Markets in a minute 13th November 2023

Last week, the S&P 500 rose by 1.4% (MTD 5.3%, YTD 16.6%), while the Euro Stoxx 50 rose by 0.5% (MTD 3.4%, YTD 14.2%). Equities continued the rebound from the sell-off towards the end of October, supported by signs of slowing activity.

In the US, the Fed's Senior Loan Officer Opinion Survey (SLOOS) for Q3 showed continued tightening of lending standards and reduced loan demand. This suggests that the Fed's tightening is having one of its intended effects of slowing credit growth. Meanwhile, labour-market data showed loosening conditions, with continuing claims rising for a seventh consecutive week to 1.834mn, though the level remains low by historical standards.

In Germany, September industrial production fell by 1.4% m/m, driven by declines in manufacturing (-1.7%) and energy (-2.1%). Despite robust factory orders in Q3, industrial production data suggests weak activity.

Fed Chair Powell's comments at the IMF last week again emphasised data dependence and were somewhat hawkish as he stated: "If it becomes appropriate to tighten policy further, we will not hesitate to do so." In addition, the University of Michigan survey showed consumer inflation expectations for the next 5-10 years rising to 3.2%, the highest level since 2011.

Given this backdrop and after the previous week's strong rally, bond markets gave back some of those gains. The US 10-year yield rose by 8bps to 4.65% (bond prices fall as yields rise).

This week, focus is set to be on numerous economic datapoints. These include US consumer prices (tomorrow) and retail sales (Wednesday), German business confidence (tomorrow) and Chinese activity data (Wednesday). The data should allow the market to better assess the likely policy paths in the coming months.

Negotiations over preventing a US government shutdown after funding ends this Friday are also likely to be watched closely.