Canadian dollar falls to a four-year low. France loses credit rating

At the end of Friday, the Dow Jones (US30) Index was down 0.20% (for the week -1.83%). The S&P 500 Index (US500) closed unchanged (for the week -0.52%). The Nasdaq Technology Index (US100) was up 0.76% (for the week +0.96%). The Nasdaq Technology Index hit a new record high on Friday, driven by investor enthusiasm for artificial intelligence and the technology sector. The rally was fueled by Broadcom (AVGO) shares’ impressive 19% gain after the company reported better-than-expected earnings and posted a strong 220% increase in AI-related annual revenue, underscoring the growing demand for artificial intelligence chips. This upbeat report helped boost other semiconductor stocks, including Nvidia (+1.2%) and Micron Technology (+2.7%).

The Canadian dollar fell to 1.42 per USD in December, the lowest since March 2020, amid the Bank of Canada’s (BoC) dovish stance. The Central Bank recently cut its key benchmark rate by a significant 50 bps to 3.25%, reducing the appeal of the loonie and widening the interest rate differential between Canada and the US. The decision followed rising unemployment and slower-than-expected economic growth, prompting the Bank of Canada to take measures to support the economy.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.01% (for the week -0.27%), France’s CAC 40 (FR40) closed down 0.15% (for the week -1.00%), Spain’s IBEX 35 (ES35) fell 0.11% (for the week -2.82%), and the UK’s FTSE 100 (UK100) closed down 0.14% (for the week -0.10%).

Rating agency Moody’s downgraded France to ‘Aa3’ from ‘Aa2’, citing concerns that the country’s public finances will be significantly weakened by political fragmentation that will limit the scope and scale of large deficit reduction measures for the foreseeable future. On the political front, French President Macron nominated Francois Bayrou as the new Prime Minister and eased the political risks weighing on French assets.

The UK GDP data showed that the UK economy contracted by 0.1% (expectation of +0.1% growth) in October. This unexpected decline was the second consecutive monthly drop and did not match moderate growth expectations. The weak data fueled hopes for an earlier rate cut by the Bank of England next year.

On Friday, WTI crude oil prices rose by 1.8% to settle at $71.30 per barrel, the highest since November 7, and up 6% for the week thanks to tightening global supplies and rising fuel demand. The rally was fueled by expectations of sanctions against Russia and Iran, lower interest rate estimates in the US and Europe, and supportive measures for China’s economy.

The US natural gas prices fell to $3.30 million barrels per ton (MMBtu), retreating from a 13-month-high amid rising supply. Producers are ramping up production, anticipating higher winter demand and increased exports from liquefied natural gas (LNG) plants.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) rose by 0.35%, China’s FTSE China A50 (CHA50) declined 0.79%, Hong Kong’s Hang Seng (HK50) gained 1.21%, and Australia’s ASX 200 (AU200) was negative 1.48%.

The director of the People’s Bank of China’s (PBoC) research bureau said China will cut interest rates and reserve requirements next year.  Friday’s data showed Chinese banks issued 580 billion yuan of new loans in November 2024, well below market expectations of 950 billion yuan and less than half of the 1.170 trillion yuan in the corresponding period last year, indicating weak credit demand in the mainland. Last Thursday, China said it would widen its budget deficit, issue more debt, and loosen monetary policy to keep economic growth stable.