Market Commentary 5th November 2024
Market Commentary 5th November 2024 |
Equity Indices |
UK |
UK equity indices moved lower last week amidst declines for most major equity indices around the globe. The FTSE 100 index declined by 0.87%, whilst the mid-cap FTSE 250 posted a loss of 1.63%. Investors paid close attention to the announcements made by chancellor Rachel Reeves during her budget speech on Wednesday. The Chancellor announced a range of tax increases, including a rise in employer’s National Insurance contributions and Capital Gains Tax. In addition, changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) were announced to reduce the maximum amount of relief which can be claimed. Widely rumoured changes to pensions were mostly absent from the budget, however, the chancellor announced that from April 2027, pensions will be included in an individual’s estate for Inheritance Tax purposes. The market reaction to the budget was mixed. UK government borrowing costs rose, whilst equity markets largely shrugged off the announcements. Some of the UK’s largest employer’s, such as supermarkets, are likely to be negatively impacted by the National Insurance increase, given they employ large numbers of people and operate on small margins. |
Europe |
All of the major European equity indices saw declines last week and the FTSE All World Index – Europe ex UK fell by 1.41%. Germany’s DAX index moved 1.07% lower, France’s CAC 40 lost 1.18% and the Swiss Market Index declined by 1.78%. Inflation data for the Eurozone showed that consumer prices rose by 2.0% year-on-year in October, accelerating from the 1.7% recorded for September. Economic growth data confirmed that the Eurozone economy expanded by more than expected during the third quarter, with Gross Domestic Product (GDP) rising by 0.4% versus expectations for growth of 0.2%. Germany’s economy expanded by 0.2%, defying expectations for an economic contraction during the quarter. A Purchasing Managers’ Index (PMI) for the manufacturing sector came in weaker than expected, with the data pointing to recessionary conditions persisting during October. A raft of weak indicators, including the month’s manufacturing PMI data, suggest that the Eurozone economy is lacking momentum. |
US |
In the US, the S&P 500 index fell by 1.37%. The Dow Jones Industrial Average posted a small loss (-0.15%), whilst the NASDAQ 100 declined by 1.57%. Third quarter economic growth data showed that US Gross Domestic Product (GDP) rose at an annualised pace of 2.8%, which was weaker than expected and slower than the 3% growth recorded for the second quarter. The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) index, showed that inflation slowed from 2.3% in August to 2.1% in September. Labour market data released on Friday showed that the US economy added significantly fewer than expected jobs during October, with 12,000 new jobs versus expectations for an increase of 100,000. Analysts cited the impact of Hurricane Helene and Hurricane Milton as factors behind the weak job growth. |
Asia |
Equity indices in Asia were mixed and the FTSE All World Index – Asia Pacific declined by 0.58%. China’s Shanghai Composite Index declined by 0.84%, whilst Japan’s Nikkei 225 index posted an increase of 0.37%. Economic data in China was relatively positive. Activity in the manufacturing sector rose for the first time in six months, whilst the services sector saw muted growth during October. Newsflow on the real estate sector improved, with the value of new home sales by China’s largest 100 developers rising by 7.1% year-on-year. The week’s data contributed to hopes that Beijing’s recent stimulus efforts will start contributing to an improvement in economic growth. The Bank of Japan (BoJ) kept interest rates on hold at 0.25% last week, which was widely expected by investors. The decision to keep rates on hold indicated that the central bank is not yet fully confident that their inflation target of 2% will be met sustainability. |
Bond Yields |
UK |
The 10-Year Gilt yield increased from 4.23% to 4.44% across the week. Whilst government bond yields around the globe moved higher, Gilt yields saw a slightly larger movement, with the announcements on public spending and borrowing from Rachel Reeves contributing to nervousness amongst Gilt investors. |
Europe |
The 10-Year German Bund yield rose from 2.29% to 2.40% during the week, with better than expected German economic data contributing to yields moving higher. |
US |
The 10-Year Treasury yield climbed from 4.24% to 4.39% during the week. Whilst US economic data generally came in weaker than expected, which typically drives yields lower, investors remained focussed on the possibility of inflationary policies being introduced under a potential Trump administration. |
Currency |
GBP / USD – Current 1.2924 Previous 1.2962 GBP / EUR – Current 1.1933 Previous 1.2008 The Pound declined by 0.29% against the US Dollar and 0.62% against the Euro. Currency traders appeared cautious on Sterling, with the currency falling versus other major currencies following Wednesday’s budget announcements. |
Commodities |
Gold |
The Gold spot price remained relatively stable during the week, moving 0.44% lower to $2,736.53 per ounce. Demand for the precious metal has remained firm during recent months. |
Oil |
Oil prices moved lower last week, with the Brent Crude spot price declining by 3.88% to $73.10 per barrel. Concerns around weak oil demand appeared to dominate amongst commodity traders during the week, despite data showing a strong drawdown on US oil inventories. |