Yesterday morning, Chancellor Rachel Reeves delivered a short statement to the press setting out her key priorities ahead of the Budget on the 27th of November. Despite intense speculation over possible tax measures, Reeves did not make any tax related announcements, with her speech more about tackling NHS waiting lists and boosting infrastructure and industrial investment than fiscal tightening. And yet, the possibility of upcoming tax increases was conspicuous in the absence of any clarity surrounding it (Reeves explicitly declined to answer a question on personal income tax), causing the FTSE 100 to edge lower shortly after she concluded. All the while, UK government bond yields eased slightly after her remarks: 10-year gilt yields slipped by around 4.5 basis points to 4.39%, while 30-year yields dipped 5 basis points, which will be welcomed by the Treasury.
On Tuesday, officials in Beijing launched a new initiative to boost import growth, aiming to position China as a premier destination for global exports. Despite China continuing to expand its role as a global supplier, imports of manufactured goods have largely stagnated. The initiative – titled Big Market for All: Export to China – will feature 10 major promotional events each year and include a maximum of six countries per event in order to shore up the economy as a premier export destination by connecting foreign manufacturers with Chinese buyers. While China’s trade surplus is on track to surpass last year’s record of around $1 trillion, exporters are increasingly offsetting weaker U.S. demand (dampened by higher tariffs) by expanding sales to other markets, often at reduced margins.
Meanwhile in Japan, Prime Minister Sanae Takaichi addressed the nation on Tuesday, noting that wage increases remain insufficient to underpin stable inflation at targeted levels. Although inflation is running near 3%, with food prices as the primary driver, it remains below the threshold for long-term stability anchored by wage growth. Takaichi suggested that policymakers should take a measured approach to further interest-rate hikes and signalled plans for fiscal support aimed at lifting household spending, strengthening consumer confidence and supporting broader economic momentum.
Her remarks followed fresh data showing that Japan’s manufacturing activity slowed this month at the fastest pace in 19 months, driven largely by weakened demand in the automotive and semiconductor sectors.
Investors also saw a brief sell-off in Asian markets yesterday, with the Tokyo stock index retreating from Tuesday’s record high before clawing back some losses by the end of the session. While no single catalyst has been identified, many market participants interpret the move as profit-taking in technology shares following the strong (albeit uneven) rally they have enjoyed this year.
Still to come this week we have Eurozone PPI and retail sales, the Bank of England’s interest rate decision – where markets are pricing in no change in rates – and China’s inflation reading.
Nicola Tune, Portfolio Specialist
