UK Economy returns to growth

Economic growth returns

This week brought some good news for the UK. Surprisingly strong growth in the first quarter of the year has pulled the UK out of recession. This needs to be kept in context as the economy is around 0.2% bigger than this time last year, but at least this is going in the right direction. This will no doubt be welcomed by Rishi Sunak who can chalk off another of his five pledges, although progress on the remaining three remains elusive. The only sting in the tail is that growth is coming from the services sector and brings the potential for upward pressure on inflation.

The Bank of England’s interest rate decision was more relevant for markets. In fact, it was the messaging that accompanied the decision that was important. Governor Andrew Bailey tried to avoid committing to a specific timetable for cuts, while giving the bank room to manoeuvre if the picture changes. But the BoE’s tone was much more accommodating than it has been, and the chance of UK and European interest rates diverging from the US has increased. This went down well with bond investors and helped the generally positive mood in equity markets.

For the following stories, please click on this link*

  • UK: BofE leaves rates on hold as investors look for signs of a cut
  • Property: Construction rises but high rates cool buyers’ interest
  • Tech: Investors call time on ARM’s AI rally

(*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.)

Federal Reserve more cautious on rate cuts

Interest Rate Cuts?

This week has brought official confirmation of several recent trends. Sentiment is often hard to pin down. It evolves over time, sometimes quite swiftly, and so defining exactly how people feel about a particular issue can be difficult. This week has brought some much needed clarity on two big issues: How closely does the market’s view of inflation match the Federal Reserve’s? And, how bad are Rishi Sunak’s chances of re-election?

Investors have pushed back their assumptions for rate cuts due to rising inflation and robust growth in the US. The Fed held rates as expected and governor Jerome Powell effectively ruled out any further hikes. He warned that rates will remain elevated, while leaving room for a rate cut later this year and the slight drop in government bond yields shows markets broadly agree with the Fed’s view. Meanwhile, any doubts about the Conservatives’ popularity have been laid to rest as results from the local and mayoral elections show recent opinion polls are pretty accurate. Sunak and Powell will both hope that sentiment improves this year, but Sunak appears to have a tougher job convincing people he’s on the right track.

For the following stories, please click on this link*

  • USA: Fed holds rates and warns of higher for longer
  • Pharma: Success of key products drives positive updates
  • Tech: Positive trading updates, but stocks remain volatile

(*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.)