World central banks continue to cut interest rates. US stock indices break records again

The Dow Jones Index (US30) closed Thursday at the opening price. The S&P 500 Index (US500) gained 0.74%. The NASDAQ Technology Index (US100) closed positive 1.54%. Meanwhile, the S&P 500 and NASDAQ indices hit new all-time highs. Stocks are rising amid speculation that President-elect Trump will boost corporate profits by cutting taxes and reducing regulation. Stock indices also rose as the FOMC, as expected, lowered the target range for the federal funds rate by 25 bps to 4.50%–4.75% from 4.75%–5.00% and said risks to the targets remain “roughly balanced.” The Central Bank noted that labor market conditions have generally eased, and inflation is trending lower, although it remains “somewhat elevated.”

The Mexican peso (MXN) rose to 19.9 per US dollar, rebounding from a two-and-a-half-year low of 20.27 hit on November 1, thanks to hawkish expectations from the Bank of Mexico. October annual inflation rose to 4.76%, beating estimates and September’s six-month low of 4.58%, which may prompt the Bank of Mexico to slow rate cuts and keep rates relatively high, thereby attracting foreign capital and strengthening the peso.

Equity markets in Europe rose steadily yesterday. Germany’s DAX (DE40) rose by 1.70%, France’s CAC 40 (FR40) closed higher by 0.76%, Spain’s IBEX 35 (ES35) gained 0.65%, and the UK’s FTSE 100 (UK100) closed negative 0.32%.

The Bank of England cut interest rates to 4.75% as expected but estimated higher inflation and economic growth following the government’s new budget, which, due to prognoses of the Bank of England, will add almost 0.5 percentage points to peak inflation and delay the return to the 2% target by a year, and boost economic growth by 0.75% in 2024.

In November 2024, Norges Bank left its key rate unchanged at a high of 4.5% for the seventh consecutive meeting, matching market expectations, and signaled that it would hold the rate again in its upcoming December decision. The Central Bank said that restrictive monetary policy is still justified in bringing inflation down to the target level, delaying the start of monetary easing compared to other monetary authorities in Europe.

As expected, Sweden’s Riksbank cut its key rate by 50 bps to 2.75% at its November meeting. The Central Bank has cut the key rate four times this year since May in response to falling inflation and sluggish economic activity. Economic growth has stalled, and inflation has fallen below the 2% target.

The Central Bank of the United Arab Emirates cut its benchmark overnight deposit rate by 25 basis points to 4.65% in November 2024, closely following the US Federal Reserve’s rate cut. However, the interest rate on short-term liquid borrowings from the regulator remained 50 basis points above the prime rate. The UAE Central Bank’s prime rate, which is linked to the Fed Reserve Rate, reflects the path of monetary policy and sets the floor for interest rates in the UAE overnight market.

WTI crude oil prices fell below $72 per barrel on Friday but maintained an upward trend for the week, as investors weigh factors impacting future oil demand and supply. Market sentiment is affected by uncertainty surrounding the incoming Donald Trump administration, which could affect oil prices by increasing US production and possibly imposing tariffs that could slow the economy of China, the world’s largest oil importer, thereby dampening demand. Expectations that the Trump administration may impose tougher sanctions on oil-producing countries such as Iran and Venezuela could also support oil prices as such measures could curb global supply.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 0.25%, China’s FTSE China A50 (CHA50) was up 3.45%, Hong Kong’s Hang Seng (HK50) added 2.02% and Australia’s ASX 200 (AU200) was positive 0.76%.

The Hong Kong Monetary Authority (HKMA) cut its benchmark rate by 25 bps to 5.0% on November 8, hours after the US Federal Reserve cut interest rates by the same amount. Monetary policy in the Asian financial hub has become aligned with the US as the local currency is pegged to the US dollar.

The offshore yuan has fallen in value to about 7.16 per dollar as investors fear possible additional tariffs following Donald Trump’s presidential election victory. During his campaign, Trump promised to boost US manufacturing by proposing tariffs of 60% or more on Chinese goods. Markets are betting that Beijing will introduce additional stimulus measures to counter the risk of higher tariffs under a second Trump administration.

Japan’s Index of leading economic indicators, which gauges the economic outlook for the coming months based on data such as job offers and consumer sentiment, rose to 109.4 in September 2024 from 106.9 the previous month, the lowest since October 2020.