A bit of turkey hangover is still lingering after the U.S. Thanksgiving long weekend, with U.S. futures lower this morning alongside their TSX counterpart. It’s been a choppy few months, with AI bubble worries driving a string of consecutive declines at times. Despite this, the S&P 500 finished last week strong, gaining 3.73% over the short trading week, just enough to leave November barely positive at 0.13%. Two weeks of declines were offset (just enough) by two weeks of advances, which you could read as either confidence or indecision. In Canada, the pattern of volatility was similar, but the outcome was better. The TSX also saw two weekly declines in November, but a strong final week, up about 4%, pushed the index firmly into positive territory with a 3.71% price gain for the month. All eyes now turn to bank earnings, which kick off tomorrow with Bank of Nova Scotia, followed by National Bank and Royal Bank on Wednesday, and BMO, CIBC, and TD on Thursday.
Don’t get too excited. China’s factory activity slightly improved in November but remained in contraction for the eighth straight month. This marks the longest slump on record as the economy continues to weaken. The manufacturing PMI came in at 49.2, while the non-manufacturing index dipped into contraction at 49.5 for the first time in nearly three years due to ongoing softness in real estate and residential services. The data highlights the challenges the country is facing due to weak domestic demand, falling retail sales, and slowing global trade, despite some easing tensions with the U.S. While growth is still on track to meet China’s 5% target, policymakers are unlikely to add more major stimulus and it’s likely the country will see further slowing in the months to come.
Going the other way. While most major central banks have shifted toward rate cuts or a pause, the Bank of Japan is edging toward tightening. Bank of Japan Governor Kazuo Ueda gave his strongest signal yet that a rate hike may come as soon as the December 19 meeting, saying the board will weigh the pros and cons of raising rates based on economic and inflation data. The yen moved higher on speculation and boosted market odds of a December increase to about 76%, up from around 58% just last week, with the probability rising to the mid-90% by January. Ueda said any hike would be a modest adjustment rather than a brake on growth. While some policymakers prefer a January move to avoid mixed messages after the government’s recent spending package, persistent inflation and a weak yen have strengthened the case to act sooner. More in fixed income below.
Digging deeper into last Friday’s GDP numbers, the Canadian economy grew faster than expected in Q3, expanding at a 2.6% annualized rate thanks to stronger crude oil exports and increased government spending. This helped the country avoid a technical recession after a revised 1.8% contraction in Q2. While manufacturing output helped support monthly growth, business investment stalled, household consumption slipped, and tariffs from the U.S. continued to weigh on sentiment and exports. Economists now see little chance of a BoC rate cut at their next meeting on Dec. 10, though an advance estimate showing a 0.3% GDP decline in October suggests a weak start to Q4. Despite the drag from tariffs, gains in energy exports, government capital projects, and housing resale activity bolstered Q3 results, prompting some analysts to dismiss recession fears for now as the Canadian dollar strengthened and bond yields rose.
Euro-zone inflation is expected to stay near 2% in November, reinforcing expectations that the ECB will keep interest rates unchanged in December as officials wait for new forecasts extending to 2028. Mixed national inflation readings and differing economist views highlight a lack of clear direction, with some arguing slowing price pressures will support rate cuts next year, while others expect stronger growth and even a possible future hike. Meanwhile, in the U.S., investors are keeping a close eye on inflation and jobs figures ahead of the Fed’s final meeting of the year, with markets currently pricing in another cut at the Dec. 12th meeting.
Is college the new avocado toast, costing too much and delivering too little? Confidence in the value of a four-year degree has fallen dramatically, with 63% of Americans now saying it isn’t worth the cost due to high debt and weak job prospects, up significantly from a decade ago. Attitudes have soured across all political groups and even among graduates themselves, driven by rising tuition, student debt burdens, and a cooling labour market for recent grads, whose unemployment rate now exceeds the national average. Analysts note that AI is reducing entry-level opportunities, eroding the traditional wage and employment advantage associated with degrees and pushing more young people toward trades schools. Either way, education remains one of the most reliable long-term investments in earnings and employment stability, so stay in school!
Diversion: Who needs enemies with friends like these?
