U.S.

Labor figures reach best level since April

U.S. equity markets advanced over the holiday-shortened trading week, which included a full market closure on Thursday for Thanksgiving. The overall tone across financial markets leaned positive, supported by a combination of softer economic indicators and increasingly dovish commentary from several Federal Reserve officials. These factors collectively strengthened the market’s expectation that the Federal Reserve may move forward with a rate cut in December, despite ongoing debates about the durability of underlying inflation pressures.

Market performance was noticeably stronger among small-cap stocks. The Russell 2000 Index gained an impressive 5.52%, significantly outperforming major large-cap benchmarks. The Nasdaq Composite also posted a robust rebound following the sell-off in the previous week. Investor concerns about lofty valuations—particularly within the technology and artificial intelligence (AI) sectors—appeared to ease as market participants shifted focus back toward the long-term potential of AI-driven technological innovation and earnings growth. In general, risk appetite increased, buoyed by the perception that monetary policy may become more supportive heading into year-end.

Retail sector data highlight late-quarter slowdown

Although government shutdown–related delays disrupted the usual data release schedule, September retail sales ultimately offered further clarity on consumer behavior. The Commerce Department reported that overall sales rose 0.2% for the month. While this marked a continued expansion, the pace was notably slower than the 0.6% increase posted in August and also missed market expectations of around a 0.4% gain. Excluding the volatile auto and gasoline components, retail sales advanced by just 0.1%, pointing to a clear moderation in household spending momentum.

The control group category, which strips out items such as building materials, autos, and fuel and is directly incorporated into the GDP calculation, declined 0.1% on a month-over-month basis. This decline may imply reduced consumer contribution to late-quarter GDP growth, particularly as higher interest rates continue to weigh on discretionary spending.

Meanwhile, producer price data from the Bureau of Labor Statistics (BLS) indicated that wholesale-level inflation pressures remain contained. Headline PPI increased 0.3% in September, aligning with consensus expectations. Core PPI—excluding food and energy—rose only 0.1%, suggesting that upstream price pressures continue to ease and may eventually provide relief for retailers and consumers.

Jobless claims fall while confidence weakens

Initial claims for U.S. unemployment benefits fell to 216,000 in the week ending November 22, a decline from the prior week’s revised reading of 222,000. This marked the lowest figure since April and reinforces the view that the labor market, while gradually cooling, remains resilient. Continuing claims edged higher to 1.960 million, remaining just below the 2024 high of 1.968 million observed in July. The increase in continuing claims hints that displaced workers may be taking longer to find new jobs, consistent with a softening labor market.

Consumer sentiment, however, painted a more cautious picture. The Conference Board’s Consumer Confidence Index dropped sharply by 6.8 points to 88.7 in November—its lowest level since April. According to Chief Economist Dana Peterson, all five components of the index either weakened or remained soft. Consumers frequently referenced concerns regarding inflation, the rising cost of living, tariffs, trade policy uncertainty, and ongoing political developments as factors weighing on their outlook. The divergence between labor-market data and sentiment may reflect broader anxieties surrounding global economic conditions and geopolitical risks.

Beige Book notes shifting employment and pricing dynamics

The Federal Reserve’s latest Beige Book, a regional survey released eight times per year, provided a nuanced view of economic conditions across the twelve Federal Reserve districts. The report indicated that overall economic activity remained broadly steady, with only modest variations across regions. Employment levels were described as having “declined slightly,” which aligns with recent data showing slower job creation and a modest rise in continuing unemployment claims.

Pricing pressures were reported to have “moderately increased,” with tariff-related input cost inflation highlighted in both manufacturing and retail sectors. Despite these pressures, many firms noted that passing cost increases on to consumers has become more difficult due to softening demand. The Beige Book also observed that while general consumer spending weakened, high-end retail activity remained relatively stable, suggesting that upper-income households continue to show stronger spending capacity.

Treasury market benefits from policy expectations

Government bonds strengthened modestly as yields declined across most maturities, driven by rising confidence that the Federal Reserve may reduce borrowing costs in December. Falling yields supported a broad rally in Treasuries, while municipal bonds also posted gains. Secondary market liquidity in munis was limited, partly due to the holiday week and modest primary issuance.

Improved risk sentiment contributed to positive performance for both investment-grade corporate bonds and high yield debt. Corporate issuers benefited from tightening credit spreads as investors grew more comfortable taking on additional risk in anticipation of a more accommodative monetary policy stance.

Major U.S. Index Performance

(Data sources: Reuters via Yahoo! Finance and Bloomberg; closing levels as of 4 p.m. ET.)

Europe

Regional equity markets move higher

European stocks recorded solid gains for the week. The STOXX Europe 600 Index rose 2.35% in local currency terms, supported by stabilizing inflation trends and resilient corporate earnings reports. German equities outperformed, with the DAX climbing 3.23%, while Italy’s FTSE MIB advanced 1.63%. France’s CAC 40 gained 1.77%, and the UK’s FTSE 100 increased 1.90%, lifted by strength in energy and financial sectors.

Regional indicators point to inflation near ECB objective

Recent inflation readings from France, Spain, and Italy suggested that eurozone price pressures may continue to hover near the European Central Bank’s 2% target. France reported a 0.8% annual increase in consumer prices, consistent with October’s figure. Spain’s inflation eased to 3.1% from 3.2%, while Italy’s rate declined to 1.1% from 1.3%. Forecasts for the broader eurozone inflation reading, due on December 2, indicate an expected level of around 2.2%. Markets interpreted this stability as evidence that the ECB may not need to tighten policy further.

UK government announces new taxation measures

The UK government’s autumn budget introduced roughly GBP 26 billion in tax increases aimed at reinforcing public finances. Key policies included extending the freeze on personal tax brackets, imposing additional taxes on high-value property transactions, and raising taxes on investment income. The Office for Budget Responsibility (OBR) reacted by lowering its growth forecasts and projecting that the country’s tax burden could reach 38% of GDP by 2030–2031. The OBR further noted that about three-quarters of the anticipated reduction in borrowing over the next five years will stem from the newly implemented tax measures.

Mixed sentiment in Germany

Economic data from Germany showed contrasting signals. The Ifo Institute’s Business Climate Index declined due to increasingly pessimistic expectations among firms. By contrast, consumer sentiment surveys from GfK and the Nuremberg Institute for Market Decisions suggested that households displayed a slightly improved willingness to spend heading into December, driven by seasonal factors and stable labor market conditions.

Japan

Tokyo stock indexes rise as investors reassess rate expectations

Japanese equities advanced over the week, supported by global risk appetite and renewed confidence in domestic economic resilience. The Nikkei 225 gained 3.35% and the TOPIX Index increased 2.45%. Technology and AI-related companies staged a noticeable rebound following a recent sell-off tied to valuation concerns. Investors responded positively to softer U.S. data and dovish messaging from the Federal Reserve, which strengthened expectations for additional U.S. rate cuts and contributed to improved sentiment in Japanese equity markets.

Core inflation stays elevated

Tokyo’s core inflation rate remained at around 2.8% year over year in November, exceeding the Bank of Japan’s 2% inflation target for another month. A series of stronger-than-expected October activity indicators—including industrial production, retail sales, and a steady unemployment rate—reinforced optimism about the strength of Japan’s economy. These indicators also added pressure on the BoJ to shift away from its long-standing ultra-loose monetary stance.

Bond yields approach multi-year highs

The yield on the 10-year Japanese government bond rose from 1.78% to 1.82%, approaching levels last seen nearly 17 years ago. Firmer inflation data and continued economic improvement supported expectations that the BoJ may soon consider policy tightening. The Japanese government’s new JPY 21.3 trillion stimulus package—its largest since the pandemic—added further complexity to fiscal outlook discussions, particularly because it includes at least JPY 11.5 trillion in additional bond issuance.

The yen traded in a narrow range, ending the week around JPY 156.14 per U.S. dollar.

China

Mainland markets advance despite economic concerns

Chinese equity markets posted gains during the week as investors renewed interest in domestic technology and AI-related sectors. The CSI 300 Index increased 1.64% and the Shanghai Composite climbed 1.40%. Hong Kong’s Hang Seng Index added 2.53%, driven by stronger sentiment toward growth-oriented shares and easing concerns about near-term liquidity risks.

Industrial profits decline

Industrial profit data released for October showed a year-over-year decline of 5.5%, following gains of more than 20% in each of the prior two months. The sharp reversal suggested that economic momentum weakened at the start of the fourth quarter. Producer prices remained in deflationary territory for the 37th consecutive month, highlighting structural challenges in several sectors despite Beijing’s continued policy support. Nevertheless, analysts generally believe that China remains on track to meet its official growth target of about 5% for the year.

Other Key Markets

Russia–Ukraine

U.S. framework seen as potential pathway for peace

The United States recently unveiled a 28-point peace framework designed to support negotiations in the Ukraine conflict and establish a more stable European and international security architecture. Discussions involving EU and NATO member nations, as well as Ukrainian officials, produced a refined version of the proposal aimed at encouraging more balanced engagement between the two sides. Emerging markets analysts noted that while the plan provides a potential basis for a long-term settlement, significant political and territorial concessions would still be required, and both parties appear reluctant to commit fully to the negotiation process at this stage.

South Korea

Policymakers keep interest rates steady but acknowledge scope for reductions

The Bank of Korea’s Monetary Policy Board maintained the Base Rate at 2.50%, judging that the current stance remains appropriate for the domestic economy. Policymakers highlighted that inflation has increased somewhat and overall economic performance continues to show improvement, though uncertainties surrounding global trade and financial conditions persist. They also observed that global growth is expected to moderate due to U.S. tariff actions, but that the slowdown may be gradual thanks to easing U.S.–China trade tensions and expansionary fiscal efforts by major economies.

South Korea’s consumer inflation rose to 2.4% in October, while core inflation reached 2.2%. Officials raised their inflation expectations for 2025 to 2.1%. While the central bank has paused further rate cuts since May, policymakers emphasized that they will keep the door open for potential future reductions depending on the evolution of inflation, growth, and global financial conditions.