ANALYSIS: Global markets were lower last week, but US indices did see a rebound on Friday as a prominent Fed official sparked hopes of a rate cut next month. The head of the Federal Reserve Bank of New York said there was scope for shortly reducing interest rates due to weakness in the labour market. This also was after the delayed non-farm payrolls report showed the US economy added 119,000 jobs in September, which was more than expected, although the unemployment rate ticked up to 4.4%, the highest since 2021.
The S&P500 and Dow were both down around 1.9% for the week, while the Nasdaq fell 2.7%. However, the three indices posted gains of 1%, 1.1% and 0.9% respectively on Friday. Europe and Japan both closed before the official’s remarks were made, dipping over 3% for the week. Asia was also very weak.
There has been a lot of discussion around whether the AI boom has reached bubble proportions, or whether it is still early days in the narrative. Against that backdrop, Nvidia’s results drew intense focus - and the numbers exceeded expectations. The company’s key data centre business saw sales surge 66% to US$51.2 billion in the quarter, and it guided for around $65b in the current quarter, about $4b above analyst forecasts. Net income rose 65% to $31.9b.
The outlook was equally upbeat, with Nvidia reporting visibility over roughly $500 billion in AI-chip orders for 2025–26. Management said demand for its advanced Blackwell chips was “off the charts”, and cloud GPUs were “sold out”. The results reinforced the AI growth narrative and quieted bearish sentiment, as major customers such as Microsoft, Meta, and Google continue to buy as many advanced chips as they can find.
Market reaction was initially positive - the stock rose about 6% - but later reversed to close a few percent lower on Thursday, likely reflecting broader macro factors. With the US government shutdown resolved, investors turned attention to incoming data, including the delayed jobs report for September. Markets had been expecting that the world’s largest economy would have added about 50,000 jobs during the month, but it was 1.4 times that. Jobs gains were driven by the healthcare sector (43,000), while hiring in the hospitality sector was also in good spirits – bars and restaurants added 37,000 positions.
The broader US economy remains in solid shape. PMI data on Friday showed the composite index edging up from 54.6 to 54.8 in November, with manufacturing slipping slightly and services rising - all in expansion territory (>50). These readings imply growth around 2.5% annualised in Q4, supported by a “broad-based” upturn. Consumer sentiment also improved after the shutdown ended, with the University of Michigan survey showing declining inflation expectations: the one-year outlook fell to 4.5%, and the five-year to 3.4%.
US Treasury Secretary Scott Bessent mentioned over the weekend that the US was not at risk of recession in 2026 and would benefit further from the Trump administration’s trade and tax policies, noting that parts of the One Big Beautiful Bill Act were still taking effect. He acknowledged soft spots in housing and other rate-sensitive sectors, but his optimism was echoed by New York Fed President John Williams, who suggested a rate cut could soon be warranted. Williams said the economy is now more “evenly balanced” and inflation is trending toward the Fed’s 2% target.
Although the Fed remains somewhat divided (as reflected in last week’s meeting minutes), markets welcomed Williams’ comments and are now pricing in a 70% chance of a rate cut on December 10.
Markets are sensitive at the moment, but it is worth taking a step back and looking at the broader picture. The S&P500 is up over 12% this year and the Nasdaq is up over 15%.
Alphabet rose 8% last week, rebounding as investors recognised the company’s progress in leveraging AI and cloud growth. Its new Gemini 3 AI model and news of Warren Buffett’s Berkshire Hathaway buying shares further lifted sentiment. Alphabet has been the strongest of the “Magnificent 7” this year, up 57% year-to-date.
Eli Lilly gained 3% last week (after rising 11% the week before) on continued strong demand for its weight-loss and diabetes treatments. The company also reached a milestone, surpassing $1 trillion in market value - joining only ten others, and the sole non-tech name aside from Berkshire Hathaway.
Looking ahead, earnings season is winding down, but notable reports are still due from Dell, Deere & Co., and Alibaba. Key data this week includes personal consumption data and Q3 GDP. US markets will have a shortened trading week due to Thanksgiving.
The Australian market fell 2.5% last week, with the ASX 200 closing at 8,416. Sentiment was dampened by strong US jobs data. However, with prospects of a December Fed rate cut improving, the local market has started this week stronger. BHP fell nearly 6% last week, amid reports that China’s state-run iron ore buyer instructed mills to halt low-grade ore purchases. There was also speculation of another BHP bid for Anglo American, which the miner has since confirmed is no longer under discussion.
The NZX 50 held up comparatively well, easing just 0.3% last week. Several corporate updates painted a more positive economic picture.
Contact Energy’s monthly update showed a lift in hydro storage after wetter weather, while electricity demand rose 5.2% year-on-year. Retail sentiment improved as KMD Brands reported a 7.9% rise in group sales in the first quarter, led by a 13.9% jump at Kathmandu. The acid test, as for most retailers, will be around Christmas trading and to a certain extent Black Friday, but it’s encouraging.
Napier Port delivered an 11% rise in full year revenues to $157.7 million and a 24% profit lift to $24.8 million, exceeding guidance and reflecting an economy showing early signs of recovery. The port expects 2026 full year operating earnings of $70–74 million. A2 Milk lifted its full year 2026 guidance, forecasting low double-digit revenue growth, helped by a weaker New Zealand dollar. Turners Automotive reported a 13% increase in first-half net profit to $30 million and remains on track for a record full-year pre-tax profit of around $60 million.
Today Kiwi Property has announced a 7% rise in half-year rental income to $102 million and an 11.5% lift in operating profit to $62.9 million, though net profit fell 77% to $9.8 million due to revaluations. The company said it remains well positioned for growth as conditions stabilise and Ikea’s upcoming opening at Sylvia Park boosts activity.
On the data front, inflation pressures persist in groceries but have moderated from pandemic highs. Food prices rose 4.7% in the year to October 2025, led by grocery items - for example, a two-litre bottle of milk averaged $4.78, up 13.5% year-on-year.
The dairy sector has enjoyed a golden run, although prices have clearly softened this year. Last week’s dairy auction had the headline Global Dairy Trade index falling for the seventh consecutive auction, with headline prices down 3.0%. Fonterra farmers stand to see a windfall from the sale of the consumer business next year, but may now be looking at a lower farmgate milk payout for this season below $10.
The housing market continues to recover: national sales were up 6.4% year-on-year in October, median days-to-sell fell to 41, and the House Price Index rose 0.6% month-on-month - its third consecutive gain, though still 15% below its peak.
It is a big week ahead with the RBNZ set to decide on rates. A 0.25% cut taking the OCR to 2.25% is locked in, while there is also an outside chance of a 0.50% trim. Either way borrowing and deposit rates look set to fall as the commercial banks pass on the next round of monetary easing.
This week we are also getting data on the retail sector, with a retail trade survey due and a read on consumer confidence. There is also a Business Outlook update out, along with plenty of corporate releases to watch, including from Fisher & Paykel Healthcare and Ryman Healthcare.