Markets staged a welcome recovery in November. Good news on the inflation front led to a drop in government bond yields. US Treasuries had their best month since May 1985. Equities bounced, recovering October's falls and more. Whatever the protestations of the central banks, markets believe interest rates have peaked and that cuts will come soon. This month's news that eurozone inflation had fallen to 2.4 per cent in November reinforces the case for interest rates having peaked.
The German 10-Year Treasury had the most dramatic fall. From a 12-year high of 3.0 per cent in October, it dropped steeply to 2.5 per cent by the end of November. It's currently 2.36 per cent. The US 10-year Treasury yield fell to 4.3 per cent from a high of 5.0 per cent, and the 10-year gilt yield fell to 4.2 per cent from a high of 4.7 per cent. The Nasdaq led the way in equity markets, gaining 10.7 per cent and ending the month at its high for 2023. The magnificent seven powered on, with Tesla up 20 per cent, Nvidia up 15 per cent, Microsoft up 12 per cent and Apple up 11 per cent. The German Dax followed closely behind, gaining 9.5 per cent, and then the S&P 500, up 9.1 per cent. The Nikkei 225 gained 8.5 per cent, the Italian MIB 7.1 per cent and the CAC 40 6.3 per cent.
In the UK, the FTSE All-Share was up only 3.0 per cent. Despite a strong recovery from mid and small caps (the FTSE 250 was up 7.1 per cent and the FTSE AIm All-Share up 5.3 per cent), the 2.3 per cent return from the FTSE 100 held back the overall return of the broader Index. US small caps also recovered, with the Russell 2000 up 9.1 per cent.