Latest News – Page 3 – Wealth Design

Chancellor hopes NI cut will put voters in a positive mood

This week, Jeremy Hunt attempted to lighten the mood for voters by reducing National Insurance. The early introduction of this tax cut raises the possibility of an election in early 2024 as the Conservatives weigh up whether this is long enough for workers to feel the benefit against the potential for a rate hike if inflation stays high. The Office for Budget Responsibility’s assessment of the outlook was lukewarm at best. It expects low growth this year and next, but says inflation will take until the second quarter of 2025 to return to target.

The outlook for the UK and the US rests in part on consumer confidence and how that translates to spending. Confidence has unexpectedly improved in the UK, but remains negative and there is another energy price hike coming in January. Meanwhile US consumer confidence has weakened slightly and some data points to a slowdown in retail spending. US markets were positive in advance of the Thanksgiving holiday and investors will be looking at whether this positivity carries through to the annual retail spending bonanza that is Black Friday.

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UK: Chancellor targets growth and productivity improvements
US: Markets in positive mood in advance of thanksgiving
Oil: Tension between OPEC members as oil price falls

(*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.)

Drop in headline inflation provides positive momentum for markets

This week David Cameron’s return from the political wilderness caught everyone by surprise. Cameron is the first former prime minister to return to government since 1970 as he takes up the role of Foreign Secretary. His appointment dominated the headlines and successfully attracted attention away from Suella Braverman’s acrimonious departure from government. But Cameron’s return doesn’t do much for the government in the longer term. It remains far behind in the polls and the recent King’s Speech had little to allow it to regain political momentum.

The positive reaction to this week’s inflation figures suggests markets are also being distracted by short-term news. Despite the big drop, UK CPI is only 0.3% below where the market had expected it to land as falling domestic energy bills take effect and, in line with the recent trend, core inflation remains sticky. The decline is welcome but does little to change the outlook. Very low unemployment and strong wage inflation means the Bank of England may be convinced to keep rates high for a while. Meanwhile, falling retail sales suggests the risk of recession is still live.

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Inflation: Markets rise as inflation falls faster than forecast
China: Retail spending rises, but property still in the deep freeze
Equities: Luxury goods feeling the chill of lower demand

(*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.)

Markets look towards interest rate cuts

This week markets have taken the opportunity to catch their breath. Investors are looking for the inflection point, where it becomes clear that the next step for central banks is to begin cutting rates. Central bankers have naturally spent this week trying to calm expectations that the next move is a step down and most have been sticking to the higher-for-longer scenario. The tension between these two positions means markets remain uncertain and continue to be driven by each day’s news flow.

Elsewhere, the lack of growth in today’s GDP numbers is not great but focussing on each piece of economic data is unlikely to provide much clarity. With economic news remaining mixed, each release is as likely to reinforce existing ideas as it is to provide fresh insight. Some will see this as proof the UK remains resilient, while others will see the steady slide to recession. Markets are likely to remain volatile until a clear picture appears. Meanwhile, corporate news was dominated by the collapse of WeWork, however, as always there were pockets of good news.

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UK: Gilts continue to rally as markets look to rate cuts
Equities: High Street retailers shrug off tough trading conditions
Property: Steady progress for IWG as WeWork declared bankrupt

(*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.)

Central Banks choose to wait and see as high interest rates take hold

This week we had two eagerly anticipated but equally unsurprising interest rate decisions. Both the US Federal Reserve and the Bank of England elected to keep interest rates where they are. In the UK inflation is coming down slower than hoped for and in the US economic growth is stronger than expected. Both banks are waiting for the impact of previous rate hikes to take effect and are happy to sit on their hands for now.

Despite nothing changing the market has reacted aggressively anyway. The number of “higher for longer” and “the new new-normal” blog posts, opinion pieces and research notes we’ve received in the last couple of days is astounding. Everyone it seems is starting to believe this time really is different and high rates are here to stay. With the typical delay between rates going up and the economy feeling the impact being between around 18 months, and this being month 16 since rates started rising, we feel this might be a little premature. Like the banks, we’re happy to wait and see.

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Nick Booker: Our new Chartered Financial Planner
Europe: Tight conditions slow EU economy
US: Rates unchanged as American consumers continue to spend
Equities: High costs challenge renewable industries

(*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.)

ECB leaves rates unchanged as economic activity slows

The European Central Bank left interest rates unchanged at 4%. The decision was widely expected and financial markets were unmoved by the decision as the ECB tries to balance the need to bring down inflation with evidence of a slowing economy. Consumer sentiment in the continent remains poor and economic output has declined due to less activity in the services sector. Although there was no change in rates at this meeting, the ECB said it is still committed to keeping rates high to ensure inflation is brought under control.

There is a similar picture in the UK although the decline in the services sector was offset by an increase in manufacturing activity. The unemployment rate in the UK increased to 4.2%, however, the Office for National Statistics has changed the way it calculates its employment data and warns the new figures are what it calls “experimental”. This leaves the Bank of England facing the same dilemma as the ECB at its interest rate meeting next week.

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US: More volatility for bonds as consumer demand drives surprisingly strong US growth.
US: Uncertainty spurs more volatility for US Government Bonds
Equities: Banks continue to benefit from higher interest rates

(*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.)

Inflation refuses to budge – Government bonds under pressure

This week neatly illustrates the problem facing the Bank of England. Inflation remains stubbornly high and wage growth continues at near record levels, but consumer confidence and spending have contracted sharply. It is usually good to treat a single month’s data with a healthy dose of scepticism, however, the monthly CPI reading is now stuck just under 7% where it has been since July. High interest rates are now having the restrictive effects intended on consumer activity, but inflation seems to have stopped reacting to the downward pressure. The bank’s choice is stark; is the priority inflation or economic growth?

In the US, the Fed has indicated that it will leave rates on hold at its next meeting, but US consumption is speeding up rather than slowing and markets have concluded the higher for longer doesn’t rule out another hike later this year. Bond markets have looked at the data and concluded that tackling inflation is and will remain the priority of central banks and this has dragged government bonds down again.

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Global: Inflation and strong retail sales cause bonds to slide
China: GDP growth bounces back
Equities: US tech stocks face scrutiny as Q3 earnings season begins

(*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.)

Recruitment firms feel the effect of cooler jobs market

The UK’s jobs market is showing further signs of weakening as recruiters PageGroup, Hays and Robert Walters all said earnings fell in the last quarter as companies become more cautious about hiring new staff. PageGroup said full year profits are expected to be slightly below its previous forecast. Robert Walters, which concentrates on professional roles, said its revenues are down 13% as candidates become more cautious about moving to a new employer. All three recruiters reported that employers are increasingly choosing to take on temporary staff due to the uncertain outlook.

Meanwhile, KPMG and the Recruitment and Employment Confederation said wages for new hires and for temporary staff are rising at the slowest rate in more than two years. Recruitment firms reaped the benefit of employers competing for staff in the post-pandemic recovery. Shares in the UK’s listed recruiters comfortably outperformed in 2021 and parts of 2022 but they have struggled for much of this year.

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Global: Markets rise but investors remain cautious as war breaks out in Middle East
US: Less aggressive tone from the Fed lifts bonds and equities
Israel: War with Hamas pushes investors towards haven assets

(*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.)

Better inflation news in UK as food retailers expect prices to fall

UK retail prices are rising at their slowest in more than a year as retail price inflation fell from 4.7% to 4.4%. A big contributor to the slowdown is the rapid cooling of food prices. Food inflation fell from 11.5% in August to 9.9% in September according to the British Retail Consortium. Despite inflationary pressure from high oil prices and higher borrowing costs, retailers expect inflation to continue to slow this year.

Tesco has upgraded its forecast for annual profits after a very strong first six months of the year. The company has raised its full-year profits guidance to £2.6bn to £2.7bn, up from £2.5bn last year, as sales increased 13%. The company says it is attracting higher-end and budget shoppers by being slower to pass on cost increases to customers. The company says food inflation is expected to keep falling. Greggs has also reported that cost pressures from higher raw materials and energy are beginning to ease as it released an upbeat quarterly update which showed sales up 14%..

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US: Investors concerned the Fed may become more hawkish as US economy remains resilient
Bonds: Sell-off as investors face up to higher for longer
Equities: Metro Bank tries to raise cash as housing market cools

(*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.)

Inflation cools but higher energy prices complicate the outlook

This week there have been a number of small victories in the ongoing battle with global inflation. Both Spain and Germany reported prices rising slower than expected, which led to a cooler overall inflation picture for the Eurozone as a whole. There was further good news from the US, as the annual rate for Core PCE inflation, the Federal Reserve’s preferred measure of inflation, came in more or less in live with expectations as it continued its steady decline.

Elsewhere, inflation is preparing for a fightback with rising oil prices and a strong US dollar being bad omens for countries that import a lot of their energy, UK and large parts of Europe especially. While this is bad news for central banks, and indeed everyone with a gas bill, these two factors will also be bad for growth, slowing down economies further and hopefully negating the need for more rate rises designed to do the same.

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Currencies: US Dollar strength continues
Oil: Brent tipped to hit $100 as US inventories fall
China: Political tensions deter investment

(*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: Easing food prices causes surprise decline in inflation

Inflation unexpectedly fell last month as the increase in food prices slowed and a drop in services activity caused the Consumer Prices Index to drop slightly to 6.7%. Core inflation (excluding volatile fuel and food prices) also slowed as it fell to the lowest rate since March. Lower inflation allowed the Bank of England to keep interest rates on hold and mortgage borrowing costs are now expected to continue falling.

Improving inflation was generally welcomed by investors and policymakers, but there are signs inflation may remain high for some time. The recent decline is partly due to the slowdown in food inflation but, at 13%, this is still very high. Commodities, including crude oil, raw materials and some foods have also been rising in recent weeks. The OECD said central banks will need to keep rates elevated to deal with sticky inflation and it expects the UK’s core inflation rate to remain higher than other developed countries.

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Global: Central Banks leave rates unchanged as markets look to ‘higher for longer’
Interest Rates: BoE, FED and Swiss Bank leave rates unchanged
Equities: Higher oil prices and end of rate holes boost UK shares

(*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.)