Weekly Market Wrap 20/11/2023

Much anticipated inflation data was released in the UK and US, with both figures providing surprises for investors. Yields in key government bonds shifted as the interest rate outlook for markets changed, whilst UK retail sales data may have created a new headache for the Bank of England.

UK Market  

The UK market ended the week higher. UK CPI data surprised markets to the downside, both headline and core inflation came in lower than expected, calming investor fears over further Bank of England interest rate rises. Headline inflation slowed from 6.7% to 4.6% (est 4.8%), whilst core CPI slowed to 5.7% (est 5.8%) from 6.1%. Markets have not priced in any further rate rises, whilst the first rate cut is priced in by investors to occur in June 2024. UK Retail Sales data released on Friday showed that UK sales fell by more than in October, falling by 2.7% when a drop of 1.5% was forecast. The impact that the cost of living crisis has taken on the UK consumer is expected to bring forward the BoE’s rate cutting cycle.

US Markets

The S&P 500 ended the week 2.24% higher, whilst the Nasdaq ended the week 1.99% higher. Markets rallied on Tuesday after US inflation data came in below market expectations. Headline inflation fell to 3.2% (est 3.3%), whilst core inflation fell from 4.1% to 4.0% (est 4.1%). Markets have begun pricing in rate cuts for as early as Q2 2024, however as we have seen over the last 2 years, the Fed’s monetary policy decisions will be driven by the economic data seen from the US.

European Markets 

The Euro Stoxx 50 ended the week 1.96% lower. Data released on Tuesday showed that the European economy contracted very slightly in Q3, shrinking by 0.10% in the quarter, however this was still 0.10% higher than the figure this time last year. Surprisingly, employment rose in the region as the economy slowed, with employment figures increasing by 0.3% in Q3 and up 1.4% YoY. 

Fixed Income

Yields on US 10-year bonds fell by 18 basis points across the week to 4.44%, as lower than expected inflation figures caused investors to reevaluate their interest rate expectations.

Commodities

Brent crude fell by 1.01% this week, as concerns over supply disruption due to conflict in the middle east continued to ease.

The Week Ahead

Monday – BoE Governor Speech

Tuesday – FOMC Minutes

Wednesday – US Initial Jobless Claims

Thursday – US Manufacturing & Services PMI

Friday – German GDP

*x% up/down to price as of last week’s close