Take Two: US stocks hit new record as Trump elected US President and Fed cuts interest rates
- 11 November 2024 (3 min read)
What do you need to know?
US stocks soared as Donald Trump was elected US President, and the Federal Reserve (Fed) cut interest rates for the second time in a row. The 25-basis-point (bp) cut takes the benchmark rate to 4.5%-4.75%; the Fed noted inflation has made progress towards its 2% target “but remains somewhat elevated”. The Dow Jones, S&P 500 and Nasdaq indices reached record highs last week, while Trump’s decisive victory helped the US dollar record its biggest one-day gain in eight years. AXA IM believes Trump’s proposed economic measures could boost inflation over the coming years, reducing the Fed’s scope for easing policy; we forecast it pausing at 4.25% next March.
Around the world
The Bank of England (BoE) cut its benchmark interest rate by 25bp to 4.75% as expected, marking the second rate cut since it started its easing cycle in August. The BoE raised its UK growth and inflation forecasts following the new government’s Autumn Budget and said monetary policy will need to remain restrictive “for sufficiently long” in order to return inflation to target sustainably. AXA IM anticipates the BoE will keep interest rates on hold for the remainder of 2024 before pushing through four 25bp reductions in 2025.
Figure in focus: 50.0
Eurozone business activity held steady in October, the latest Purchasing Managers’ Index (PMI) showed. The composite PMI, which includes manufacturing and services, was revised up to 50.0 from the flash estimate of 49.7 – ahead of September’s 49.6. A reading of exactly 50 indicates no change in private sector output levels compared to the month before. Shrinking levels of business activity in the bloc’s two largest economies, Germany and France, offset expansion in other Eurozone countries such as Spain. Elsewhere, Japan saw a sharp fall in business activity with the composite PMI falling to 49.6 in October from 52.0 in September.
Words of wisdom
National People’s Congress Standing Committee: The permanent body of China’s National People’s Congress (NPC), the country’s legislature, which enacts China’s laws and oversees other parts of the government. The 14th NPC Standing Committee held its 12th session last week, and approved a 10trn yuan ($1.4trn) plan to refinance local government debt as part of measures to revitalise the world’s second largest economy. The policy should free up resources to boost investment and consumption, China Finance Minister Lan Fo’an said.
What's coming up?
Monday marks the start of the United Nations climate change conference COP29. This year's event is being held in Azerbaijan and will run until 22 November. On Tuesday, the UK publishes unemployment figures while Germany reports inflation data, followed by the latest US inflation data on Wednesday. On Thursday, the UK and Eurozone each report new estimates of third quarter GDP growth followed by Japan on Friday.
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