Investors await the start of the rate cutting cycle

This week, there has been an increase in attention towards Chancellor Jeremy Hunt, as he is expected to announce his Spring Budget in two weeks’ time. In the previous Autumn budget, the main focus was on businesses. However, with the general election approaching, it is anticipated that Hunt will prioritize individuals in an effort to boost his party’s political appeal.

Reports this week have suggested Hunt is drawing up plans for a new scheme that would allow first-time buyers to purchase a home with only a 1% deposit, with the government acting as a loan backer. The scheme is part of the Conservative Party’s efforts to appeal to younger voters and homeowners, who have been increasingly priced out of the housing market. The party faces competition from Labour, which has promised to be “the party of home ownership.”

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• Data: Poor data confuses the policy path
• UK: Elevated borrowing costs support record profits
• China: Chinese consumers spend as Nikkei 225 eclipses all-tome high

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

Technical recession confirmed for UK

This week we got what should have been monumental news that the UK is officially in recession. The specific definition being used for this headline isn’t particularly useful however. Most people would associate a recession with rising unemployment, something we have yet to see. So far belt tightening in the retail sector is dragging down growth figures thanks to poor Christmas sales but if it keeps up, we can expect job losses eventually. That the last six months haven’t exactly been great for the UK economy should come as no surprise to anyone.

Elsewhere the mood is likely more upbeat over at the Bank of England. A recession is the best known cure for inflation and they’ve been trying to cause one ever since they started jacking up interest rates. How bad things need to get and for how long before they’re satisfied will be questions they’ll need to answer. In an election year this could be a boon to Labour who can now blame the government for causing a recession, but there is every chance the figures could be revised up in a few months and the Conservatives will take the credit for a recovery so it’s probably a wash.

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• Inflation: Markets choppy as UK and US send different signals
• UK: Enters recession as wage growth remains strong
• Equities: Big brands warn that consumers are more cautious

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

UK economy remains weak

The UK is expected to have fallen into recession in the final quarter of 2023. GDP fell by 0.1% in the third quarter of 2023 and The National Institute of Economic and Social Research expects to see GDP contract for the second successive quarter when official figures are released next week. Meanwhile consumer spending continues to slow. Sales in January increased 1.4% compared to last year, but this is lower than the 1.9% increase in December and the value of retail sales has been below inflation for some time. The Recruitment and Employment Federation said hiring has slowed and starting salaries have fallen below the long-term average.

Not all news this week was gloomy as the UK’s services sector continues to expand and the outlook for the housing market has improved. The number of mortgage borrowers has increased as borrowing rates fall. Estate agents report more buyers and sales and the monthly surveys from Nationwide and Halifax show average house prices are rising.

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• Markets: Reassessing the timing of rate cuts as China takes steps to end the sell-off
• US: Equities gain but investors more cautious on bonds
• China: Equities rally, but persistent deflation is a problem

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

 

UK and USA interest rates left unchanged

This week the Federal Reserve and the Bank of England both left interest rates on hold. The recent modest reduction of inflation meant the decisions to leave rates unchanged was no surprise. Jerome Powell and Andrew Bailey tried to cool expectations of early rate cuts but weaker US jobs data re-established the positive mood in bond markets as UK, US and European government debt rallied.

The more interesting story was in US equities as enthusiasm for high-growth tech stocks was tested by mixed trading updates. Although Microsoft’s revenue growth was better than forecast investors paused to catch their breath after its recent rapid growth. Meanwhile, shares in Alphabet and Apple fell as their relatively positive updates failed to keep up with investor expectations. Other tech stocks including Intel and AMD also fell this week as they failed to hit their revenue forecasts. Good results from Meta and Amazon showed tech stocks still have the ability to spring a positive surprise, but markets appear sensitive to any signs that tech stocks may not be able to live up to their high valuations.

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• Rates: US & UK rates held as investors look towards first cuts
• US: Tech stocks struggle to live with aggressive valuations
• Equities: New products deliver for Europe’s big Pharma stocks

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)