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• US sharemarkets rose in November with the S&P500 index exceeding 2,600 points• Jerome Powell next US Federal Reserve Chair• Political uncertainty in Europe resurfaces
US sharemarkets rose in November. This probably shouldn’t come as a surprise to keen observers of US shares with November considered one of the best months of the calendar year for returns. In the past 20 years, the US Dow Jones index has recorded average gains of 1.9 per cent during November. This year was no exception with the Dow up by 3.8 per cent. All US markets achieved record highs with the Dow rising above 24,000 points and the S&P500 index rising above 2,600 points for the first time, up by 2.8 per cent. The Nasdaq lagged, rising by 2.2 per cent.
Market sentiment was mostly positive in the US during November. Strong September quarter earnings results (around 72 per cent of companies beat earnings estimates according to FactSet data), supportive economic data releases, mergers and acquisition activity, ongoing low inflation, progress on the Trump Administration’s tax cut plans and the ‘steady hand’ nomination of Jerome Powell as US Federal Reserve Chair boosted shares. 

Elsewhere, European sharemarkets retraced as political uncertainty in Spain and Germany, where Chancellor Angela Merkel failed in her initial attempts to form a coalition government, rattled markets. The German Dax index fell by 1.6 per cent in November. The UK FTSE index declined by 2.2 per cent on persistent uncertainty around the May Government’s ‘Brexit’ plans.
The month began with strong US economic data – the Conference Board measure of consumer confidence hit a 17-year high in October. The US Federal Reserve left the federal funds target rate range at 1.00-1.25%. The Fed described economic growth as ‘solid’ and core inflation as ‘soft’. US President Donald Trump nominated Jerome Powell to be the next Chair of the Fed. The Dow Jones index rose by 162 points in aggregate over the first three days of November. 
The Bank of England lifted interest rates for the first time in more than a decade with the bank rate up from 0.25% to 0.50%. The Bank vowed future rate rises will be limited and gradual. The FTSE rallied by 0.9 per cent on Nov 2.
Global sharemarkets were mixed during the second week of November. The Dow Jones fell by 101 points on November 9 amid concerns that the US tax reform package would be delayed. The German Dax (down by 2.6 per cent) was the worst performer on a raft of negative economic, corporate and geopolitical news. Australiansharemarkets were relative outperformers with the S&P/ASX 200 index pushing through the 6,000 ‘ceiling’ on Melbourne Cup Day (November 7) for the first time since 2008. The RBA left the cash rate at 1.5 per cent.
Shares were volatile in the middle part of November (November 10-17). US sharemarkets oscillated daily on tax  reform developments. Eventually US lawmakers in the House of Representatives passed the tax reform bill on November 16. This coincided with the release strong industrial production data for October, which lifted to 6-month highs. Japan’s Nikkei index lagged (down by 1.3 per cent) after September quarter economic (GDP) growth disappointed at 0.3 per cent on the quarter on softer consumer spending and business investment.
A record-breaking NAB business survey in October that saw conditions and profitability rise to record highs failed to spur Aussie shares (-1.2 per cent). Unemployment fell to 4 ½-year lows of 5.4 per cent in October, but investors chose to focus on the weak 2 per cent wages growth outcome for the September quarter. The Reserve Bank had already responded by lowering its underlying inflation projections in its quarterly Statement of Monetary Policy on November 10.
In the week November 17-24 global sharemarkets posted positive returns. The Nasdaq (up by 1.6 per cent) was a strong performer as technology stocks, such as Apple and Amazon, continued their strong 2017 rally. Globally, technology stocks are up around 40 per cent so far this year. US retailers such as Macy’s were strong performers as Black Friday sales exceeded market expectations. Reuters reported ‘Adobe Analytics, which measures 80% of online transactions at the largest 100 US web retailers, forecast online Black Friday sales of $7.9 billion, a record high.’
The German Dax rose by 0.5 per cent during the same period as optimism about the underlying strength of the European economy offset political uncertainty in Germany. Eurozone purchasing managers surveys rose further in November. Consumer sentiment also rose to a 20-year high.
Central banks were in focus on November 23-24. Minutes from the US Federal Reserve meeting held over October 31 and November 1 showed that many participants felt that a rate increase was likely warranted in the near term if the economy remained on track. The minutes of the European Central Bank’s October meeting revealed that policymakers broadly agreed on extending their asset purchase program, but were divided over whether to keep the bond buying program open-ended.
Attention turned to commodity markets in the final week of November. All eyes were on Vienna on November 30 for the final Organisation of Petroleum Exporting Countries (OPEC) meeting of the year. Oil prices had increased by around 28 per cent since the start of September to November 24 on heightened market speculation that an agreement would be reached to prolong oil output reductions beyond March 2018. However, prices eased from 2-year highs prior to the meeting on concerns over possible Russian oil producer opposition to the ‘accord’. However, an agreement was eventually reached to extend supply limits through to the end of 2018. The crude oil price finished the month at US$57.40 per barrel, up by 5.6 per cent.
US shares finished the month strongly, with the Dow Jones index up by 3.0 per cent and the S&P500 up by 1.7 per cent in the final week of November. Media company Meredith said it would buy Time for US$2.8 billion (including debt). Shares in home improvement makers rose in response to data showing a lift in new home sales to 10-year highs. US home prices also lifted by a strong annualised 6.2 per cent in September.
The US Senate Budget Committee approved the tax-cut bill and key Republican Senator Mr. John McCain endorsed the bill, boosting market sentiment with the Dow rising a staggering 332 points on November 30. US Federal Reserve Chair nominee Jerome Powell’s comments on the gradual path of interest rate hikes and deregulation propelled financial stocks higher.
Overall in November, the Dow Jones rose by 3.0 per cent, the S&P500 increased by 2.8 per cent, the Nasdaq by 2.2 per cent. Across Europe, the German Dax fell by 1.6 per cent while the London FTSE declined by 2.2 per cent. In Japan, the Nikkei rose by 3.2 per cent. In Australia the ASX 200 index rose by 1.0 per cent and the All Ordinaries gained 1.4 per cent. 

Across the 21 industry sectors in Australia, Consumer durables and apparel (up 14.1 per cent), Capital goods (up 7.9 per cent) and Software & services (up 6.2 per cent) all rose. Telecommunications (down 2.7 per cent), Banks (down 2.5 per cent) and Food, beverages & tobacco (down 1.9 per cent) lagged. Overall, all but 3 of 21 sub-industries were up
Originally published by Craig James – Chief Economist (Author), CommSec