Week ending 24th November 2023.

It was a fairly quiet week as markets wound down for the Thanksgiving holiday. In the US, markets closed on Thursday and opened for limited hours on Friday, which meant global markets had to look elsewhere for cues.

In the UK, markets were subdued post Chancellor Jeremy Hunt’s Autumn Statement. Significant cuts to business taxes and National Insurance were highlights, aimed at spurring business investment and economic growth. The UK’s growth projections now stand at 0.6% for this year, with gradual increases expected throughout 2024 and 2025.

UK Consumer Confidence indicator saw an uptick to -24 in November from -30 in October, beating forecasts and reflecting a cautiously optimistic consumer sentiment despite ongoing cost of living concerns.

Over in Europe, Germany’s economy showed a slight contraction of 0.1% in the third quarter. This confirmed initial estimates, signalling challenges with high energy costs and rising interest rates. Germany, Europe’s largest economy, has experienced a particularly tough year.

On Friday, European stock markets managed to close in the green, buoyed by European Central Bank President Lagarde’s remarks suggesting a ‘wait and see’ approach to changes in the bank rate for the region. Nonetheless, she stressed that the efforts to combat inflation are far from over.

In Japan, core inflation edged up to 2.9% in October 2023, raising questions about the Bank of Japan’s monetary policy. The market is closely watching for potential shifts in the BOJ’s approach as its last policy meeting of the year approaches. The BOJ has insisted the cost pressures are largely driven by higher global commodity prices and the weaker yen, not an indication of price gains led by stronger domestic demand and wage growth. The government continues to pressure companies to raise wages to aid employees amidst higher living costs.

In the US, new orders for manufactured durable goods saw a sharp decline of 5.4% in October 2023, indicating a cooling in demand for transportation equipment. The major factor was a substantial decline in civilian aircraft orders whilst the United Auto Workers (UAW) strike union against Detroit’s “Big Three” automakers also impacted the result. However, excluding defence spending and the more volatile transportation category, durable goods orders have risen steadily this year.

Key economic reports in the week ahead include US GDP Q2, Chinese PMI and Eurozone Inflation. In the US investors await the Fed’s preferred measure of inflation Core PCE MoM and consumer confidence.

The UN Climate Change Conference – COP 28 will also commence this week on the 30 November. OPEC+ are also set to meet on 30 November to discuss supply. There has been reports of disagreements among members over how much production to cut.

Kate Mimnagh, Portfolio Economist