Market Update: 2nd December 2024

What has been happening?

A relatively quiet week in the UK, with no significant economic data released. A broad report on the financial stability of the UK was released by the Bank of England (BoE), highlighting global risks associated with geopolitical tensions, global fragmentation and pressures from government debt. With the UK’s Gross Domestic Product (GDP) made up of more than 80% from the service sector, any upset in financial markets can have a detrimental impact on the UK economy, which was cited in the report as being a current risk.

A lot of chatter from UK politicians around the number of people in the UK registered as economically inactive due to long-term sickness, which is at record highs of 2.3 million people. This is an extraordinary figure for a modern economy which must be addressed if the UK wants to grow its economy.

Eurozone inflation rose to 2.3% YoY in the month of November, up from a previous 2.0%. This rise pushes inflation above the European Central Bank’s (ECB) target of 2.0% which is not great news. However, it is unlikely to stop further interest rate cuts as the ECB moves to normalised borrowing rates.

Political uncertainty in France causes a sell-off of their bonds, with yields reaching record-levels, surpassing Greece’s for the first time. As the French economy accounts for 20% of eurozone Gross Domestic Product (GDP), the markets will be watching to see how this all unfolds.

Mixed bag for the US last week. New home sales and consumer confidence data came in worse than expected, potentially showing the cost of living crisis continues. Gross Domestic Product (GDP) growth came in as forecasted, with Q3 growth being 2.8%, down from a previous 3.0%. As well as this, the minutes from the Federal Reserve’s recent meeting were released which showed officials are positive about the US economy and labour market. It was also mentioned they no longer feel the need to urgently cut borrowing rates back to “normal levels”, and that they will take a more gradual approach.

After the South African Reserve Bank's (SARB) recent decision to reduce borrowing rates the Rand has seemingly not done too badly against its main traded currency the USD. This currency pair will continue to be monitored by markets as we go into the final month of the year.

The Reserve Bank of New Zealand (RBNZ) decided to reduce borrowing rates last week, from 4.75% to 4.25%. This was expected by markets so the currency did not see much movement.

Chinese Manufacturing remains buoyant with data released last week suggesting the industry is still growing at a pace above the market's expectation.

Australia experienced positive growth in the construction sector in Q3, with both construction projects completed and new expenditure in projects and equipment higher than expected for the quarter.

What to watch out for this coming week?

• UK Houseprice Inflation (02/12) - House price inflation statistics will be released on Monday. As homes make up a large majority of personal wealth in the UK, this figure can serve as a broader economic indicator.
• Eurozone Unemployment data (02/12) - The eurozone unemployment rate is expected to remain at 6.3% for the year, any deviation from this could affect the euro.
• Eurozone Gross Domestic Product (GDP) (06/12) - Eurozone GDP growth is expected to have risen over the last quarter, from 0.6% in Q2 to 0.9% in Q3.

• US Manufacturing Data (02/12) - Several releases from the US on Monday related to the manufacturing sector, specifically Manufacturing PMI and Manufacturing Prices. With Trump’s new administration being set on growing this sector all eyes will be on these releases.
• US employment data (06/12) - Nonfarm payroll and the unemployment rate will be released on Friday for the US. Markets will be watching these as the Federal Reserve makes rate decisions in part based on how employment/unemployment is doing. If there are signs of available growth in the jobs market they may cut rates quicker.

• South African Gross Domestic Product (GDP) (03/12) - Q3 GDP figures for South Africa will be released on Tuesday. This will have a significant influence on the South African Reserve Bank (SARB) next interest rate decision.