UK markets pulled back this week, with the FTSE 100 Index falling by 1.95% to trade at 8,210 points at the time of writing.
Growth in UK retail sales and consumer spending picked up last month, as warmer weather boosted purchases of summer clothing and food for barbecues.
The value of retail sales rose by an annual rate of 1% in August, up from 0.5% in the previous month and above the three-month average of 0.4%, the British Retail Consortium said on Tuesday. The improvement in spending bodes well for the UK economy in the second half of the year, after output expanded faster in Britain than in any other G7 country in the first six months. The trade body’s data, collected with consultancy KPMG, echoes separate figures which were published on Tuesday by Barclays. They showed that consumer card spending returned to growth in August, rising at an annual rate of 1% after two consecutive months of decline. Spending on groceries increased by 1.9% in August, the largest rise since March, according to Barclays.
UK house prices rose at the fastest annual pace since 2022, according to the lender Halifax, as lower mortgage costs helped fuel a rebound in the property market. The average house price increased by 4.3% annually in August, marking the strongest growth rate since November 2022, reaching £292,505, according to new data on Friday.
Elsewhere, the UK government has dropped plans for a “British Isa” that would have allowed an extra £5,000 for UK listed equities only, although the Treasury insisted that no final decision has been made. The Labour government’s decision comes after investment sites such as Hargreaves Lansdown and AJ Bell warned the Treasury that another Isa product would make investing more complicated for individuals and could even deter them from using the tax-free wrappers.
Commodity markets
In the commodity markets, Brent crude futures traded around $73 per barrel on Friday, hovering near nine-month lows due to market worries about the supply and demand balance for the rest of the year.
The Brent global benchmark is down around 7% overall this week. Oil demand is waning in China and in the United States, the gasoline driving season has now ended. Oil is heading into a lower demand period as far as the consumer goes and it is also going into the seasonal refining maintenance period in the United States and Europe that is going to decrease crude oil demand.
Meanwhile, there are worries that more supply is coming to the market as demand slows. Output in Libya could ramp up as rival governments in the North African country have reached an agreement to end a dispute that disrupted supplies. However, the selloff has resulted in OPEC+ agreeing to delay a planned oil production increase for October and November and the producer’s group could further pause or reverse hikes if needed.
Gold prices traded around $2,520 an ounce on Friday and are relatively unchanged this week, supported by a weaker US Dollar and lower yields after signs of the US labour market losing steam led investors to expect a super-sized rate cut from the Federal Reserve this month.
Equity markets
US equity futures fell on Friday as investors prepared for the August jobs report that could affect the Federal Reserve’s interest rate decision this month.
In Thursday’s regular session, the Dow Jones Industrial Average lost 0.54%, the S&P 500 shed 0.32%, while the Nasdaq Composite rose 0.25%. US job openings fell to the lowest level in more than three years in July, keeping the Federal Reserve on track to lower interest rates later this month. There were 7.7 million job vacancies in July, according to the labour department’s Job Openings and Labor Turnover Survey released on Wednesday. This was down from 7.9 million in June, and the lowest total since January 2021. Economists, who consider job openings to be a proxy for labour demand, had been expecting 8.1 million openings, according to a Reuters poll.
US manufacturing contracted at a moderate pace in August amid some improvement in employment, but a further decline in new orders and a rise in inventory suggested factory activity could remain subdued for a while. The survey from the Institute for Supply Management on Tuesday also showed manufacturers continuing to pay higher prices for inputs last month. Five manufacturing industries, including primary metals, furniture and computer and electronic products reported growth last month. Machinery, textile mills, transportation equipment as well as electrical equipment, appliances and components were among the 12 industries reporting contraction.
Bets for a 0.5% rate cut by the Federal Reserve on September 18th have risen to 41% from 34% a week ago, according to the CME Group’s FedWatch tool. Data on Thursday showed that US private employers hired the fewest number of workers in three and a half years in August, while the number of Americans filing new applications for jobless benefits declined last week. The US economy is projected to add 160,000 jobs in August 2024, above the 114,000 added in July, and the unemployment rate is expected to fall to 4.2%, from 4.3%, which was the highest since October 2021. Whilst the August figures are likely to indicate a stabilisation in the labour market, a continued slowdown is expected.
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