Weekly round up
UK markets fell this week with the FTSE 100 Index dropping by 1.5% to trade at 7,272 points after a somewhat unexpected rise last week following the announcement of the death of Queen Elizabeth II.
UK inflation eased to 9.9% last month after petrol prices fell by 14.3p per litre between July and August. The better-than-expected inflation figure comes after investment bank, Goldman Sachs last month tipped inflation to hit a high of 22.4% in January. However, inflation is still predicted to increase over the coming months due to the ongoing war in Ukraine, rising food prices and shipping congestion globally.
The Office for National Statistics figures came out after Prime Minister Liz Truss last week announced a package of support measures to help households deal with spiralling energy costs. The government has temporarily cut green levies, saving households around £150 a year, and capped energy costs, which means the annual energy bill for average households will be around £2,500 from 1st October. Households will also still be entitled to the existing £400 grant to help with energy costs, which will be paid in instalments over six months, starting from October.
Despite inflation easing last month, the Bank of England still expects it could peak at 13% next year and economists are predicting interest rates could reach 4.2% by next May. The British Pound continued to depreciate to below $1.14, the lowest since 1985 as more data pointed to a looming recession in the UK, while the Bank of England is set to hike interest rates again next Thursday.
In the commodity markets, Brent crude futures traded around $90 a barrel on Friday and are set to decline for the third straight week, as investors weighed a weakening global economic outlook and potential subdued demand against tightening supplies.
Despite the IEA and OPEC remaining somewhat bullish on fundamentals, the persistent headwinds from surging inflation and shrinking financial conditions and subsequent impact on economic activity, remain a significant downside risk for demand. However, ongoing supply disruptions from key exporter Russia and a conflict between Armenia and oil producer Azerbaijan, have been limiting further downside momentum.
On the supply side, China is considering allowing more fuel exports, which could be a sign of weak domestic consumption. Gold prices traded near two-year lows of $1,655 an ounce on Friday as a strong dollar and impending interest rate hike from the US Federal Reserve next week dampened bullion’s appeal.
US equity futures fell on Friday after a profits warning by packages delivery company, FedEx following Thursday’s closing bell in New York. The company withdrew its full-year results guidance issued at the end of June with Chief Executive, Raj Subramaniam, stating that ‘Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US’.
In Thursday’s regular trading session, the Dow Jones Industrial Average lost 0.56%, the S&P 500 dropped 1.3% and the Nasdaq Composite fell 1.43%, with all three benchmarks on track for a significant weekly loss. US retail sales rose 0.3% in August, recovering from a downwardly revised 0.4% decline in July while analysts expected them to be flat. Jobless claims numbers fell to the lowest since May, export and import prices fell, while industrial production unexpectedly declined.
The US Labour department’s consumer price index report released on Tuesday showed that monthly CPI unexpectedly rose 0.1% against analysts’ expectations of a 0.1% contraction, and the annual rate eased to just 8.3%, less than expected. This raised fears that the Federal Reserve will need to move even more aggressively to combat inflation, increasing the likelihood of a 1% rise in the benchmark
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