UK markets stumbled this week as worries persisted about the possibility of a recession with the FTSE 100 Index falling by 1.3% to trade at a one month low of 7,740 points at the time of writing.
Data from mortgage provider, Nationwide showed UK house prices unexpectedly rose between March and April, suggesting the property market is stabilising as borrowing costs ease.
Prices increased 0.5% last month, ending seven consecutive months of decline and beating analysts’ forecasts of a 0.4% fall.
Mortgage approvals rose by more than expected in March, hitting a five-month high, further signalling that the property market is stabilising after the volatility of recent months.
Net mortgage approvals for house purchases rose to 52,000 in March, from 44,100 in February, according to data from the Bank of England released on Thursday.
The Bank of England data also showed that the failure of Silicon Valley Bank and takeover of Credit Suisse in March triggered only a small withdrawal of funds from UK banks.
On the political front, Rishi Sunak’s Conservative government faced crushing losses in UK local elections this week, as voters in many parts of England turned against the party.
European financial markets
The European Central Bank raised interest rates by 0.25% on Thursday, with President Christine Lagarde warning that the fight against inflation has not yet been won.
She also signalled that the decision to increase the benchmark rate to 3.25% would not be the last such move this year. Economists now expect a couple more 0.25% increases by the European Central Bank to lift its deposit rate to 3.75% by July, which would match its highest-ever level in 2001.
Commodity markets
Brent Crude futures traded around $73 per barrel on Friday, down significantly this week, after concerns about the US economy and signs of weak manufacturing growth in the world’s largest oil importer China. However oil prices managed to recover slightly from a one year low hit earlier in the week, boosted by a weaker Dollar. OPEC and allies including Russia, started voluntary output cuts at the beginning of May.
Russian Deputy Prime Minister, Alexander Novak, said on Thursday that Russia was abiding by its voluntary pledge to cut oil output by 500,000 barrels per day from February until the end of the year. Despite this, Russian crude shipments jumped above 4 million barrels per day last week, prompting speculations that Russia could be ramping up oil exports to maximise income for the country’s weakening economy.
Gold traded around $2,040 an ounce on Friday, approaching record highs, amid renewed turmoil in the US financial sector and dovish bets for the Federal Reserve.
US equities
US equity futures rose on Friday but were set for a weekly decline, as worries about stress in the banking system and a possible Federal Reserve induced recession lingered.
In Thursday’s regular trading session The Dow Jones Industrial Average lost 0.86%, while the S&P 500 Index dropped 0.72% and the Nasdaq Composite declined 0.49%.
The Federal Reserve raised its benchmark interest rate by a quarter of a percentage point on Wednesday, its tenth consecutive increase in just over a year, but signalled it could soon pause its aggressive monetary tightening campaign.
The latest increase brings the federal funds rate to a new target range of 5% to 5.25%, the highest level since mid-2007.
When determining the extent to which further increases may be appropriate, the Federal Open Market Committee said it would take into account its rate rises so far and the fact that they would take time to feed through to the economy. It also added that it would be guided by future economic data.
Elsewhere, the number of Americans filing for unemployment benefits rose by 13,000 to 242,000 on the week ending April 29th, surpassing market expectations of 240,000, marking a softening of the US jobs market.
Meanwhile, the US unemployment rate is expected to have increased from 3.5% to 3.6% in April, although this would still remain close to five-decade lows.
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