UK markets advanced this week, with the FTSE 100 Index rising by 0.65% to trade at 8,340 points at the time of writing.
UK house prices rose by 3.7% year on year in November, up from 2.4% recorded the previous month and marking the fastest rate of annual growth since November 2022, according to lender, Nationwide.
The average home in the UK now costs £268,144, just 1% below the all-time peak in 2022. The rise was above economists’ expectations and was helped by solid wage growth, low levels of unemployment and declining mortgage rates. Household balance sheets are also in good shape, with debt levels at their lowest level relative to household income since the mid-2000’s.
Retail sales in the UK fell by 3.3% year-on-year in November, compared with growth of 2.6% in November 2023, according to data released by the British Retail Consortium. Food sales increased by 2.4% year-on-year between September and November, against a growth of 7.6% in the same period last year. Non-food sales dropped 2.1% over the three months to November due to fewer winter clothing purchases, higher than the 1.6% decline reported in November 2023. Similarly, in-store non-food sales decreased by 2.2%. The shift mainly stems from Black Friday sales moving into December, leaving November to face consumer hesitancy and a 10% energy bill hike.
Elsewhere, UK construction activity picked up in November, with the S&P Global UK Construction PMI rising to 55.2, up from 54.3 in October and beating market expectations of 53.4. The upturn was driven by the sharpest rise in commercial work in more than two years. However, residential work declined at the steepest rate since June.
Commodity markets
In the commodity markets, Brent crude futures traded around $72 per barrel on Friday and are set to end the week little changed, with weak demand in focus, as the OPEC+ group postponed planned supply increases and extended deep output cuts until the end of 2026.
Eight OPEC+ members, led by Saudi Arabia and Russia, will keep production cuts of 2.2 million barrels per day in place until the end of March 2025. The cuts will then be gradually phased out on a monthly basis until the end of September 2026 to ‘support market stability’, according to a statement from the countries. The cuts were originally supposed to start phasing out in December. OPEC+ wants to increase production but prices have remained under pressure from soft China demand and strong US production.
The Paris-based International Energy Agency has warned that global supply will exceed demand by 1 million barrels per day next year, even if the current OPEC+ cuts remain in place.
Gold traded around $2,640 an ounce on Friday and is set for a weekly fall, after Federal Reserve Chair, Jerome Powell said on Wednesday that the US economy is stronger than expected and suggested a more cautious stance towards interest rate cuts.
Equity markets
US equity futures were little changed on Friday as investors took a cautious approach ahead of the November jobs report that could impact the Federal Reserve’s decision on interest rates in December. In Thursday’s regular session, the Dow Jones Industrial Average fell 0.19%, the S&P 500 lost 0.19%, while the Nasdaq Composite declined 0.17%.
The Organisation for Economic Co-operation and Development has warned central banks against cutting interest rates too fast, flagging the threat posed by persistent inflation in the price of services. The Paris based organisation said in its latest global outlook that the world economy was showing “remarkable resilience”, as it welcomed a continued retreat in overall price pressures following the severest bout of inflation for a generation. Its growth forecast for the US was sharply upgraded to 2.4% next year, compared with 1.6% in its September outlook, driven by solid consumption and underpinned by wage growth.
Central banks in most of the OECD economies have cut rates in response to the fall in price pressures, with headline inflation in October back at target levels in about two thirds of advanced economies covered by the report. However, with services price inflation at a median of 4% across the group of rich nations, central banks cannot afford to loosen their grip too much, the report said.
The number of Americans filing new applications for unemployment benefits rose slightly last week, with weekly jobless claims increasing by 9,000 to 224,000, pointing to steadily easing labour market conditions heading into the final stretch of 2024.
Economists polled by Reuters had forecast 215,000 claims for the latest week. Sluggish hiring means some people who lose their jobs are collecting unemployment checks for longer periods relative to earlier this year, potentially keeping the jobless rate above 4%. Economists said this should allow the Federal Reserve to cut interest rates again this month, despite stalled progress in lowering inflation to the US central bank’s 2% target. Claims remain at levels consistent with continued job growth, and have signalled a sharp rebound in nonfarm payrolls in November, after the labour market was severely distorted by hurricanes Helene and Milton, as well as strikes by factory workers at Boeing.
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.