “rose moderately,” with input cost pressures “widespread in manufacturing and retail, largely reflecting tariff-induced increases.” The report also noted that “consumer spending declined further,” although “higher-end retail spending remained resilient.”

Data from several regions indicated that inflation was relatively subdued in November, suggesting that broader eurozone inflation could remain around the European Central Bank’s (ECB’s) 2% target. According to data published Friday, consumer prices increased 0.8% year over year (YoY) in France, in line with October’s reading, while inflation in Spain eased to 3.1% from 3.2% over the same period. Italy’s reading dropped to 1.1% from 1.3% in the prior month.

Inflation data for the eurozone as a whole is scheduled to be published on 2 December. Analysts are expecting the reading to come in around 2.2%, according to FactSet data.

German business sentiment unexpectedly declined in November, according to data from the Ifo Institute, which reported that its Business Climate Index fell from the prior month “due to more pessimistic expectations.” However, survey data from the GfK market research institute and the Nuremberg Institute for Market Decisions indicated that consumer confidence improved modestly heading into December, as an increase in households’ willingness to buy outweighed worsening economic and income expectations.

Profits in China’s industrial sector unexpectedly fell 5.5% in October YoY, the country’s statistics office reported. The drop in industrial profits came after increases of more than 20% in each of the prior two months, adding to evidence that China’s economy lost momentum in the fourth quarter. It followed data earlier this month showing that China’s producer price index remained in negative territory in November for the 37th month, even after Beijing launched its so-called anti-involution campaign aimed at curbing price wars and excessive output in industries from food delivery to car manufacturing. Nevertheless, most analysts believe that China will meet its official growth goal of about 5% this year.

Tokyo’s core inflation held steady in November at around 2.8% YoY, remaining above the Bank of Japan’s (BoJ’s) target of 2% and reinforcing views that the BoJ could move toward a rate hike in the coming months. A string of stronger-than-expected October activity data, including industrial production, retail sales, and a steady unemployment rate, created optimism that the domestic economy remains resilient. These developments helped sustain confidence that Japan is progressing toward a more durable inflation backdrop.

The yield on the 10-year Japanese government bond rose to 1.81% from 1.77% at the close of the previous week, nearing fresh 17-year highs. Yields moved higher as firm inflation data and improving economic indicators supported expectations for potential BoJ tightening. Speculation intensified that the central bank may raise rates as soon as next month amid persistent inflation and a still-weak yen. It reduced political pressure to maintain ultraloose policy, contributing to the shift in sentiment. Recently, Japan’s cabinet approved a JPY 21.3 trillion stimulus package (around USD 135 billion), the largest since the pandemic, with plans to issue at least JPY 11.5 trillion in additional bonds, prompting renewed concerns about Japan’s fiscal trajectory.

The yen stabilised around JPY 156.2 per US dollar, finishing the week little changed from about JPY 156.4 at the end of the previous week. While stronger domestic data and firmer inflation offered some support, expectations for continued wide interest rate differentials limited upward momentum. The currency ultimately traded in a narrow range as markets awaited clearer signals from the BoJ regarding its policy path.

The first release of Australia’s improved monthly consumer price index (CPI) report reflected a 20bps acceleration in headline inflation to 3.8% YoY in October, above the consensus of 3.6% YoY. The trimmed mean measure accelerated by 10bps to 3.3% YoY. In view of the upside surprises in the third quarter and October inflation prints, the Reserve Bank of Australia (RBA) is likely to keep the policy rate on hold in the near term. Australia construction activity fell 0.7% quarter-on-quarter (QoQ), against expectations for an increase, while private CAPEX increased to 6.4% QoQ in the third quarter of 2025. Private sector credit increased 0.7% MoM in October, a touch higher than consensus.

Last week, the MSCI All Country World Index (MSCI ACWI) rallied 3.6% (21.6% YTD).

The US S&P 500 Index finished the holiday-shortened week higher by 3.7% (17.8% YTD), boosted by dovish comments from some Federal Reserve officials and several weaker-than-expected economic reports that seemed to reinforce the idea that a December rate cut remains on track. Markets were closed on Thursday for the Thanksgiving holiday.

Growth stocks outperformed value stocks, while small-cap stocks outperformed large-cap stocks. The Russell 1000 Growth Index returned 4.2% (19.3% YTD), the Russell 1000 Value Index 3.4% (15.1% YTD), and the Russell 2000 Index 5.5% (13.5% YTD). The technology-heavy Nasdaq Composite surged 4.9% (21.7% YTD), rebounding from the prior week’s sell-off as concerns about elevated valuations and spending on artificial intelligence (AI) appeared to take a back seat to optimism about the technology's growth potential.

In Europe, the MSCI Europe ex UK Index climbed 2.6% (16.3% YTD). Major stock indexes advanced. Germany’s DAX Index was up 3.2% (19.7% YTD), France’s CAC 40 Index added 1.8% (13.7% YTD), and Italy’s FTSE MIB Index gained 2.8% (33.2% YTD). Switzerland’s SMI rose 1.6% (14.2% YTD). The euro strengthened against the US dollar, closing the week at USD 1.16 for EUR, up from 1.15.

The FTSE 100 Index in the UK put on 1.9% (23.0% YTD), and the FTSE 250 Index surged 3.8% (11.1% YTD). The British pound appreciated against the US dollar, closing the week at USD 1.32 for GBP, up from 1.31.

Japan’s stock markets rose over the week. The TOPIX Index moved up 2.5% (23.4% YTD), and the TOPIX Small Index gained 3.3% (29.1% YTD). Both indexes ended the week higher as soft US economic data and dovish signals from Federal Reserve policymakers strengthened expectations for additional US rate cuts. Japanese tech and AI-related shares rebounded, mirroring a rally in the US, following a sharp sell-off the previous week amid ongoing concerns about overstretched valuations in the sector throughout most of November.

In Australia, the S&P/ASX 200 Index rose 2.4% (10.0% YTD) following global equity markets, thanks to more dovish narratives from Fed officials and a report that White House National Economic Council director Kevin Hassett, a Trump ally, is in line to be the next Fed Chair. Australian government bond yields moved higher with the curve flattening after the higher-than-expected October CPI data release. The Australian dollar strengthened by 1.0% against the US dollar.

In Canada, the S&P/TSX Composite jumped 4.1% (30.0% YTD).

The MSCI Emerging Markets Index rallied 2.5% (30.4% YTD), with the markets of China, Taiwan, India, South Korea and Brazil contributing to the rally.

Mainland Chinese stock markets advanced as investor enthusiasm for domestic technology and AI trades outweighed concerns about a growth slowdown. The onshore CSI 300 Index, the main onshore benchmark, added 1.6% (18.1% YTD), and the Shanghai Composite Index advanced 1.4% (18.9% YTD). Hong Kong's benchmark Hang Seng Index gained 2.5% (33.3% YTD). The MSCI China Index, which primarily consists of offshore-listed stocks, gained 2.3% (33.3% YTD).

Regarding Russia-Ukraine, the US recently proposed a 28-point peace plan for the resolution of the war in Ukraine’s Donbas region, as well as establishing a broader European and global security framework. The plan was presented to and discussed with European Union (EU) and North Atlantic Treaty Organisation (NATO) member states, as well as Ukraine.

According to T. Rowe Price emerging markets (EM) credit analyst Peter Botoucharov, EM sovereign analysts Razan Nasser and Chris Kushlis, and associate portfolio manager Ivan Morozov, the discussion led to an “updated and refined peace framework” that does not really differ in substance from the initial plan but aims to rebalance the peace agreement toward a more equal standing between Ukraine and Russia.

Their initial view is that the plan could serve as a reasonable basis for a final peace agreement. The red lines on both sides remain distant, but positions appear to be moving toward a potential, negotiable resolution of the crisis. The more detailed issues in the proposal, as well as the broader scope of the plan, could provide a solid basis for trade-offs and potential agreement, but the difficult concessions each side may need to make do not give them confidence that both sides are fully committed to the negotiation process at this stage.

In South Korea, the Bank of Korea’s Monetary Policy Board held its policy meeting and decided to keep the key interest rate, the Base Rate, at 2.50%. Central bank officials deemed it “appropriate” to keep rates steady: While they noted that inflation has “risen somewhat” and that the economy “continues to improve,” they also felt that there is “uncertainty in the growth outlook” as well as “risks to financial stability.”

Looking at the global picture, policymakers observed that global growth is expected to slow due to US tariff policies. However, they believe that the pace of the slowdown will be “gradual,” thanks to easing US-China trade tensions and “expansionary fiscal policies in major economies.” Turning to the South Korean economy, policymakers acknowledged sluggishness in construction investment but overall felt that growth has “continued its improvement trend,” thanks in part to consumption and export growth. They also believe that export growth, while expected to slow somewhat, “is likely to remain better than expected” due in part to “the strong semiconductor sector” and the trade and tariff agreement reached with the US earlier this year.

Central bank officials noted that consumer price inflation increased in October to 2.4%, while the core rate of inflation (excluding food and energy costs) rose to 2.2% amid “higher prices for travel-related services and agricultural, livestock, and fishery products, as well as by a faster rise in petroleum product prices.” Policymakers projected that consumer price inflation will be 2.1% this year, up from 2.0% in August, while core inflation is still expected to be about 1.9%. In 2026, they anticipate consumer price inflation and core inflation to be 2.1% and 2.0%, respectively, up from a previous projection of 1.9%.

Although policymakers have kept rates steady since a late-May rate cut, they did not rule out future reductions in the Base Rate. They intend to leave “room for potential rate cuts” while “closely monitoring changes in domestic and external policy conditions” and their impact on economic growth, inflation, and financial stability.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.3% (5.1% YTD), the Bloomberg Global High Yield Index (hedged to USD) 0.6% (9.2% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index 0.4% (11.6% YTD).

US Treasuries generally produced modestly positive returns for the week as yields on most maturities decreased amid heightened expectations that the Fed will ease borrowing costs in December. Over the week, the 10-year Treasury yield decreased by -5bp, ending at 4.02% from 4.07% (down -56bps YTD). The 2-year Treasury yield declined by -2bps, ending the week at 3.49% from 3.51% (down -75bps YTD).

US investment-grade corporate bonds and high-yield bonds both outperformed Treasuries amid the week’s improved risk sentiment.

Over the week, the 10-year German Bund yield decreased by -1bp, ending at 2.69% from 2.70% (up 32bps YTD). The 10-year UK gilt yield decreased by -10bps, ending the week at 4.44% from 4.54% (down -13bps YTD).