By Bas Kooijman, CEO and Asset Manager of DHF Capital S.A
United States – Markets Reach New Highs as Fed Cuts Rates
U.S. markets navigated a mixed but eventful week, with several major indexes touching record highs following the Federal Reserve’s decision to cut interest rates for the third consecutive meeting. Investors initially reacted positively, lifting the Dow Jones Industrial Average and the small-cap Russell 2000 Index, which tends to benefit most from lower borrowing costs. However, by the end of the week, the S&P 500 gave back earlier gains, and the Nasdaq Composite declined as concerns resurfaced around stretched technology valuations and the sustainability of heavy investment in artificial intelligence.
At its final meeting of the year, the Federal Reserve lowered its benchmark rate by 25 basis points to a target range of 3.50% – 3.75%. The decision was notable for the first policy dissent in six years, underscoring mixed views within the central bank on how quickly economic conditions may soften. Fed Chair Jerome Powell signaled a more cautious stance, acknowledging emerging “downside risks” to the labor market and emphasizing the need to assess incoming data before making further policy changes.
Labor market indicators also pointed to shifting momentum. Weekly jobless claims climbed to their highest level since September, suggesting some cooling in employment conditions. However, job openings for October edged slightly higher, and continuing unemployment claims fell, highlighting a still-resilient but gradually moderating labor landscape. Treasury markets reflected this uncertainty: short-term yields declined after the Fed’s announcement, while longer-term yields moved higher, signaling investor expectations of ongoing economic adjustments ahead.
Europe – Mixed Market Sentiment as Central Banks Hold Their Line
European markets ended the week slightly softer overall, with the STOXX Europe 600 Index dipping marginally. Country-level performance varied, with Germany’s DAX posting modest gains while French and UK equity benchmarks slipped. The macro backdrop continues to revolve around central bank policy expectations and uneven economic momentum across the region.
The European Central Bank (ECB) remained a key focus as policymakers signaled that upcoming rate decisions will depend heavily on data. Some ECB officials suggested comfort with the possibility of another rate increase, citing persistent inflation risks. However, consensus expectations point to the ECB keeping rates unchanged in the near term. A Reuters survey of economists indicated that most expect no policy adjustments until at least the end of 2026.
Economic data from the UK added pressure. The economy unexpectedly contracted for a second consecutive month, driven by weakness in construction and services activity.
Higher taxes and ongoing fiscal uncertainty appear to be weighing on household and business confidence. The housing market also showed signs of cooling, reaching its lowest demand levels in two years based on survey data from the Royal Institution of Chartered Surveyors. Elsewhere in Europe, the Swiss National Bank left interest rates unchanged at 0.0%, reflecting continued subdued inflation and slow economic activity.
Asia & Other Markets – Anticipating Policy Shifts Across Regions
In Asia, markets presented a mixed picture as investors assessed central bank signals, economic performance, and ongoing structural challenges across key regions.
Japan’s equity markets continued to climb, supported by expectations that the Bank of Japan (BoJ) will raise interest rates at its upcoming December meeting. Stronger communication from the BoJ has led investors to believe the central bank is preparing the market more carefully than it did ahead of its surprise rate hike earlier in the year. Yields on Japan’s 10-year government bonds edged higher, reflecting expectations of a policy shift. Updated economic data showed Japan’s GDP contracting more than initially estimated in the third quarter, largely due to weaker capital investment, an indication that the recovery remains uneven despite tightening labor conditions and rising wages.
China saw a more cautious week, with mainland markets slipping slightly as investors took profits after recent gains. Inflation data highlighted ongoing deflationary pressures: while consumer prices remained positive for a second straight month, producer prices extended their multi-year decline. China continues to battle weak domestic demand and the lingering effects of its prolonged property market slump. Government efforts to stabilize prices and reduce excessive competition in industries such as food delivery and automotive manufacturing have had limited impact so far, underscoring the challenges policymakers face in restoring confidence and stimulating consumption.
Looking Ahead –
Overall, the week underscored a global market landscape that remains resilient but increasingly shaped by shifting monetary policies and evolving economic conditions.
As central banks signal the next phase of their policy paths, investors will continue watching economic data closely to gauge whether global markets can maintain their current momentum.