The latest economic news and market highlights from the UK and abroad.
The key takeaways
📉 UK retail slump – The CBI (Confederation of British Industry) distributive trades, a measure of retail sales volumes, fell by 18% in November. The drop was worse than expected and highlights plummeting confidence within the sector.
🚘 US inflation picks up – the US Core PCE (Personal Consumption Expenditure) index rose by 0.3% from September to October, driven by higher service costs.
💥Japan’s confidence boost – the Japanese index hit 36.4 in November. With solid growth across income and overall livelihood - although employment outlook dipped.
💻 Probe into Microsoft – the Federal Trade Commission (FTC) launched a sweeping anti-trust probe into the company’s activities from cloud computing, to software-licensing and AI development.
☎️ Direct Line rejects Aviva – Direct Line snubbed Aviva’s takeover bid, claiming it undervalued the company, despite its high premium over the current share price. Aviva has until Christmas Day to try again.
What does that mean for you and your clients?
With retail sales down in the UK, industry outlook remains bleak. Many businesses are bracing for rising employer national insurance contributions announced at the Autumn Budget, sparking fears over profits. If employers turn to cost-cutting measures like reducing staff, this could also negatively impact the UK employment rate. However, we’ll have to wait until this change takes effect in April 2025 before properly measuring its full impact.
Over in the US, despite a small rise in inflation, the economy is still powering through. GDP grew by 2.8% from Q2 to Q3 following a boost from Trump’s election victory. However, the president-elect invites uncertainty and the range of economic predictions coming into 2025 remain wide.
Chart of the week - Trump's tariffs
Source: Bloomberg, 2023 data
Why’s this worth sharing?
Trump’s election was seen as a win for the US market with lower taxes, deregulation, and higher tariffs, but not all plans may work in its favour.
While the widely publicised plans for tariffs of 60% on goods and 100% on Chinese imported cars grabbed headlines, he’s now threatened Canada and Mexico (two of the US’s largest trading partners) with 25% tariffs on all imported products from both countries. Beside a potential souring of relations, given the extent of trade between these North American neighbours, the anticipated financial hit to both Canada and Mexico could be substantial. But does this mean US companies and consumers are set to benefit?
Many US firms manufacture or produce goods in these two countries, so tariffs risk raising prices domestically. Industries such as auto makers, with their complex supply chains weaving in and out of the US and its neighbours, are set to suffer. While one of Canada’s largest exports to America is energy, namely oil and gas. So, tariffs risk pushing up the price of fuel and heating.
Of course, this is Trump – so investors are left guessing. It’s too early to tell whether this is a serious commitment, an opening gambit or something he’ll have forgotten by January. Only time will tell.
The Markets
UK edges up – despite tax concerns, UK markets ended marginally up. Supported by M&A activity and stock-specific action, including Direct Line who maintained gains following Aviva’s approach.
US markets extend USD gains – although falling in GBP terms, US markets rose domestically. The S&P 500 reached another record high, on falling geopolitical risks given the ceasefire agreement with Israel and Hezbollah. Ford and General Motors fell on exposure to potential Mexico/Canada tariffs.
Asian markets mixed – the Hang Seng fell on disappointment around China’s stimulus plans and fresh US tariff fears. However, after an earlier dip, the Nikkei rose as investors began snapping up bargains.
Oil and gold fall – oil prices fell on de-escalation in the Middle East, although trading was thin as investors wait on a delayed OPEC+ meeting. Gold also fell on de-escalation news, given its role as a safe-haven asset.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.28% | 11% |
| FTSE 250 | 0.93% | 8.69% |
| S&P 500 | -0.71% | 27.56% |
| NASDAQ | -1.35% | 24.87% |
| Hang Seng | -0.52% | 19.66% |
| Nikkei 225 | 1.14% | 7.17% |
| Brent Crude | -2.38% | -3.31% |
| Gold Spot | -1.93% | 23.98% |
| UK 10yr Gilt yield | -14bps | +68bps |
| US 10yr Treasury yield | -16bps | +30bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close Thursday 28th November 2024.
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