The latest economic news and market highlights from the UK, US and Asia.
Key takeaways:
📊 US inflation in line – US inflation rose 0.2% in October, 2.6% year-on-year, and core inflation (ex-food and fuel) increased 3.3%. All in line with expectations.
🪙 Bitcoin continues to rally – the world’s largest cryptocurrency hit record highs during the week - energised by Trump’s re-election to the White House and his more liberal attitudes towards cryptocurrencies.
🌍 COP 29 begins – the annual climate change conference began this week in Baku, Azerbaijan. Attention will likely be focused on the US, with fears they may pull out of the Paris Agreement.
📈 UK GDP slows – the UK economy grew 0.1% over the third quarter, below the consensus estimates of 0.2%, and second quarter of 0.5%. However, over the year the economy increased 1%, above the 0.7% in Q2.
💥China retail sales improve – China retail sales came in at 4.8%, well ahead of consensus estimates. A positive for Chinese authorities looking to boost the economy through monetary and fiscal measures.
What does that mean for you and your clients?
The US inflation numbers were in line with economists’ expectations, with headline inflation 2.6% year-on-year and core inflation 3.3%. While these figures are above the 2% target, another rate cut is likely before the end of the year. However, Fed Chairman Jerome Powell hinted the Federal Reserve is in no rush to cut rates due to the strength of the US economy.
Bitcoin hit record highs of over $93,000 this week, continuing the rally seen since the re-election of Donald Trump. Trump’s administration is seen as pro-cryptocurrency, fuelling the recent surge. However, gains slowed towards the end of the week.
In the UK, economic growth for the quarter was underwhelming, with only marginal growth of 0.1%. This is mainly due to activity in certain sectors which are expected to rebound. This data will influence the Bank of England’s decision on whether to cut rates at the next meeting.
China’s retail sales rose 4.8% over the year to October, beating market expectations of 3.8%. This will be a boost to policy makers in China, as it potentially indicates an improvement in consumer sentiment - a key factor behind recent weak demand and economic growth in the country.
The annual COP meeting is a chance for international policy makers to move forward with meeting the goals of the Paris Agreement - to limit global warming to 1.5-2 degrees above pre-industrial levels. As ever, competing views dominate the event, and all eyes will be on the US.
Chart of the week
Source: Furey Research Partners, FactSet & Goldman Sachs. Data as at 30 September 2024.
Why’s this worth sharing?
The above chart highlights the continued attractiveness of US small caps relative to large caps, on a valuation basis. The current macroeconomic outlook, with declining interest rates and potential tax cuts from the new US government, both being positive for smaller companies, are good signs for the asset class going forwards.
The Markets
US continues to lead: the US continued to lead global markets, with the S&P 500 up 1.05% and the Nasdaq up 0.76% over the week. Although both have pared their gains slightly since last week. Small caps have also performed well since the US election.
FTSE muted: the FTSE indices were more muted although delivered marginal gains, due to mixed earnings results and the outlook for rate cuts in the UK.
China improves: despite some positive news on the consumer side, with retail sales above expectations, the market was down over the week. This is due to potential tariffs from the US, and disappointment in the Chinese authorities recently announced fiscal stimulus.
Gold loses its luster: gold is on course for its worst week in over 3 years. The strong dollar as well as uncertainty on rate cuts weighed on the precious metal.
Bonds retreat: both UK Gilt and US Treasury yields edged higher over the week (leading to price declines). This is mainly due to concerns of inflationary policies by both governments, as well as large fiscal deficits, particularly in the US.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.11% | 8.06% |
| FTSE 250 | 0.09% | 7.31% |
| S&P 500 | 1.05% | 26.15% |
| NASDAQ | 0.76% | 25.42% |
| Hang Seng | -4.58% | 19.82% |
| Nikkei 225 | -2.92% | 4.41% |
| Brent Crude | -0.19% | -5.56% |
| Gold Spot | -2.72% | 24.80% |
| UK 10yr Gilt yield | +5bps | +94bps |
| US 10yr Treasury yield | +6bps | +58bps |
Source: FE FundInfo, goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close Thursday 14th November 2024.
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