The latest economic news and market highlights from the UK, US and Asia.
Key takeaways:
📉 UK inflation slows – headline inflation falls to 1.7%. Below expectations, and the Bank of England’s 2% target. This is the lowest reading since April 2021.
📍UK unemployment steadies – unemployment fell to 4%, though it was partly due to lower labour force participation.
✂️ Europe cuts rates – ECB lowers their Deposit Facility Rate to 3.25%. Responding to this month’s soft inflation data and modest economic growth outlook.
📊 Healthy US economy – retail sales rose 0.4% in September, beating market expectations of 0.3% and well ahead of the 0.1% in August.
👆 Chinese GDP above estimates – the Chinese economy expanded marginally above estimates in Q3, at 4.6% year-on-year versus the 4.5% expected, in a boost to policy makers.
What does that mean for you and your clients?
The continued disinflation in the UK, and other major economies, has paved the way for central banks to continue interest rate cuts. The ECB remained on this path this week, and the Bank of England and Federal Reserve are expected to follow suit.
With inflation seemingly under control, attention has turned to economic growth and the labour market. The objective being a ‘soft landing’. Current US economic data remains strong, but the November election adds some uncertainty.
This isn't unique to developed markets. The Chinese central bank recently announced a raft of stimulus measures to improve growth and consumer sentiment within their economy. So far, it's had a positive effect on markets. There's also an expectation they'll provide further fiscal stimulus.
This isn't to say that there aren’t risks that remain. Geopolitical uncertainty and conflict from Ukraine and the Middle East still have the potential to cause volatility, and upward surprises to inflation.
Chart of the week - China ETF flows
Source: HSBC Asset Management, Bloomberg and Hong Kong Stock Exchange as at 30 Sept 2024
Why’s this worth sharing?
After the recent stimulus announcement from the People’s Bank of China, there have been strong inflows into the Chinese equity market. The MSCI China Index saw renewed interest towards the end of the third quarter, leading to one of the strongest rallies in its history. Though this has softened over recent weeks.
This stimulus was needed to help an ailing economy and weak consumer sentiment. But the reaction that followed bodes well for China and the wider Emerging Markets.
The Markets
The UK ekes out more gains - the FTSE 100 and 250 indices delivered positive numbers, mainly a result of the soft inflation data pointing to further rate cuts from the BoE.
US continues strong performance - the S&P 500 and the tech-heavy Nasdaq 100 were positive over the week - the S&P even hit an intra-day all time high on Thursday. However, the S&P outperformed on a relative basis, which indicates a continued broadening out of performance from the 'Magnificent 7'.
China muted - following recent strong performance, the Hang Seng index had a negative week as investors await further fiscal stimulus to supplement the monetary policy announcements in September.
Golden gains - Gold continues to perform well year to date, offering a safe haven hedge to other asset classes with ongoing certainty including the conflict in the Middle East.
Oil retreat - Brent crude prices fell over the week, and are indeed negative year to date, following an alleviation in concerns that Israel may strike Iranian oil facilities in the ongoing conflict.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 1.60% | 11.91% |
| FTSE 250 | 1.66% | 10.10% |
| S&P 500 | 1.06% | 21.05% |
| NASDAQ | 0.03% | 18.35% |
| Hang Seng | -5.20% | 20.95% |
| Nikkei 225 | -1.68% | 7.17% |
| Brent Crude | -5.17% | -5.46% |
| Gold Spot | 2.41% | 28.30% |
| UK 10yr GILT | -12bps | +55bps |
| US 10yr Treasury | +2bps | +23bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close Thursday 17th 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.
