Nasdaq and Dow Jones Divergence Continues

The Nasdaq climbed over 1% on Monday to a record high, while the Dow Jones fell 0.25%, marking its eighth straight session of declines. The divergence in performance is one of the largest in years. Despite political turmoil with Chancellor Scholz facing a no-confidence vote, the euro held steady near a two-year low at $1.051. Markets globally remain cautious ahead of the Federal Reserve's expected 25 basis-point rate cut this week.

Equities

The FTSE 100 fell 0.5% on Monday, dragged down by weakness in energy and mining stocks. Entain dropped 6.3% after Australia's financial crime watchdog launched legal proceedings over breaches of anti-money laundering laws. Shell and BP lost 1.6% and 2.7% respectively, tracking lower oil prices as Chinese consumer spending remained subdued. Precious metal miners declined by 2.1%, reflecting soft commodity prices.

Aerospace and defence stocks rose about 1%, providing some support. The FTSE 250 fell 0.4% for its sixth consecutive session, with Computacenter dropping 3.1% after CFO Christian Jehle resigned.

The Nasdaq climbed 1.24% to a record high, while the S&P 500 rose 0.38%. The Dow Jones fell 0.25%, marking its eighth straight session of declines. Investors turned their focus to the Federal Reserve’s policy meeting, with markets almost fully pricing in a 25 basis-point rate cut on Wednesday.

Among major US stocks, Tesla jumped 6.1% after Wedbush Securities lifted its price target to $515, the highest on Wall Street. Alphabet rose 3.6%, boosting the communication services sector. Honeywell gained 3.7% after announcing plans to explore a separation of its aerospace division, which could unlock further shareholder value.

The Nasdaq extended its weekly winning streak to four weeks, powered by growth and technology stocks, while the S&P 500 has now gained more than 27% this year. In contrast, the Dow Jones remains under pressure, recording its longest losing streak since 2018.

Forex & Commodities

The US dollar held steady ahead of the Federal Reserve’s interest rate decision. The euro remained subdued at $1.0509, down nearly 5% this year, as the yield gap between US and German 10-year bonds widened to 216 basis points. The Japanese yen stabilised at 154.06 per dollar following six days of selling, with expectations for a Bank of Japan rate hike pushed to January.

Of note, S&P Global’s flash manufacturing PMI fell to 48.3, missing forecasts of 49.8 and highlighting ongoing concerns about manufacturing costs, particularly with higher tariffs looming next year.

Sterling firmed slightly to $1.2680 after a survey signalled rising business prices in the UK, reinforcing expectations that the Bank of England will maintain rates later this week. Meanwhile, the Canadian dollar slipped to a 4.5-year low amid falling rates, tariff risks, and political pressure following the resignation of Finance Minister Chrystia Freeland.

Gold prices remained steady at $2,653 per ounce as markets awaited the Fed’s outlook for interest rates in 2025.

Oil prices edged lower, with Brent crude falling to $73.85 per barrel and US West Texas Intermediate dipping to $70.60. Disappointing Chinese consumer spending data added to demand concerns, while profit-taking weighed on prices following last week’s rally.