When the chips are down

There were also fresh developments in the Artificial Intelligence (AI) race as reports emerged that Amazon is considering a $10 billion investment in OpenAI that would include an agreement for the ChatGPT developer to use Amazon’s chips. Nvidia initially fell nearly -4% on the potential loss of chip business but made a full recovery by the end of the week, finishing up over +3%.

In keeping with the recent scepticism around AI spending, Amazon’s stock price initially fell too.  Economists were treated to a double US non-farm payrolls release on Tuesday as November data was reported along with the delayed October figures. Non-farm payrolls fell by 105,000 in October as 162,000 federal employees left their jobs amid the government shutdown. However, 64,000 jobs were added in November, higher than the 50,000 expected. The unemployment rate rose to 4.6% in November from 4.4% in September.

The first US CPI report since before the shutdown showed that prices rose at a 2.7% annualised rate in November, down from 3% in September and considerably lower than the 3.1% anticipated. US retail sales in October were unchanged from September, missing projections for 0.1% growth.

In Europe, Germany’s parliament signed off on major defence projects that will result in purchases worth nearly €50 billion, while the European Union (EU) approved a €90 billion loan to Ukraine after failing to agree on a plan to use frozen Russian assets.

As widely anticipated, the European Central Bank (ECB) decided to hold its main interest rate steady at 2% on Thursday. Meanwhile, the Bank of England cut its policy rate from 4% to 3.75% after inflation unexpectedly tumbled from 3.6% in October to 3.2% in November.

Elsewhere, the Bank of Japan hiked its policy rate from 0.5% to 0.75%, the highest it’s been in 30 years. Japan’s 10-year government bond yield rose above 2% for the first time since 1999.

Equities

Global stocks finished up 0.4% in euro terms and up 0.2% in local terms last week. Year-to-date global markets are up by 6.7% in euro terms and up by 20.6% in local terms. The US market, the largest in the world, finished up at 0.4% in euro terms and up at 0.1% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.1% last week. The German equivalent finished at 2.9%. The Irish 10-year bond yield finished at 3.1%. The Euro/US Dollar exchange rate finished at 1.17, whilst Euro/GBP finished at 0.88.

Commodities

Oil finished the week at $57 per barrel and is down -30.1% year-to date in euro terms. Gold finished the week at $4,339 per troy ounce and is up 46.2% year-to-date in euro terms. Copper finished the week at $11,886 per tonne and is up 21.5% year-to-date in euro terms.

The week ahead

Tuesday 23^rd December

US Q3 GDP data is reported.

Wednesday 24^th December

US weekly initial jobless claims data is released.

Thursday 25^th December

Christmas Day – Multiple global markets close.