Weekly round up
UK markets rose this week, shrugging off Omicron variant concerns with the FTSE 100 Index gaining 2% to trade at 7,311 points at the time of writing.
Investors digested fresh UK GDP data while remaining cautious ahead of US inflation numbers due later today.
Britain’s economic growth was weaker than expected at 0.1% for October, the lowest performance in three months, and below market forecasts of 0.4%.
The UK economy is expected to slow further following the imposition of new Covid-19 rules this month, denting market expectations of an interest rate hike by the Bank of England next Thursday. UK GDP is now 0.5% below its pre-coronavirus pandemic level in February 2020.
Chinese markets were lower on Friday after indebted developer Evergrande’s offshore bonds were downgraded to default, as mainland regulators sought to reassure investors that any fallout in the property sector would be contained.
The ratings agency Fitch, rated Evergrande (the world’s most indebted developer) as ‘restricted default’ on Thursday. Fitch is the first ratings agency to do so after the company did not respond to requests for information regarding overdue payments on coupons worth $82.5 million. The ratings actions marked the most significant moment yet in a liquidity crisis that risks spreading through China’s economy.
US stocks traded mostly lower on Thursday evening, ending a three-day winning streak. The annual inflation rate in the US likely accelerated to 6.8% in November which would be the highest reading since June of 1982, and up from 6.2% in October.
It would also mark the eighth consecutive month that the inflation rate stays above the Fed’s 2% target. A global commodities rally, rising demand wage pressures and supply chain constraints continue to push prices up. Federal Reserve Chair Jerome Powell recently noted that inflation may not recede in the second half of next year and the central bank is expected to double the pace of its taper next week.
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