Market Update: 9th December 2024

What happened last week?

UK house prices grew at above expected rates according to the Nationwide House Price Index. House prices grew at a rate of 3.7% year-on-year (YoY), versus an expected 2.4%. Nice news if you’re a home owner!

In an interview last week with the Financial Times, the Governor of the Bank of England (BoE) Andrew Bailey said based on the bank's current economic outlook for the UK economy and continued decline in inflation, he expects 4 interest rate cuts next year.

The unemployment rate in the eurozone remained at 6.3% YoY in the month of December. The Eurozone is caught in a delicate balancing act. While inflationary pressures are gradually subsiding, the region is simultaneously grappling with mounting concerns about economic stagnation. The European Central Bank (ECB) has a big decision to make this week with an expected further interest rate cut to take place.

In France Michael Barnier was ousted by a majority vote of no confidence in parliament due to a proposed 60bn euro deficit-cutting budget which included large tax increases and spending cuts.

A relatively good week of news from the US with better than expected employment data showing higher average earnings and strong nonfarm payroll data. 227,000 jobs were added in November to the US economy. The unemployment rate did creep up from a previous month's 4.1% to 4.2%, however this is a minimal shift and did not impact the currency.

The Federal Reserve is set to meet on December 17-18 to discuss a potential next interest rate change. Last week's relatively strong employment data will potentially signal a further interest rate cut, which the markets are already predicting.

Strong Gross Domestic Product (GDP) data from Japan with quarter-on-quarter (QoQ) growth coming in above expectations at 0.3% versus a forecasted 0.2%. The Yen has lost almost 50% of its value versus the Dollar in the past 5 years, could it be time for a recovery of some sorts?

The Chinese government announced that it will intervene and take steps to revive the economy, and has loosened its monetary policy for the first time in 14 years. They said this is needed to strengthen extraordinary countercyclical adjustments, boost consumption, improve investment efficiency and expand domestic demand. This decision boosted stocks and bonds.

What to watch out for this coming week?

• Swiss National Bank (SNB) Interest Rate Decision (12/12) - The SNB is predicted to cut interest rates from 1.0% to 0.75%.
• European Central Bank (ECB) Interest Rate Decision (12/12) - The ECB are set to cut central borrowing rates from 3.40% to 3.15%. Any deviation from this could spark a change in the currency's value as the move will already be priced-in.
• UK Gross Domestic Product (GDP) for October (13/12) - The GDP growth for the UK in the month of October will be released on Friday.

• US Consumer Price Index (11/12) - Several inflation related releases from the US showing the changes to prices in the month of November. The markets will keep a close eye on this data to predict the Feds next interest rate decision in next week.
• Bank of Canada (BoC) Interest Rate Decision (11/12) - The Bank of Canada is expected to reduce interest rates from 3.75% to 3.25%, which is very likely given the inflation rate is within the BoCs control range.

• Reserve Bank of Australia (RBA) Interest Rate Decision (10/12) - Reserve of Australia will make an interest rate decision. It is expected they will keep them at 4.35%, however recent economic data showed weak growth in Q3 which might lead the bank to intervene and cut rates.