UK markets were little changed this week, with the FTSE 100 Index rising by 0.16% to trade at 8,255 points at the time of writing.
British house prices fell by 0.1% in May from the previous month, representing a stabilisation of the market after a slowdown last year which was followed by a recovery on hopes of falling borrowing costs, according to data from mortgage lender Halifax.
Analysts polled by Reuters had mostly expected an increase of 0.2% on the month. In the 12 months to May, prices rose by 1.5%, Halifax said on Friday, faster than the median forecast by Reuters for an annual increase of 1.2%. The housing market remained resilient throughout the spring months, supported by strong nominal wage growth and some evidence of an improvement in confidence about the economic outlook.
The UK housing market has picked up speed after mortgage rates fell from 15-year highs last year on expectations that the Bank of England will start to cut its benchmark interest rates. Investors are currently putting a roughly 70% chance on the Bank of England lowering interest rates at its September meeting.
The UK manufacturing industry returned to growth in May as levels of production surged and business optimism hit a more than two-year high.
The closely watched S&P Global/CIPS UK manufacturing Purchasing Managers’ Index (PMI) survey rose to 51.2 in May, after falling back to 49.1 in the previous month. Any reading above 50 means a sector is in growth, while a score below this means it is contracting. Production expanded at the fastest rate since April 2022, with consumer, intermediate and investment goods registering expansions. Firms said they were getting more new work than in previous months, while they also reported renewed efforts to complete existing contracts.
Despite the strong output performance, the data could potentially cause issues for policymakers at the Bank of England as prices continued to rise across the sector in a sign that inflationary pressures have not yet retreated.
Commodity markets
In the commodity markets, Brent crude futures traded around $79 per barrel on Friday and are set for a weekly fall, after eight OPEC+ members led by Saudi Arabia and Russia agreed to phase out 2.2 million barrels per day in production cuts from October through September 2025.
Analysts from JP Morgan said the sell-off was likely a reaction to the OPEC+ decision, though soft manufacturing data and weaker jobs data from the US raised concerns about the health of the US economy. However, Saudi Arabia and Russia indicated they may be willing to maintain their cuts through the end of the year if demand isn’t strong enough to absorb the additional barrels. Moreover, rising oil inventories are expected to shift to draws in the third quarter, with the OPEC+ cuts remaining in place until at least October, according to JP Morgan.
Oil process began to rise again towards the end of the week, as the European Central Bank cut interest rates for the first time in five years and as traders bet the Federal Reserve will follow suit in September.
Gold Prices traded around $2,350 on Friday, and are set for a weekly rise, as weaker than expected US job data increased hopes of a Federal Reserve interest rate cut later this year, sending the Dollar and Treasury yields lower.
Equity markets
US equity futures were relatively unchanged on Friday, as investors look ahead to the monthly jobs report for further insights on the state of the labour market and guide to the monetary policy outlook.
The major averages ended Thursday’s regular session in a mixed state with the Dow Jones Industrial Average gaining 0.20%, the S&P 500 falling 0.02%, while the Nasdaq Composite shred 0.09%.
The number of Americans filing new claims for unemployment benefits increased last week and unit labour costs rose by less than previously thought in the first quarter, indicating that the labour market is cooling. Initial claims for state unemployment benefits rose by 8,000 to a seasonally adjusted 229,000 for the week ended June 1st, the US Labor Department said on Thursday. Economists polled by Reuters has forecast 220,000 claims in the latest week.
The labour market has been steadily rebalancing back toward pre-pandemic levels after the Federal Reserve raised interest rates by roughly 5.25% since March 2022 to slow demand in the overall economy. However, the level of weekly jobless claims remains in a range that suggests the labour market is still tight. Continuing claims are still very low by historical standards and the data supports the notion that workers in the US who lose a job are able to find a new one with relative ease.
Elsewhere, the Commerce Department reported the US trade deficit widened in April, as a jump in imports outpaced a slight increase in exports, which is likely to dampen economic growth in the second quarter. The US trade deficit increased by 8.7% to $74.6 billion, the Commerce Department’s Bureau of Economic Analysis said on Thursday, the largest since October 2022.
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