Market Watch: November 28

U.S. equities started the week higher on dovish Fed (FOMC) commentary and optimism around AI-related earnings, with Alphabet’s chip partnership news fueling tech gains. Sentiment held through mid-week as rate-cut odds climbed above 80%, though stale retail sales and Producer Price Index (PPI) data offered little fresh insight into the health of the economy. Canadian markets saw steady gains through the week until Friday’s upside Q3 GDP surprise drove local yields higher and tempered Bank of Canada (BoC) rate easing expectations. In Europe, stocks advanced as UK Chancellor Reeves’ budget signaled fiscal discipline despite stealth tax hikes, while UK government bond yields (gilts) were volatile on shifting growth outlooks. Asian benchmarks were mixed: Japan rallied on fiscal stimulus hopes, while China saw gains amid corporate pledges following Hong Kong’s fire tragedy. Oil softened on progress toward a Russia-Ukraine peace deal, while gold firmed on rate cut hopes.

Highlights:

U.S. equities returned 4.77%¹, buoyed by dovish Fed rhetoric and AI optimism, but stale economic data offered little clarity; rate-cut expectations dominated sentiment, overshadowing concerns about valuations and muted holiday spending signals.
Canadian equities returned 4.12%² steadily tracking global gains throughout the week. Fridays stronger-than-expected GDP print shifted focus to domestic fundamentals, lifting yields and dampening near-term easing hopes.
European stocks rose 3.20%³ as investors digested a U.K. budget that emphasized fiscal discipline and structural reforms. While tax measures raised growth concerns, improved credibility and stable inflation supported risk appetite.
Emerging markets were 3.13%⁴ higher as Chinese benchmarks edged higher amid corporate relief pledges following Hong Kong’s fire. Optimism was tempered by lingering tariff and geopolitical uncertainty.

Bond markets juggle fiscal discipline and inflation uncertainty

U.S. Treasury markets were anchored this week by dovish Fed commentary, with rate-cut odds climbing steadily as policymakers signaled support for easing at the last meeting of the year (Dec. 10) despite stale retail and PPI data offering little clarity. Midweek, speculation around Kevin Hassett succeeding Powell reinforced expectations for a more accommodative monetary policy, keeping the short end of the yield curve anchored. In Canada, yields rose late in the week after Q3 GDP surprised to the upside, tempering near-term BoC cut expectations despite signs of slowing momentum into Q4. European curves were mixed: gilts initially sold off on UK Chancellor Reeves’ budget before stabilizing as fiscal discipline reassured investors, while German government bonds held firm amid subdued inflation prints. Japanese yields edged higher on fiscal stimulus chatter, contrasting with muted moves elsewhere in Asia as geopolitical risks lingered.

Highlights:

The 2- and 10-year U.S. Treasury yields fell 6 basis points (bps) and 9 bps, respectively. In Canada, the 2- and 10-year yields were down 7 bps and up 10 bps, respectively. Bond yields and prices move inversely to one another.
Government bond markets were driven by dovish central bank signals, with U.S. yields anchored by rising rate-cut odds, Canadian debt selling off after a strong GDP surprise, and European curves swinging on fiscal headlines and mixed inflation prints.
Investment-grade spreads tightened on improved policy visibility and stable macro data, while high-yield performance was supported by risk-on sentiment early in the week, though lingering growth concerns and heavy CapEx plans kept issuance and appetite selective.

Weekly dashboard

Canada reports third-quarter GDP growth of 2.6%, avoiding recession

Canada’s economy grew at a much faster pace than expected in the third quarter as crude oil exports and government spending boosted overall economic activity even as business investments and household consumption disappointed. According to Statistics Canada (StatCan), the third quarter annualized gross domestic product grew 2.6%, escaping what could have been a technical recession after a contraction in the previous quarter of a downwardly revised 1.8%.

Highlights:

StatCan said the third quarter number could be subjected to a larger than normal revision in February as some parts of GDP by expenditure relies on foreign merchandise trade data that was not available due to the U.S. government shutdown.
On a month-on-month basis, the economy matched analysts’ predictions following a deceleration of an upwardly revised 0.1% in the prior month, StatCan said, primarily driven by a 1.6% expansion in manufacturing output.
But the underlying impacts of tariffs on the economy continue to reflect on business and consumer sentiment. Business capital investment was unchanged in the third quarter and household final consumption expenditure dropped 0.1% in the third quarter.

U.S. producer prices rise in September on higher energy costs

U.S. producer prices rebounded in September as the cost of energy goods surged and producers passed on some tariffs. According to the U.S. Labor Department’s Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand increased 0.3% after an unrevised 0.1% drop in August. The report was delayed by the 43-day shutdown of the government. Economists had forecast the PPI would rebound 0.3%.

Highlights:

In the 12 months through September, the PPI increased 2.7% after advancing by the same margin in August.
Producer goods prices jumped 0.9%, the largest gain since February 2024, after climbing 0.2% in August. Energy goods, which accelerated 3.5%, accounted for two-thirds of the increase in goods prices.
Wholesale services prices were unchanged after falling 0.3% in August, when trade margins were compressed. The decline in trade margins had suggested that wholesalers were absorbing some of the tariffs on imported goods.

Eurozone business activity continues growth despite manufacturing hit

Business activity continued to grow in the eurozone in November, albeit at a slightly slower pace, hurt by lingering weakness in the manufacturing sector. According to S&P Global, the eurozone’s composite purchasing managers index, based on survey responses from around 5,000 manufacturers and service providers, fell to 52.4 from 52.5 in October. Economists had forecast it to hold at 52.5.

Highlights:

Services activity in the eurozone inched higher in November, but manufacturing returned to contractionary territory, hitting a five-month low, the survey said.
The data showed mixed signals across various countries. French business activity overall contracted, but reached its closest point to expansion for the first time in 15 months, while Germany’s hit a two-month low.
In the U.K., activity dropped particularly in the services sector ahead of the government’s budget announcement later in the month, which is expected to include tax increases and spending cuts.

^{1 S&P 500 Index USD}
^{2 S&P/TSX Composite Index USD}
^{3 Bloomberg Developed Markets ex N. America Large & Mid Cap Price Return Index USD}
^{4 Bloomberg EM Large & Mid Cap Price Return Index USD}

by Scotia Wealth Management

Market Watch: November 28

Week in review

Tech strength and FOMC rate cut bets drive steady equity gains despite releases of stale economic data

Bond markets juggle fiscal discipline and inflation uncertainty

Weekly dashboard

Canada reports third-quarter GDP growth of 2.6%, avoiding recession

U.S. producer prices rise in September on higher energy costs

Eurozone business activity continues growth despite manufacturing hit

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