UK markets pulled back this week, with the FTSE 100 Index losing 0.5% to trade at 7,450 points at the time of writing.
On Wednesday, Chancellor Jeremy Hunt cut business taxes by £20 billion in an Autumn Statement aimed at boosting growth, but the UK’s budget watchdog warned that overall taxes are still rising to a post-war high. Hunt said he would cut the main rate of national insurance by 2% to 10% from 6 January 2024, the start of what is expected to be an election year, at a cost of £9 billion. The other big measure saw the chancellor make permanent the ‘full expensing’ capital allowance regime, at a cost rising to £11 billion, which he described as “the largest business tax cut in modern British history”.
The timing of the national insurance cuts, which will benefit 27 million working people, prompted speculation that the government wants to leave open the option of a spring general election if its dire opinion poll ratings improve.
However, the Office for Budget Responsibility said the tax cuts were dwarfed by the impact of the government’s freeze on tax thresholds between 2022-2023 and 2028-29, meaning nearly 4 million people would end up paying income tax for the first time, and 3 million more would move to the higher rate.
Hunt also promised measures to unlock the building of more homes in the UK, which have consistently fallen short on government housebuilding targets.
Elsewhere, UK business activity grew marginally in November easing fears of the economy contracting in the last three months of the year. The S&P Global/CIPS Flash UK PMI Composite Output Index, a measure of the health of manufacturing and service sectors, rose to 50.1, from 48.7 in October. This indicates that a majority of businesses reported an expansion, marking the first upturn since July. Although not seen as an accurate predictor of GDP growth, the PMI indices are closely watched because they provide a near real-time indicator of the health of the private sector.
Commodity markets
In the commodity markets, Brent crude futures traded around $81 per barrel on Friday recovering from a sharp fall earlier this week as investors speculated on whether OPEC+ would come to an agreement on further production cuts. Oil is on track for its first weekly gain in five weeks, supported by expectations that OPEC+, led by Saudi Arabia, could reduce supply to balance the markets into 2024.
OPEC and its allies surprised the market with an announcement on Wednesday that it would postpone a ministerial meeting by four days to 30 November, after producers struggled to come to a consensus on production levels. The most likely outcome now appears to be an extension of existing cuts.
On the demand side, poor refining margins have led to weaker crude demand from refineries in the US. In China, analysts say oil demand growth could weaken to around 4% in the first half of 2024 from strong post-Covid growth levels in 2023, as the country’s property sector crunch weighs on diesel use.
Non-OPEC production growth is set to stay strong, with Brazilian state energy firm Petrobras planning to invest $102 billion over the next five years to boost output to 3.2 million barrels of oil equivalent per day, by 2028, from 2.8 million barrels of oil equivalent per day in 2024.
Gold traded around $1,995 an ounce on Friday hovering close to a key $2,000 per ounce level, as an overall weaker US dollar and lower Treasury yields increased demand for bullion.
Equity markets
US equity futures were little changed on Friday as investors return to a shortened day of trading after Thursday’s closure for the Thanksgiving holiday. Investors are selling dollars at the fastest rate in a year, as they raise their bets that the US Federal Reserve has finished its aggressive campaign of interest rate increases and will deliver multiple cuts next year.
Asset managers are on track to sell 1.6% of their open dollar positions this month, the largest monthly outflow since last November according to State Street, which is custodian to $40 trillion of assets. Managers had made significant sales every day since weaker than expected US jobs data on 3 November, according to the bank. This has helped put the dollar on course for its worst monthly performance in a year, with analysts warning that sales by asset managers could be the start of a longer-term trend among investors to reduce exposure to US assets. However, recent Federal Open Market Committee meeting minutes showed the Federal Reserve will keep monetary policy restrictive and will proceed carefully, while providing no indication that interest rates could be cut soon.
The number of Americans filing new claims for unemployment benefits fell more than expected last week, but that likely does not change the view that the labour market is slowing amid higher interest rates. In another worrying indicator for the Federal Reserve, a survey from the University of Michigan showed consumers this month anticipate higher inflation both in the near and long term, particularly inflation over the next five years.
Scam awareness during Black Friday and the holiday period
We want to ensure that you remain aware of potential scams, especially during busy times around Black Friday and the holiday period.
Scammers often take advantage of the festive period to exploit unsuspecting individuals not only by getting people to pay for items that are counterfeit or non-existent but to gather sensitive information under the guise of signing up for deal alerts, investment opportunities or prize funds.
Here are a few tips:
Stay Informed
Be cautious of unsolicited communications by emails, phone calls, or social media, especially if they demand urgent action.
Avoid gift cards as payment method
Criminals may encourage you to use gift cards as payment methods – it’s harder for fraud teams to trace.
Verify Contacts
If you receive any communication claiming to be from our firm, verify by contacting us directly using our official contact information. Do not use the contact details provided in suspicious messages.
Secure Online Practices
Ensure your online accounts have strong, unique passwords. Be wary of “phishing” attempts where scammers mimic legitimate websites to steal log-in details.
Protect Personal Information
Avoid sharing sensitive information, such as account details or passwords, through email or over the phone. Legitimate businesses will not request such information in this manner.
Double-Check Investments
If presented with new investment opportunities, thoroughly research and verify the legitimacy of the offering before making any decisions. Always be sceptical of ‘guaranteed’ returns or deals that are too good to be true.
If you ever have concerns or questions contact a member of our team.
The information provided in this communication is not advice or a personal recommendation, and you should not make any investment decisions on the basis of it. If you are unsure of whether an investment is right for you, please seek advice. If you choose to invest, your capital may be at risk and the value of an investment may fall as well as rise in value, so you could get back less than you originally invested.