The latest economic news and market highlights from the UK, US and Asia.
Key takeaways:
💼 UK Budget reactions – Gilts and equity markets dipped post-budget on concerns over borrowing and inflation.
❄️ Cooling US job numbers – JOLTs monthly job openings fell by 418,000 in September, to its lowest level since early 2021 – with the highest falls across health care, social assistance and local government sectors.
↗️ US inflation inches up - the Fed’s preferred inflation measure, the core PCE price index, rose 0.3% month-on-month in September, driven by service prices.
🏀 Chinese manufacturing rebounds - China’s manufacturing PMI hit 50.1 in October, marking its first expansion in activity since April.
🐎 Japan interest rates hold steady – after a major parliamentary shift over the weekend, the Bank of Japan held interest rates at 0.25%, with the bank’s governor citing concerns over the global economic outlook.
What does that mean for you and your clients?
Labour’s first budget was more muted than some had anticipated. Despite this Thursday still saw a sell-off in bonds and yield-sensitive equity sectors, as investors feared a rise in spending could fuel inflation – which could delay the Bank of England’s plans to further cut interest rates.
However, it’s still early days, with many still digesting the news, it’s too soon to say if these fears will play out. It’s also worth remembering that despite the negative reaction so far, market moves have been nowhere near the frenzied panic seen in the wake of Liz Truss’ disastrous 2022 “mini budget”.
For Parmenion’s broader take on the budget, check out our reaction here.
Chart of the week - the shape of the maturity wall
Source: Apollo; ICE BofA, Bloomberg, PitchBook LCD, MBA, Apollo Chief Economist
Why’s this worth sharing?
This week’s chart spotlights the value of outstanding debt maturing from 2024 to 2031 across commercial real estate (CRE), leveraged loans, US investment grade credit (IG) and US high yield credit (HY). While the absolute numbers of the chart are less important, what’s crucial is the slope of the “maturity wall”.
Sectors like commercial property could face the biggest short-term headache, with a large chunk of debt requiring re-financing soon. Many companies originally took on this debt when interest rates were at record lows. Now with the highs of today, those needing to re-finance may find that their once-manageable repayments are now much harder to bear, risking defaults or even collapse. And with potential interest rate cuts being delayed, the risk of these scenarios only intensifies.
The Markets
UK budget woes – UK markets fell following Wednesday’s budget, with losses more prominent for the domestically-focused FSTE 250.
US markets dips on tech earnings – disappointing results from Meta and Microsoft led to broader falls in tech amid questions on the impact of AI costs.
Asian markets mixed – after rises earlier in the week, the Nikkei 225 ended lower following US tech falls and domestic political uncertainty. Despite a boost from the China PMI data, the Hang Seng finished flat after its own tech names also suffered.
Gold ends flat - after rising earlier in the week, gold ended flat after some profit taking. However, the precious metal has still seen impressive returns year to date.
Oil falls – oil prices fell after Israeli strikes avoided Iranian oil refineries and markets priced in lower risk of escalation in the Middle East.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | -1.68% | 8.26% |
| FTSE 250 | -2.01% | 6.50% |
| S&P 500 | -0.73% | 19.55% |
| NASDAQ | -1.23% | 38.54% |
| Hang Seng | -0.32% | 23.77% |
| Nikkei 225 | 2.70% | 5.86% |
| Brent Crude | -3.93% | -6.50% |
| Gold Spot | -0.13% | 33.01% |
| UK 10yr Gilt yield | +24bps | +89bps |
| US 10yr Treasury yield | +9bps | +34bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close Thursday 31st October 2024.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
