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Stones piled on top of each other by the sea

07 Oct 2024

Economic Highlights

Welcome to our Economic Highlights, bringing you market updates from across the UK, US, Europe and China, as well as the FTSE weekly winners and losers.

UK

London skyline showing the financial district

There was very little economic data of note last week, with the focus remaining on pre-Budget commentary. However, the Governor of the Bank of England created a bit of a stir in the market by hinting in an interview with the Guardian that the MPC might be willing to be more “aggressive” in cutting interest rates, although that would, require the data to come the right way, notably with respect to inflation. Futures markets were already largely pricing in a second 0.25% cut in November, but they have now moved a bit closer to expecting another one in December rather than waiting till February.
 

US

New York skyline

Not only was the September employment data well ahead of forecasts, but previous months’ figures were revised up too. The Non-Farm Payroll increase of 254k was well ahead of the consensus forecast of 150k and even beat the highest forecast in the range. It was accompanied by positive net revisions of 72k to the previous two months’ readings, leaving them at a respectable +114k in July and +159k in August. The household survey claimed an increase in employment of 430k, and that helped to push the unemployment rate down from 4.2% to 4.1%. Indeed, with the unrounded figure being 4.051%, it was only 2 basis points away from being a rounded 4% on the nose. With full-time jobs rising as temporary employment fell, this was a convincingly strong print and it wiped out any expectation of a second 0.5% rate reduction in November, lowering the pricing to 0.25%.
 

Europe

EU flags

Although, having seen data from a number of component countries already, the 1.8% headline inflation print for the eurozone in September was not a big positive surprise, it was well received, falling, as it did, from 2.2%. The core rate was more elevated at 2.7%, although down from 2.8% in August and still on a falling trend. With year-on-year Retail Sales growth reported for August at just 0.8% (below the 1% expectation), the ECB has cover to continue to cut rates, and the futures market agrees, pricing in four successive 0.25% reductions in October, December, January and March.
 

China

China

We await the on-the-ground reaction to the government’s monetary and fiscal stimulus packages as well as more fine detail of the fiscal elements. The stock market has responded well but was closed for five days at the beginning of October as the country celebrated its Golden Week. It does feel as though the government has recognised its economic pain threshold and has decided to draw a line under the weakness. Whether it can trigger strong growth remains up for debate.

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Important information

The information in this document is for private circulation and is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgment as of this date and are subject to change. The Company and its related Companies, directors, employees and clients may have positions or engage in transactions in any of the securities mentioned. Past performance is not necessarily a guide to future performance. The value of shares, and the income derived from them, may fall as well as rise. The information contained in this publication does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors. Copyright Investec Wealth & Investment Limited. Reproduction is prohibited without permission.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.