Souring Sentiment Sends Stocks Lower

For the week ending 21 November 2025

As of midday Friday, global equities were lower on the week despite a strong earnings report from AI bellwether Nvidia and a solid September US nonfarm payrolls. Stretched valuations and uncertainty over Fed policy contributed to the pullback. The yield on the US 10-year note fell 3 basis points on the week to 4.07%, while the price of a barrel of West Texas Intermediate crude oil was little changed at $57.95. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 22.2 from 21.2 a week ago. 

MACRO NEWS

US nonfarm payrolls rose in September

Data released Thursday showed that the US economy added 119,000 jobs in September, more than double the amount economists expected. However, the unemployment rate rose to 4.4%, the highest level in four years, as the labor force participation rate rose. Wages rose at an annual rate of 3.8%. On Wednesday, the Bureau of Labor Statistics  canceled the October jobs report, saying that the payrolls figures will be incorporated into the November report but that the data required to calculate the unemployment rate cannot be collected in arrears. Both the October and November reports will be released on December 16, after the Fed’s December 10 meeting, limiting policymakers visibility into the jobs market. Weekly initial jobless claims data were also released Thursday. That measure showed that labor market conditions were little changed during the government shutdown though continuing claims continued to edge higher, suggesting that workers are taking longer to find new jobs.

FOMC minutes show sharply divided Fed

The press conference after the early-November FOMC meeting made clear that members of the rate-setting committee were divided, but the depths of that divide were made clearer when the minutes of the meeting were released Wednesday. While the Fed cut rates earlier in the month, the minutes showed that there were strongly differing views on the appropriate course for rates for the December meeting. Many saw a December cut as inappropriate, while most noted that further cuts could add to inflation. However, most still expect to see more rate cuts over time. Members generally expect more gradual softening of the labor market, but they saw no evidence of a sharp deterioration. President Trump renewed his verbal offensive against Fed Chair Jerome Powell this week, calling him “grossly incompetent “ and saying he would love to fire him. Also this week, Trump said he may have settled on his pick to replace Powell, whose term as chair expires in May. On Friday morning, Federal Reserve Bank of New York President John Williams, a permanent voting member on the FOMC and a very influential one, said he still sees room for a near-term rate cut, a comment that boosted the odds of a December cut back to 68% from 30% on Wednesday.  

Soft Japan GDP bolsters case for stimulus

Japanese GDP declined an annualized -1.8% in Q3, though not as deeply as the -2.4% forecast. The soft reading bolsters the case for a stimulus package and a go-slow approach from the Bank of Japan. BOJ Governor Kazuo Ueda reportedly told Prime Minister Sanae Takaichi that the central bank is in the process of slowly dialing back its easing support for the economy. With inflation above target and a policy mix of loose fiscal and still accommodative monetary policy, yields on Japan’s long-term debt soared and the yen weakened. Equities, which had rallied in anticipation of additional stimulus, have recently given back about 7% of their gains. Investor concern is growing that Japan risks a “Liz Truss” moment amid Takaichi’ s unfunded tax cut plan. Meanwhile, tensions between Japan and China remain elevated as China objects to comments from PM Takaichi earlier in the month that a Chinese attack on Taiwan would pose an existential threat on Japan and could trigger a military response. China has demanded that the comments be retracted. Japan has not obliged.

US proposes plan to end war in Ukraine

The US has reportedly put forth a framework to end the war between Russia and Ukraine. The plan’s 28 points fall into four general buckets: peace in Ukraine, security guarantees, security in Europe and future US relations with Russia and Ukraine. The proposal is said to require significant territorial concessions on the part of Ukraine, something it has rejected in the past. It would also limit the size of Ukraine’s military to about 400,000 troops, roughly half today’s level and restrict certain types of weaponry. In return for these seemingly harsh terms, Ukraine would reportedly receive a US security guarantee. There is a school of thought that the proposal makes maximal demands of Ukraine but that there may be flexibility in negotiations.  According to Ukrainian officials, President Volodymyr Zelensky has agreed to work with the US on its draft plan. Zelensky finds himself under domestic and international political pressure as a corruption scandal involving the Ukrainian state nuclear power operator has implicated some of his close associates. The White House is reportedly pressuring Ukraine to agree to the plan by the middle of next week. On Friday morning, Zelensky said Ukraine is working on an alternative proposal, but notes that Ukraine is at risk of losing a key partner in the US.

QUICK HITS

Preliminary November global purchasing managers’ indices were mixed.

According to Treasury International Capital data released on Tuesday, foreign private investors bought a net $132.9 billion worth of US stocks in September, a sharp increase from the $89.4 billion purchased in August and a reversal from the $16.2 billion in outflows seen in July.

President Trump is soon expected to sign an executive order that will make it difficult for states to impose their own regulations on AI models. Trump this week called for a single national standard to regulate AI rather than a patchwork of 50 separate regulatory regimes.

It was revealed this week that the abrupt resignation of former Fed Governor Adriana Kugler  was as a result of her breaking the central bank’s personal investing rules that prohibit investing in individual stocks and trading during blackout periods.

The Financial Times reported that foreign purchases of Chinese equities have hit their highest level in four years as offshore inflows into China stocks from January to October  totaled $50.6 billion, up from $11.4 billion in 2024, according to data from the Institute of International Finance.

The United Nations Security Council this week approved President Trump's peace plan for Gaza, including an international stabilization force.

With the government having reopened for business, economic data began to flow again this week, some of it quite dated, including news that durable goods orders rose 2.9% in August.

After meeting with Saudi Crown Prince Mohammed bin Salman in Washington this week, President Trump announced that the US and Saudi Arabia had reached a defense agreement and that the US will supply the kingdom with F-35 fighter jets.

The US Department of Energy said this week that it plans to build and own as many as 10 nuclear reactors, using funds from Japan’s $550 billion investment pledge.

Fed Governor Michael Barr said Thursday that the adoption of AI is not yet translating into increased productivity, but the technology is generating significant gains in economic growth.

US existing home sales rose 1.2% from the month before in October, while the median price of a home rose 2.1% to $415,200.

Canadian CPI fell to 2.2% in October from September’s 2.4% reading, while retail sales fell 0.7%.

The UK is planning to introduce a new model that will allow visa holders earning over £125,000 a year to apply for permanent residency in three years instead of the standard five-year wait. 

During its Thursday earnings call, Walmart management reported an upbeat outlook for US holiday sales.

A painting by Austrian artist Gustav Klimt this week set a new record for the most expensive work of modern art ever sold at auction, fetching $236.4 million. 

EARNINGS NEWS

As Q3 earnings season winds down, blended earnings per share (which combines reported data with estimates for those that have yet to report) show that S&P 500 earnings rose 13.3% compared with the same quarter last year, according to data from FactSet. Blended sales rose 8.4% year over year.  The blended net profit margin for the S&P 500 for Q3 2025 is 13.1%, which is above the previous quarter, and the highest since FactSet began compiling data on this metric in 2009. 

THE WEEK AHEAD

Monday: None

Tuesday: US September retail sales, PPI, Case-Shiller, pending home sales

Wednesday: Australia CPI; UK budget announcement; US durable goods orders

Thursday: US closed for Thanksgiving, EU consumer confidence

Friday: Japan retail sales, Canadian GDP

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.