While the markets were still firmly expecting a cut in US key interest rates in October, this changed in November. In the meantime, the probability of this happening was only around 25%. This had volatile consequences for the stock markets.
The shutdown of all US authorities, which lasted a total of 43 days, ended in mid-November. As a result, there were no inflation figures, no labor market report and very little other US macro data, which made it difficult for market participants to find their bearings. The published indicators, including the purchasing managers' indices for industry and services, confirmed the robust US economy.
However, the strongest influence on the equity and bond markets is likely to have been the interest rate expectations of the US Federal Reserve. In the early days of the month, the probability of an interest rate cut by the US Federal Reserve (Fed) began to decline. This had a negative impact on the stock markets, leading to increased volatility and a sell-off on the markets. This affected the technology sector and the major tech stocks, the so-called "Magnificent 7", which were largely responsible for the price increases.
After a prolonged phase of price gains in artificial intelligence, chips and cloud infrastructure, these stocks corrected significantly. Despite solid quarterly reports, the sustainability of growth was called into question and there was even talk of an AI bubble. Investors were increasingly unsure whether the enormous investments in data centers, chips and software could actually be converted into corresponding sales and profits.
In the third third of the month, however, the picture changed and market participants began to anticipate an interest rate cut in the USA more strongly again. This was partly due to concerns that the long shutdown could potentially have a negative impact on the labor market and partly due to speculation that Federal Reserve Chairman Jerome Powell could be replaced by a less tough successor in May 2026. The stock markets were thus able to recover from the price losses. Towards the end of the month, market participants were again pricing in an 87% probability of an interest rate cut of 25 basis points at the next Fed meeting in December.
In Europe, the stock markets performed better in relative terms than in the US, mainly due to the US initiative to bring about an end to the war between Russia and Ukraine. However, defense stocks, which have been in high demand recently, experienced a price correction as a result. The inflation rate in the eurozone was 2.2% in November (previous month: 2.1%) compared to the same month of the previous year. No change in the deposit rate of 2% is therefore expected at the ECB's December meeting.
Yields on the bond markets for government bonds in the USA and the eurozone were mixed month-on-month. Yields on 10-year US government bonds fell by 7 basis points at the end of the month, closing at 4.01%. Yields on 10-year German government bonds rose by 6 basis points from 2.63% to 2.69%. The yield on 10-year Italian government bonds rose slightly to 3.40%.
The price of gold continued to rise over the course of the month, not least due to the temporarily high volatility on the markets, and reached USD 4,230 per ounce at the end of the month. The US dollar fell against the euro and closed at 1.159.
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