Weekly Market Updates / 3 weeks ago
The Axiom IFS Update 6th November 2023
British workers coming into the office every day outnumber those who spend part of the week working from home, for the first time since the end of pandemic restrictions. Less than a third of London’s white-collar employees are back in the office full time, the lowest level in the UK, the Hays report also showed.
Britain is probably already in a recession after soaring interest rates and rising unemployment turned households more cautious about spending, according to an analysis by Bloomberg Economics. The research estimates that there’s a 52% chance of a mild recession in the second half of this year, as defined by two consecutive quarters of contraction. The analysis was published Monday ahead of official data on gross domestic product due Friday. A recession would be a headache for Prime Minister Rishi Sunak, due to fight an election next year. A downturn could increase the chances of the Bank of England pivoting toward reducing interest rates, especially if inflation has come down sharply. That said, the pound had its best week for a year as the Euro and Dollar both ran into headwinds.
The pound looks set to deliver a fresh leg higher as the market mood is supportive for risk-sensitive assets. However, headwinds could be guided by the preliminary Q3 Gross Domestic Product for 2023, which will be published later this week. Economists project a marginally negative Q3 GDP as UK firms cut heavily on workforce and inventories due to a poor demand environment.
The Dollar hovered near six-week lows as Friday’s softer than expected non-farm payrolls data and less hawkish signals from the Federal Reserve drove up bets that the bank was done raising interest rates. However, while the prospect of no more hikes bodes well for global markets, the central bank is still expected to keep rates higher for longer, denting the chances of any major near-term gains in other currencies.
The Euro rose against the greenback to levels last seen in September on the back of recent Dollar weakness, rather than any form of regional economic strength. Nevertheless, German factory orders increased 0.2% on the month in September, a stronger result than the expected 1% fall, but still a sharp drop from the revised 1.9% gain seen in August.
Last week’s events saw a week of choppy price action in USDCAD, with Friday’s price action a microcosm of these dynamics. Whilst the loonie found some initial support from oil prices, USDCAD still managed to finish flat on the day and up 0.4pp on the week as traders progressively priced out the odds of a further rate hike post Tuesdays CPI release, and events elsewhere in the world continued to drive market sentiment.
Gold prices slipped on Monday after a slight uptick in U.S. bond yields and ahead of a speech by Federal Reserve Chair Jerome Powell later this week for more clarity on the interest rate outlook.
European equities rose early on Monday, extending their November rally on growing hopes that major central banks may have finished raising interest rates. The region-wide Stoxx Europe 600 added 0.2 per cent in early trade, with all sectors apart from real estate in positive territory. The index last week rose in five consecutive sessions to bounce back from its lowest point since January. London’s FTSE 100 gained 0.1 per cent, as did France’s Cac 40. Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 both added 0.1 per cent ahead of the New York open.
Almost a year after the demise of Sam Bankman-Fried’s crypto empire, one of the blockchain projects most associated with the now disgraced entrepreneur is emerging from under the cloud his downfall cast over the digital-asset world. Solana’s SOL token has surged about 340% to $41 in 2023, outdoing the 114% rally in market bellwether Bitcoin and becoming the best performing token among the largest cryptocurrencies tracked by Bloomberg. That follows a 94% drop last year as Bankman-Fried’s FTX and Alameda Research — two major backers of the project – collapsed into bankruptcy.
The price of oil rose after Saudi Arabia and Russia reaffirmed they will stick with oil supply curbs of more than 1 million barrels a day through the end of the year. Brent crude rose above $86 a barrel. The announcement by the OPEC+ heavyweights on Sunday comes after the fading Israel-Hamas war premium and concerns over weaker global demand pushed oil prices down by more than 6% last week.
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