Indices move to new highs again

U.S.

Small-caps outperformed large-caps by a wide margin, and value stocks outpaced growth shares. Energy stocks rose after Saudi Arabia made a surprise announcement that it was unilaterally cutting oil production by 1 million barrels per day.

The major factor driving the week’s gains was the prospects of significant fiscal stimulus under the incoming Biden administration. The prospects for the Democrats taking the Senate and achieving control of the government bolstered sentiment early in the week. Stocks rallied sharply on Wednesday morning, after it was confirmed that Democrats had won the two seats in Georgiaś run-off election. With 50 seats in the Senate, Democrats will now gain control of chamber given the tie-breaking vote by incoming Vice President Kamala Harris.

SP500 11.1.

EU

Shares in Europe rose despite the imposition of stricter lockdowns. Investors hope that coronavirus vaccines and a potentially massive U.S. stimulus package would help an economic recovery. The pan-European STOXX Europe 600 Index ended the week 3.04% higher, while Germany’s Xetra DAX Index added 2.41%, France’s CAC 40 advanced 2.80%, and Italy’s FTSE MIB notched a gain of 2.52%. The UK’s FTSE 100 Index rallied 6.39%, led by banking and energy stocks.

German industrial production and trade figures for November were better than expected. Industrial output rose 0.9% in the month versus a consensus forecast of 0.7%. Exports grew 2.2%, beating a forecast for 1.0% growth and a monthly increase of 0.8% in October. Imports climbed 4.7%, compared with 0.3% in the previous month. Factory orders rose 2.3%.

An estimate of consumer prices showed that the eurozone suffered a fifth straight month of deflation in December, with consumer prices falling 0.3% year over year. However, a core measure excluding food, energy, tobacco, and alcohol showed a 0.2% uptick in inflation, the same as the previous month.

Japan

Japanese stocks posted strong gains for the week. The Nikkei 225 Stock Average advanced 2.5% (695 points) and closed at 28,139.03, recording another multi-decade closing high. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of the Japanese stock market, also performed well. The yen weakened and closed near JPY 104 versus the U.S. dollar.

NIKKEI 11.1.

China

Chinese stocks began the year with strong gains, with the CSI 300 Index of large-cap stocks up 5.5% and the Shanghai Composite Index adding 2.8%. Sentiment was negatively impacted by the New York Stock Exchange announcement that it would move ahead with delisting three Chinese telecommunications companies. Reports that the Trump administration was considering adding Chinese internet leaders Alibaba and Tencent to a U.S. investment blacklist also tested investors’ nerves and marked an escalation in the Trump administration’s effort to increase restrictions on U.S.-listed Chinese companies.