Market Commentary 15th October 2024 – from Charlie Hancock

UK economic data was relatively positive. The Office for National Statistics (ONS) reported that the economy expanded by 0.2% month-on-month in August after stagnating during July and June. The increase in economic output was driven by a broad based recovery in activity, with improvements in construction, manufacturing and services. Retail sales data showed that sales in September rose at the fastest pace since March.

Newsflow on the UK property market was mixed. Lenders reported that defaults continued to rise in recent months, whilst the Halifax stated that in the year to September, house prices rose at the fastest pace since late 2022, with annual growth of 4.7%.

Germany’s ministry for economic affairs revised their economic growth forecast for this year down to -0.2%, with the previous estimate being growth of 0.3%. The economic ministry said that stronger consumption would be needed to see the economy return to growth in 2025.

Officials from the European Central Bank (ECB) made some dovish remarks last week, hinting that interest rates are likely to be cut more than once before the end of the year. The governor of Greece’s central bank, Yannis Stournaras, told the Financial Times that even if rates were cut by 0.25% twice by the end of 2024, this would still leave interest rates in “highly restrictive territory”.

US economic data painted a mixed picture. Inflation data for September came in slightly higher than expected, with headline consumer prices rising by 2.4% year-on-year. The rate of core inflation, which excludes food and energy prices, accelerated for the first time since March 2023, with prices rising by 3.3%. Meanwhile, weekly jobless claims reached a 14-month high, with 258,000 new claimants. The number of continuing claims also increased, pointing to softer labour market conditions.

A closely watched consumer confidence index compiled by the University of Michigan unexpectedly declined in October, with consumers expressing a more cautious view of their own personal finances.

China’s stock market remained volatile last week and efforts from the People’s Bank of China (PBoC) to boost sentiment on Chinese equities appeared to fall short. The central bank implemented measures to boost liquidity in an effort to encourage institutional investors to buy stocks. Economic data continued to point to weak growth, with consumer spending over the recent National Day holiday period remaining below pre-pandemic levels.

Economic data in Japan showed that in real terms, wages declined by 0.6% year-on-year in August. Weakness in pay growth may support calls for the Bank of Japan (BoJ) to refrain from hiking interest rates further. Consumption appeared to be weak during August, with household spending seeing a year-on-year decline of 1.6%.

GBP / EUR – Current 1.1947 Previous 1.1957

The Pound moved slightly lower versus other major currencies last week. Against the US Dollar, the Pound fell by 0.42%. Against the Euro, the Pound weakened marginally (-0.08%).