November 2024 Market Summary

Last week, the UK government unveiled its highly anticipated Autumn Budget. Initial reactions from the public reflected a mix of optimism and concern. While some investors welcomed proposed measures aimed at boosting economic growth and addressing the rising cost of living, others expressed concern over potential tax increases and public spending cuts. Overall, the budget’s implications are being closely monitored as both the UK and global economies navigate a complex landscape.

Market performance overview

Over the past 12 months, the performance of several of the top indices have exhibited growth to varying degrees. As of 4 November 2024, they are reflected as below*:

• FTSE 100: +10.88%
• S&P 500: +31.21%
• Europe’s STOXX 600: +15.43%
• Japan’s Nikkei 225: +16.34

*Source: Google Finance.

UK insights

In September 2024, UK inflation fell to 1.7%, marking the first time it has dipped below the Bank of England’s target since April 2021. This development initially sparked hopes for potential interest rate cuts, however, the recent announcement of Labour’s first Budget may temper expectations for aggressive monetary easing in the near future. Economists anticipate that the Bank of England will implement a quarter-point cut, bringing UK interest rates down to 4.75%.

Following Chancellor Rachel Reeves’ Budget announcement, the initial market reaction was relatively subdued, without any significant spikes. This response signals a positive reception to her approach and an absence of the volatility seen in the “Truss 2.0” scenario, contributing to a sense of market stability. Investors are now able to focus more on underlying economic fundamentals rather than political turbulence.

However, the bond markets exhibited a more pronounced reaction, with UK gilt yields rising sharply following news that the government plans to increase borrowing to fund investment in public services and healthcare infrastructure.

UK home sales in September 2024 increased 9% year-on-year, making it the first month-on-month sales increase since May 2024.

Other economic developments

USA

Meanwhile in the US, inflation continues to cool, reaching 2.4% in the year from 2023. This is slightly lower than 2.5% which was reported in the year to August 2024. As a result, it is leading to a decrease in wage pressures in America; it’s likely that we will see a further cut in interest rates from the Federal Reserve in November.

Overshadowing this, the final day for voting in the US election will be on Tuesday 5 November. Over 75 million votes have already been cast, with Tuesday being the final day that the electorate can go out to vote. It is not yet clear if there will be a result on Tuesday night, leading into Wednesday morning, with all major polls around the country being in a dead heat. With this uncertainty, and with the Federal Reserve making its decision on further rate cuts this week, the US markets have been volatile.

China

In China, policymakers are under pressure to implement more stimulus measures to support consumption amid deflationary pressures. Despite recent monetary easing, including interest rate cuts and liquidity injections, many economists have downgraded their growth forecasts, highlighting a prevailing pessimism linked to a prolonged property crisis. Analysts anticipate a meeting of China’s parliament later this month to announce more specific stimulus plans, as the government considers increasing debt to bolster economic recovery. Meanwhile, consumer inflation has eased unexpectedly, intensifying the need for measures to spur demand as exports weaken.

Japan

The Bank of Japan has kept its interest rate unchanged at 0.25% on 31 October. In the wake of this announcement, the yen dropped below ¥150 to the US dollar, reflecting a roughly 5% decline over the past month. However, a weaker yen has not necessarily been bad news for Japanese equity markets as it’s served to attract more foreign investors.

Europe

The European Central Bank cut its interest rate in October 2024 by a quarter-point to 3.25%. Inflation in September was weaker than expected, driving rate-setters to step up the pace of policy easing. Eurozone inflation rose from 1.7% to 2% in October 2024, mainly driven by energy and food prices. Core inflation stayed at 2.7% which was slightly higher than anticipated.

Despite a softer pace of contraction than September 2024, the Eurozone’s manufacturing PMI was weaker than predicted. Despite the uptick in growth, the latest forward-looking data suggests that a quick recovery for the sector is unlikely, reinforcing concerns that the outlook for the Eurozone remains uncertain.

This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such.