UK markets declined this week, with the FTSE 100 Index falling 0.76% to trade at 8,660 points at the time of writing.
Annual food inflation rose to 2.1% in February, up from 1.6% in January, marking the first time it has gone above 2% since September 2024, according to data from the British Retail Consortium. Inflation expectations are closely tied to food prices, according to the Bank of England, complicating efforts to bring overall inflation back to its 2% target.
In the February monetary policy report, the Bank of England said the recent increases in food price inflation were likely in part to reflect increases in the national living wage and a rise in employers’ national insurance contributions, which takes effect in April. New recycling regulations that come into force in October are also a factor in keeping prices high, according to the UK central bank.
UK construction activity fell last month at the fastest pace since May 2020, as housebuilding plummeted due to weak demand amid low consumer confidence and poor economic growth. The S&P Global UK Construction Purchasing Managers’ index, which tracks growth in the sector, fell to 44.6 in February, down from 48.1 in January and its lowest for nearly five years.
The figure was below the neutral 50.0 threshold, indicating a majority of businesses reporting a contraction and worse than the 49.5 forecast by economists polled by Reuters. Residential building decreased for the fifth month in a row and was the weakest-performing area of construction activity in February, with an index well below the 50 mark at 39.3, according to the survey.
Aside from the coronavirus pandemic, the rate of decline for housebuilding was the fastest since early 2009, with survey respondents citing weak demand conditions, difficulties from elevated borrowing costs and a lack of new work to replace completed projects. The figures highlight the government’s challenge of meeting its target to boost construction, reduce housing costs and support economic growth.
Commodity markets
In the commodity markets, Brent crude futures traded around $70 per barrel on Friday and are set for a weekly decline as fears rise that US President Donald Trump’s trade war will slow economic activity and cut crude demand.
The US Energy Information Administration reported a larger than expected rise in American crude oil stocks, adding to concerns about a slowdown in activity after Trump confirmed new trade tariffs this week on Canada, Mexico and China. Crude inventories rose by 3.6 million barrels in the past week, far exceeding analyst estimates. OPEC+ surprised the market on Monday by confirming it would proceed with a previously delayed plan to increase output in April for the first time since 2022, ending long-standing production cuts.
The cartel’s decision means that eight members of the producer group, including Saudi Arabia and Russia, will increase production by a combined 120,000 barrels a day in April and a combined 2.2 million barrels per day over the next 18 months. OPEC+ has repeatedly cut production in recent years to push up crude prices, regularly ignoring calls from the US to boost output to lower the cost of fuel, particularly for American consumers.
Meanwhile, Chinese officials have flagged that more stimulus is possible if economic growth slows, seeking to support consumption and cushion the impact of an escalating trade war with the US, which could lend some support to the oil price.
Gold prices traded around $2,920 an ounce on Friday and are set for a weekly rise, as ongoing trade tensions, inflation uncertainty and a weaker dollar boosted demand for bullion.
Equity markets
US equity futures rose on Friday as investors looked ahead to the latest monthly jobs report for further insights into the economy’s health. In Thursday’s regular trading session, the Dow Jones Industrial Average fell 0.99%, the S&P 500 lost 1.78%, whilst the Nasdaq Composite declined 2.61%.
US stocks fell this week as a renewed sell-off in the technology sector rattled a market already weighed down by concerns about the impact of Donald Trump’s trade tariffs on the world’s biggest economy. Lay-offs announced by US employers jumped to levels not seen since the last two recessions in February, amid mass federal government job cuts, cancelled contracts and fears of trade wars, offering the clearest sign yet of the toll taken on the labour market by the policies of Donald Trump’s administration.
Global outplacement firm Challenger, Gray & Christmas said on Thursday that planned job cuts soared 245% to 172,017 last month, the highest level since July 2020, when the US economy was in the grips of the coronavirus pandemic. It was the highest February total since the Great Recession 16 years ago. The government accounted for the bulk of layoffs, with Challenger tracking 62,242 announced job cuts by the federal government from 17 different agencies. The government has laid off about 62,530 workers in the first two months of the year, a staggering 41,311% increase compared to the same period in 2024.
Technology billionaire Elon Musk’s Department of Government Efficiency is slashing public spending, an exercise that has resulted in funding freezes, deep spending cuts and the purging of thousands of federal government workers. Federal government contractors have also been caught in the crossfire, extending the job losses to the private sector. Outside government, there were job cuts in retail, technology services and consumer products industries.
Elsewhere, imports of goods and services into the US surged by $36.6 billion, or 10%, to a record high of $401.2 billion in January, as businesses and consumers rushed to make purchases ahead of the Trump administration’s new tariffs.
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