As market exuberance from last week’s election gradually subsided, trading activity has returned to focus on fundamentals. This shift led to volatility across various equity sectors, ultimately causing the S&P 500 index to decline by 1.32%, closing at 5,870.62 points.

In the bond market, strong U.S. inflation data and neutral remarks from multiple Federal Reserve officials continued to narrow expectations for the 2025 rate path. Furthermore, market sentiment anticipates that a Trump administration could further widen the fiscal deficit, pushing the yield on the 10-year U.S. Treasury note up to around 4.4%, while the U.S. dollar index is poised to break through the 107 level.

Key Economic Data Review for Last Week:

U.S. CPI: The October Consumer Price Index (CPI) rose by 2.6% year-on-year (previously 2.4%) and by 0.2% month-on-month (unchanged from the previous month). Core CPI increased by 3.3% year-on-year (unchanged) and by 0.3% month-on-month (unchanged). This uptick mainly reflects a narrowing decline in energy prices and a rise in used car prices, alongside a diminishing base effect that contributed to higher year-on-year inflation, though overall inflation did not accelerate significantly.

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U.S. Retail Sales: October retail sales increased by 2.8% year-on-year (previously 2.0%) and by 0.4% month-on-month (previously 0.8%). Core retail sales grew by 3.8% year-on-year (previously 3.9%) and by 0.1% month-on-month (previously 1.2%). Control group core retail sales rose by 3.6% year-on-year (previously 4.1%) but contracted by -0.1% month-on-month (previously 1.2%).

This increase was primarily driven by auto-related sales, with other categories showing stable or modest growth. The dissipating uncertainty from the election and the upcoming holiday season are expected to continue driving fourth-quarter consumer spending.

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China Monthly Economic Data: In October, retail sales grew by 4.8% year-on-year (previously 3.2%), reflecting the ongoing impact of government incentives for replacing old products and promotional activities around “Singles’ Day.”

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Industrial production increased by 5.3% year-on-year (previously 5.4%). Output from computer and telecommunications manufacturing rose by 10.5% year-on-year (previously 10.6%), while electrical product manufacturing grew by 5.1% (previously 6.1%), indicating a slowdown, mainly due to weaker external demand for mobile phones and semiconductors.

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Fixed asset investment grew by 3.4% year-to-date (unchanged), with property development investment contracting further to -10.3% (previously -10.2%), highlighting persistent weakness in the real estate market despite stimulus measures. Manufacturing investment rose by 9.3% year-on-year (previously 9.2%), reflecting continued government support for high-tech products and services.

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Key Economic Data for This Week:

China LPR (11/20): Due to previous economic sluggishness, the People’s Bank of China (PBOC) introduced a series of monetary easing measures in September, lowering the Loan Prime Rate (LPR) by 35 basis points. PBOC Governor indicated in mid-October that the central bank would consider lowering the 7-day reverse repo rate based on market liquidity conditions towards year-end. Markets anticipate that the PBOC will keep the 1-year and 5-year LPR unchanged at 3.1% and 3.6%, respectively.

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Japan CPI (11/22): The Governor of the Bank of Japan (BOJ) stated in October that the central bank would consider rate hikes if economic and inflation conditions align with expectations. The Tokyo CPI, a leading indicator for nationwide inflation, fell below the BOJ’s 2% target in October, with service inflation also slowing. This likely signals a further decline in Japan’s national CPI, potentially delaying the BOJ’s next rate hike.

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