Beyond Bulls & Bears


Notes from the Trading Desk – Europe

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. As part of Templeton Global Investments Group, the European equity desk is manned by a team of professionals based in Edinburgh, Scotland, whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The digest

Last week was another strong week for global equities. The MSCI World Index was up 0.8%, the Stoxx Europe 600 Index was up 1.4%, the S&P 500 Index was up 0.8% and the MSCI Asia Pacific Index eked out a 0.18% gain. November was a very strong month for global equities, with the MSCI World Index up 9.2% for the month.1

Focus last week was on the peak interest-rate narrative again, with inflation prints coming in lower than expected. Also, a series of other macroeconomic datapoints showed some weakening in the US economy which, for now, seems to take us back to the “bad news is good news” logic. With that, central-bank chatter was more dovish on both sides of the Atlantic. Indicators showed that market sentiment remained bullish again last week, with the CNN Fear and Greed Index still firmly in “Greed” territory.2

November month-end

November was an interesting month for global markets. Equities and bonds were strong, whilst the US dollar and volatility indices were down. The 9.2% gain from the MSCI World Index was its biggest monthly gain since November 2020 (when news of COVID-19 vaccines circulated).3 Of course, this was on the back of October, the worst month of the year for global equities. In terms of credit, global bonds delivered their second-best month ever. What drove this was a firming of the view that we are now at peak central bank rates, with the possibility that rate cuts may be forthcoming.

Despite the upturn in market sentiment, it is clear to us that the global economy is not yet through the woods with regards to avoiding a recession; hence, chatter around potential rate cuts isn’t necessarily all positive.

In November, European stocks notched their best monthly performance since January,4 as the Stoxx Europe 600 Index closed up 6.5% on the month. Growth stocks outperformed value, with technology, real estate and retail the top-performing sectors. We saw plenty of short covering as well last month. The XOVER Index (which comprises 75 equally weighted credit default swaps on the most liquid sub-investment grade European corporate entities) had its largest monthly tightening of the year so far, with the index down over 17% on the month.5

In the United States, the S&P 500 Index closed November up 8.9%, its seventh-best month this century, recovering all of its three-month losses.6 The Nasdaq was the standout index, up 10.7% on the month. At the same time, the US dollar saw its biggest monthly drop in a year, with the US Dollar Index down 3.0%.7 The Indian rupee was the only major currency lower vs. the dollar last month.

In bonds, the US 10-year Treasury tightened by 60 basis points (bps) in November, representing its largest monthly basis-point move since 2008.8 Volatility fell sharply in November, with the VIX hitting sub-13 through the month, its lowest level since COVID-19.9 Whilst not quite at recent lows, volatility in the bond market also fell in November too, dropping 9% on the month.10

In Asia, the Nikkei continued its march higher, up 8.5% in November, pushing it back towards the recent highs made earlier in the year and indeed levels last seen in the 1990s.11 During the month, fresh stimulus measures from the Japanese government offset any concerns around future Bank of Japan (BoJ) tightening.

In contrast, Chinese equities were left behind in November, with the Shanghai Composite Index up 0.5% and the Hang Seng Index down 0.2%. The Chinese government announced some stimulus measures, but that was not enough to galvanise the markets, with the real estate sector still a concern. Chinese macro data was also mixed through November.

Week in review


European stocks finished last week higher and closed out with the best monthly performance since January. The Stoxx Europe 600 Index was up 1.4% last week and finished up 6.5% in November. The peak-rate narrative was central again to the market’s strength. European inflation data has been lower than expected, with the November European Core Consumer Price Index (CPI) report coming in at 3.6%, which was lower than anticipated. French CPI was at 3.4, whilst German CPI came in at 3.2%.

At the same time, there are further signs of a slowing European economy. Germany’s unemployment rate unexpectedly rose to the highest level in 2.5 years, coming in at 5.9% in November. Meanwhile, French gross domestic product (GDP) slipped into contraction in the third quarter (down 0.1%). Central bank rhetoric was on the dovish side last week, with Bank of England Governor Bailey describing the fall in UK inflation as “very good news”, whilst European Central Bank (ECB) member Francois Villeroy commented that disinflation in Europe is happening faster than expected.

With that backdrop, the market is now fully pricing in a 25 bps ECB rate cut for April and 120 bps of cuts by October 2024. Some may argue that if we need over 100 bps of cuts in the next 12 months, then there is something more concerning going on in the European economy.

In terms of sectors, cyclicals outperformed defensives overall, with real estate stocks notching a strong month, along with financial services. With cyclicals favoured, basic resources stocks were also stronger last week, whilst defensives lagged.

United States

US equities ground higher again last week, in what was a relatively quiet week for impactful newsflow. The S&P 500 Index closed at its best level since March 2022, up 0.8% on the week. The key market themes of peak rates, disinflation and a soft landing rumbled on in the background.

Last week there was some focus on Federal Reserve (Fed) Governor Christopher Waller, who is a known hawk, as he stated that he is “increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%” but also that he was “reasonably confident” this could happen without a sharp increase in unemployment.12 He also hinted that rates cuts were possible if inflation turns lower. Yet, Fed Chair Jerome Powell’s comments were more in line with a “higher for longer” narrative, as he said that calls for rate cuts were premature and that Federal Open Market Committee members were focused on keeping policy restrictive until the committee is convinced the 2% inflation target was in sight.

In terms of sector moves, it was no surprise to see real estate stocks outperform last week, along with materials and industrials. Communication services lagged. Oil prices fell 2% on the week, as OPEC+ pledged to cut an additional one million barrels, highlighting weakening demand. US oil inventory data rose for a sixth straight week to the highest levels since July, further signalling a weakening in demand.

In terms of US data, the latest Personal Consumption Expenditures (PCE) release came in at 3.0% vs.  3.4% previous, indicating a deceleration in consumer spending. The Fed’s Beige Book complemented the idea of a pullback in discretionary spending, showing a slowdown in economic activity.


It was another somewhat muted week for Asian markets. The MSCI Asia Pacific closed the week up 0.18%, with India’s market the outperformer, up 2.42% last week amidst stronger September GDP data, coupled with overall global sentiment. Hong Kong’s market was the underperformer, down 4.15% amidst disappointing corporate earnings and China’s economic slowdown and property market slump.


The Nikkei fell slightly last week, closing down 0.58% on the back of some profit taking. Having said that, the Nikkei did briefly touch a year-to-date high on Monday, before selling off over the rest of the week. Japanese government bonds traded up last week, as the yield sold off on the back of dovish remarks from Fed policymakers amidst signs of slowing economic activity. The yen was stronger against the dollar as anticipation grew that the Fed could start cutting rates soon.

Last week, we heard a few dovish noises from the BoJ board members (supporting continued loose policy), as they try to dampen speculation that they will soon pivot away from their dovish policy stance 2% yield curve control target. Prime Minister Fumio Kishida reiterated the government’s commitment to taking all necessary measures to cushion the negative impact of recent price hikes. During the week, Japan’s parliament enacted an extra budget for the current business year to help fund the fiscal stimulus.

Sector-wise, semiconductors outperformed last week, with accelerating inflow into tech names on the back of declining rates. Shippers were also stronger after the Baltic Exchange Dry Index surged six days in a row.13


The Shanghai Composite Index fell 0.31% last week on the back of some mixed economic data which continues to concern investors. Headlining last week, we had President Xi Jinping’s visit to Shanghai, where he urged the Yangtze Delta River region to support the private economy, foreign investment and technological innovation. Economic data was mixed last week, with contracting manufacturing numbers in the Purchasing Managers Index (PMI) for October, but higher-than-expected Caixin/S&P Global numbers, as new orders hit their best level since June.

Also, the government published its 25-point plan to get the economy moving again, with support packages for the private sector. The People’s Bank of China released its third-quarter monetary policy implementation report, which showed a change of focus towards improving the efficiency and structure of loans. The latest report highlighted concerns that China’s recovery has yet to take off, as the recent property sector slowdown has curbed demand across the economy.

On the property front, the value of new home sales by the country’s top 100 developers fell 29.6% in November from a year earlier, accelerating from the 27.5% drop in October, according to the China Real Estate Information Corp. Looking ahead, the Politburo meeting & Central Economic Work Conference will be held soon.

Hong Kong

Stocks in Hong Kong declined amidst disappointing corporate earnings and China’s economic slowdown and property market slump. Chinese developers sold off. It was also reported that state owned enterprise banks held meetings with developers which failed to make much headway, dampening sentiment further. The auto sector was under pressure, after BYD announced more price cuts, which ignited concerns of intensified industry competition into year-end, while vehicle inventories continue to rise. Tech giants also weakened.

The week ahead

Key Events
Monday 4 December: Riksbank Minutes
Tuesday 5 December: US ISM-Services
Wednesday 6 December: Germany Factory Orders
Thursday 7 December: Germany Industrial Production
Friday 8 December: US November employment report; China CPI and Producer Price Index (PPI)

Monday 4 December

  • Sweden Riksbank Minutes
  • Spain Unemployment Change
  • China Caixin China PMI-Services
  • US Factory Orders and Durable/Cap Goods Orders

Tuesday 5 December

  • France Industrial Production
  • Eurozone ECB one-year/three-year CPI Expectation; PPI
  • US PMI-Services (revision) and PMI-Composite (revision); JOLTS Job Openings, ISM-Services and ISM-Services Prices Paid/Employment/New Orders

Wednesday 6 December

  • Germany Factory Orders
  • Eurozone Retail Sales
  • China Trade Balance
  • US Mortgage Applications; ADP Employment Change; Nonfarm Productivity (revision), Unit Labor Costs (revision) and Trade Balance

Thursday 7 December

  • Germany Industrial Production
  • Eurozone GDP (revision)
  • US Challenger Job Cuts; Initial Jobless Claims and Continuing Claims; Wholesale Trade Sales/Inventories; Household Change in Net Worth; Consumer Credit

Friday 8 December

  • China CPI and PPI
  • US November Employment Report (nonfarm payrolls, unemployment rate, average hourly earnings and labour force participation rate and underemployment rate); University of Michigan Sentiment and Expectations

Views you can use

Attractive income opportunities for uncertain markets
In a turnaround from last year, there is renewed interest in the fixed income asset class as yields have risen. Ed Perks, CIO of Franklin Income Investors, shares his analysis of recent macro developments and where he sees opportunities for income. Read more:

Alternative Allocations: Alternatives by Franklin Templeton—access granted
Franklin Templeton recently hosted due diligence meetings with financial advisors where Tony Davidow, Senior Alternatives Investment Strategist, led discussions focused on alternative investments. He believes that advisor adoption is just beginning and that there are three primary drivers that could help alternatives grow at a rapid pace. Read more.


All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.

There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Taiwan could be adversely affected by its political and economic relationship with China.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

Past performance is not an indicator or guarantee of future performance. There is no assurance that any estimate, forecast or projection will be realised.

Links to External Sites

Franklin Templeton is not responsible for the content of external websites.

The inclusion of a link to an external website should not be understood to be an endorsement of that website or the site’s owners (or their products/services).

Links can take you to third-party sites/media with information and services not reviewed or endorsed by us. We urge you to review the privacy, security, terms of use, and other policies of each site you visit as we have no control over, and assume no responsibility or liability for them.


This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realised. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data.  Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.


1. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

2. CNN’s Fear & Greed Index tracks seven indicators of investor sentiment. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

3. Source: Bloomberg.

4. Ibid.

5. The Xover Index comprises 75 equally weighted credit default swaps on the most liquid sub-investment grade European corporates. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. Source: Bloomberg. As of 3 November 2023.

6. Source: Bloomberg.

7. The US Dollar Index tracks the dollar against a basket of other major currencies. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges.

8. Source: “TREASURIES-Ten-year bond yields set for biggest monthly drop since 2008.” Reuters. 30 November 2023.

9. The CBOE Market Volatility Index (VIX) measures market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Often called the “fear gauge”, lower readings suggest a perceived low-risk environment, while higher readings suggest a period of higher volatility.

10. The MOVE Index measures US bond market volatility by tracking a basket of OTC options on US interest rate swaps. The Index tracks implied normal yield volatility of a yield curve weighted basket of at-the-money one- month options on the two-year, five-year, 10-year, and 30-year constant maturity interest rate swaps.

11. Source: Bloomberg.

12. Source: “With Fed Likely Done Hiking Rates, Waller Flags Pivot Ahead.” Reuters. 28 November 2023.

13. The Baltic Dry Index was created by the Baltic Exchange in London and reported daily. It provides a benchmark for the price of shipping major raw materials by sea. Indices are unmanged and one cannot directly invest in them. They do not include fees, expenses or sales charges.

Get Content Alerts in My Inbox

Receive email alerts when a new blog is posted.