Market Sentiment Boosted by Powell’s Speech and Jobs Report

After a tough October for financial markets, the start of November witnessed a strong rebound in U.S. stocks as Treasury yields dropped sharply following reassuring statements from Fed Chair Jerome Powell and weak economic data. Job growth slowed down more than expected in October, with the U.S. economy adding 150,000 jobs, falling short of the economists’ forecasts, and paving the way for a soft landing. The unemployment rose from 3.8% to 3.9%. As the labour market's health significantly influences Fed policymakers, investors are now speculating that the U.S. central bank has halted the cycle of interest rate hikes after holding the benchmark rate steady for the second meeting in a row.

As a result, the three main Wall Street indexes registered their strongest week of the year. The blue-chip Dow Jones Industrial Average rose over 1,643 points or 5.07%, while the broad-based S&P 500 climbed 5.85% and the tech-heavy Nasdaq Composite jumped 6.61%.

European stock indexes followed suit, though to a lesser extent. The MSCI EMU gained 4.24% while the FTSE 100 was up 1.73%. The Bank of England also kept interest rates unchanged while dismissing the prospect of rate cuts any time soon.

In Asia, China’s Shanghai Composite edged up 0.43% amid disappointing economic data. Japan’s Nikkei rose 3.09% over the week. The Bank of Japan maintained its very dovish stance, holding borrowing costs at ultra-low levels.

All S&P sectors in rally mode

The S&P sectors that have been hit the hardest since the beginning of this year strongly rebounded this week, rate-sensitive sectors more specifically, such as real estate (up 8.55%, week’s top performer) and utilities (+5.22%).

Financials (+7.35%), consumer discretionary (+7.21%), information technology (+6.84%), and communication services (+6.54%) also fared well.

The least impressive performance, if one may say so, came from the energy sector (+2.26%). Oil prices notched a second weekly loss (WTI crude down 5.88%) as geopolitical risk premium was waning and China's manufacturing activity unexpectedly contracted in October.

Keep a close eye on the latest market moves with the weekly updated league tables dedicated to fixed income ETFs.