US Stocks notch their highest closing levels since early 2022

Wall Street ended Friday's trading session on a positive note, with the S&P 500 and Nasdaq showing their greatest closing values since early 2022 (4,604.37 and 14,403.97), up 0.21% and 0.69% for the week, spurred by encouraging US labour data, which has invigorated investors’ hope for a soft landing. It was the sixth straight week of gains for large cap stock indexes. Yet speculation over a rate cut in March by the Federal Reserve abated following the revelation of 199,000 fresh non-agricultural jobs in November by the Labor Department, a figure surpassing the anticipated 180,000 surge. The joblessness rate saw a dip to 3.7%, coupled with a modest uptick in average earnings by 0.4% on a month-on-month basis, trumping the projected 0.3% growth. Additional data indicated an unexpected elevation in US consumer sentiment in early December, to 69.4 from 61.3, bringing an end to an unbroken four-month contraction.

In Europe, the MSCI EMU also extended its winning streak to six weeks with a gain of 2.03% while the FTSE edged up 0.33%. Dovish comments from the ECB executive board member, Isabel Schnabel, decreased expectations of the eurozone's base rate.

On the flip side, Asian markets finished in sharp red. The Shanghai Composite lost 2.05% over the week. November's trade figures revealed a lacklustre progression in China's economic landscape. Despite a larger-than-forecast expansion in the nation’s trade surplus, driven by a slight bounce back in export activity, an unanticipated drop in imports underscores persistent frailty in domestic demand. Investor sentiment towards China had also taken a hit earlier this week amidst looming threats from Moody's of a potential credit rating demotion, citing escalated fears of an economic fallout due to a property market collapse.

Japan’s Nikkei 225 plunged 3.36% week-over-week, leading losses across Asia as recent strength in the yen was denting export-heavy stocks. Japan's service sector expansion for November fell short of forecasts, as indicated by the Purchasing Managers' Index data, suggesting the possible tempering of domestic demand in tandem with a decelerating economic growth. Inflation experienced a larger than anticipated retreat in November (CPI rising 2.3% from a year earlier, compared with the 2.7% increase in October), drawing nearer to the Bank of Japan's annual 2% target and adding to an array of signals implying a slowdown in consumer expenditure.

Energy Sector Lags Again as WTI retreats 3.8%

Oil prices dropped by 3.8% for the week, extending their losing streak to seven weeks with a cumulative loss of almost 20% over the period, amid concerns about weak demand and ample supplies despite pledges by OPEC+ nations to further cut production.

As those cuts will be voluntary, this raises doubts about whether OPEC+ producers will fully implement them. To make matters worse, weekly U.S. petroleum data showed a larger-than-expected rise in gasoline inventories at a time when U.S. crude production climbed to record high.

It’s also worth noting that, in an unusual intervention, OPEC Secretary General Haitham Al Ghais sparked controversy this week by urging countries in the OPEC+ group to reject any COP28 deal targeting fossil fuels.

The energy sector lost 3.28% for the week.

Gold Rally Reverses    

Gold prices have been climbing significantly since the end of October, topping $2,100 per ounce on Monday as investors were increasing their stakes in the precious metal, using it as a safeguard against global conflicts, fiscal crises, and anticipated rate cuts from the Federal Reserve. However, the bullish trend sharply reversed from Tuesday due to profit-taking. The shiny metal closed the week down by over 3%. However, Sunday’s attacks on commercial ships in the Red Sea could rekindle investors’ concerns about the escalation of the war between Israel and Hamas, preventing gold from falling further.

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