The crucial week that we mentioned in our last meeting on Monday finally went off without a hitch.
IIn the context of a conference before an American think thank, Jerome Powell first came to validate investors' expectations on the trajectory of the Fed's rates in the months to come. The President of the central bank thus confirmed the desire of the American institution to reduce the rate of iincrease in key rates "from the month of December". While Jerome Powell reiterated that the fight against inflation had not yet been won, and that the terminal rate to be reached and the duration of the restrictive monetary policy were still unknown, the tone used was on the other hand intended to be less aggressive than during his latest statements. It must be said that the latest data across the Atlantic are rather encouraging, namely a drop in inflationary pressures without a collapse in growth. The publication of the Beige Book, which brings together the surveys of the 12 regional Feds as of November 23, goes in this direction. Inflationary pressures are indeed less strong due to improved supply chains and lower demand. If economic activity is under pressure, only the real estate market is currently really penalized by the rise in rates. Overall, growth iis almost at equilibrium, ruling out an excessively hard landing for the American economy, which was also confirmed by the publication of GDP for the third quarter above expectations. However, the job market is still holding up. If the tensions are, there too, a little less strong, the labor market remains surprisingly solid. Job creations for the month of November also surprised on the upside with 263k creations against 200k expected, which contributes to maintaining pressure on wages with a new monthly increase of 0.6% (against 0.3% expected), i.e. 5.1% over one year. However, the financial markets did not take the employment figures seriously (after an initial phase of correction, however), proof that investor sentiment is more constructive at the end of the year.
In Europe, we may have seen the first sign of a reversal in inflation with a fall in prices over the month in Germany (at equilibrium according to European harmonization) and in Spain. Most of the decline comes naturally from lower energy prices, the main contributor to inflation in Europe. This decline should continue thanks to base effects but also, for Germany, to the implementation of a tariff shield from December.
Finally, in China, after the major demonstrations in the country, the government agreed to relax the health restrictions as we anticipated. As the country faces a surge in new cases, this notable backpedal from Xi Jinping helped Chinese stocks rebound very well last week.
