Stocks rallied again this week, fuelled by growing optimism around artificial intelligence (AI) and expectations that the Federal Reserve is nearing the end of its rate hiking cycle. It has seemed all week that, in quiet US holiday trading, the only thing moving markets was the ‘will they/won’t they’ speculation about the future role of OpenAI’s CEO Sam Altman. Last weekend he was sacked by the not-for-profit company’s board, apparently over concerns that his aggressive push to roll out ChatGPT raised safety concerns. He and most of the OpenAI workforce were then offered jobs by Microsoft (the very much ‘for profit’ 49% owner of OpenAI). By mid-week and after 750 of OpenAI’s employees had threatened to walk he was reinstated under a new board. Only in Silicon Valley.

The S&P 500 is up around 1% so far this week and is now up 8.4% in November, on pace for its strongest monthly gain since July 2022. Other global stocks were also mostly higher this week as some upbeat late-season earnings reports and cooling inflation bolstered risk appetite, also helped by bond yields which make equities relatively more attractive. In Asia, Hong Kong’s Hang Seng surged 2.7%, buoyed by a bounce among battered Chinese tech firms. Japan’s Nikkei 225 slipped initially but rebounded on positive rhetoric from Warren Buffet and remains up 28% in 2023, making it one of the world's top-performing indexes this year. European shares also edged upwards, as investors awaited further clues regarding the economic outlook from the Eurozone and ECB officials.

Australian shares pretty much treaded water this week and the benchmark S&P/ASX 200 index is flat for the week. The market was weighed down by losses among REITs, IT stocks and consumer staples, which were really just giving back gains from previous weeks.

On the upside, energy and utility stocks outperformed and the big miners and banks were stable. The Aussie dollar continued appreciating against the greenback, settling near a four-month high of US$0.66 amid iron ore price gains and a weaker US Dollar. Oil prices whipsawed midweek on OPEC uncertainty before settling lower. Gold meanwhile continued edging higher towards $2,000 per ounce, lifted by a weaker dollar and lower bond yields.

Long-term Australian bond and U.S. Treasury yields were fairly steady compared to previous weeks although the local bond market saw very short-term rate expectations move upwards quite sharply. This was because incoming RBA Governor Michelle Bullock reiterated intentions to keep policy tight in fighting domestic inflation pressures, pushing back on the government’s assertion that the persistent inflation pressures in Australia are purely a global phenomenon.  While the US curve remains deeply inverted, reflecting expectations of hard recession driven rate cuts sometime next year, the Australian equivalent suggests that the market either thinks the RBA will have less room for manoeuvre or a stronger economy. Next week we will get the new monthly Australian CPI report for October which may add to this debate.