Omnium Wealth Management

October Market Commentary: Economic Trends & Headlines

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Recent months have witnessed persistent challenges of sluggish growth and high inflation on a global scale, and last month was no exception. This article offers insights into the economic dynamics of various regions, highlighting key developments.
 

United Kingdom
The UK economy contracted by 0.5% in July, driven by factors like ongoing industrial strikes and unfavourable weather conditions. However, there was a glimmer of hope as inflation dropped from 6.8% in July to 6.7% in August, marking the third consecutive monthly decline.
 

Yet, a report from the OECD cautioned against complacency, predicting that UK inflation would average at 7.2% in 2023, outstripping many advanced economies. The Bank of England, influenced by August's surprise fall in inflation, opted to maintain interest rates at 5.25%, after 14 consecutive rate hikes. This decision was attributed to concerns that higher rates were impacting the UK's economy, exemplified by a significant drop in property values. 

Despite this economic uncertainty, wage figures for July 2023 showed a substantial 8.5% increase from the previous year. August witnessed a surge in retail sales, especially in non-food items, marking the highest levels since February. 

The retail sector faced challenges with the collapse of high-street retailer Wilko. However, Poundland owner Pepco Group has stepped in to take over leases at up to 71 Wilko stores, prioritising Wilko staff in job applications. 

In the manufacturing sector, BMW announced plans to produce two new electric Mini cars in its Cowley plant, with a £600m investment. 

The UK's finance sector encountered turbulence in September, with the state-owned British Business Bank reporting an annual pre-tax loss of over £147m due to a challenging economic environment. The controversy surrounding the closure of Nigel Farage's Coutts account continued, with the Financial Conduct Authority finding no evidence of politically motivated account closures. 

The London Stock Exchange faced a setback as chip designer Arm Holdings chose to list its shares in the US, contributing to its market value of £48.3bn upon return to the stock market. The pound ended August up 0.2% against the dollar, and the FTSE-100 Index closed at 7,648 points, up 2.46% from August. 
 

Ukraine
Ukraine's President, Volodymyr Zelensky, addressed the UN General Assembly, calling for international support amid the ongoing Russian invasion. Discussions of "war fatigue" surfaced in countries backing Ukraine, such as Poland. In a show of solidarity, the US agreed to provide a £265m military package to Ukraine. 

Europe
In September, the European Central Bank raised eurozone interest rates for the tenth consecutive time, reaching a record high of 4% in response to persistent high inflation. Germany faced challenges, slipping into a technical recession in Q1 2023, becoming one of the few G20 economies alongside Argentina with shrinking GDP projections.
 


Business sentiment in Germany waned due to high energy costs, sluggish growth in China following COVID-19 restrictions, and ongoing manufacturing sector issues. France's Carrefour adopted an unconventional strategy of labelling products with shrinking contents and rising prices to encourage manufacturers to rethink pricing policies. 

The UK's opposition leader, Sir Keir Starmer, held a positive meeting with French President Emmanuel Macron, aiming to position the Labour Party as a government in waiting. 

On the financial markets, Novo Nordisk became Europe's most valuable company, achieving a stock market valuation of £339 billion. 
 

United States
The US economy saw 2.1% GDP growth in Q2 2023, attributed to increased consumer and government spending. Treasury Secretary Janet Yellen acknowledged a "disconnect" between the economy's performance and public sentiment toward President Joe Biden's handling of economic issues.
 

A Wall Street Journal poll revealed disapproval of Biden's economic and inflation management. The Federal Reserve maintained its key interest rate at 5.25% to 5.5% to combat inflation. Job creation remained strong, with 187,000 jobs added in August. 

Far East
China's economic recovery remained sluggish, marked by a fourth consecutive monthly fall in exports. Official figures showed a decline of 8.8% in exports and 7.3% in imports in August 2023. However, economists predicted China would meet its 5% economic growth target for the year.
 

China's property market crisis persisted, with challenges at Evergrande and Country Garden. Additionally, the Chinese government's anti-corruption efforts led to the imprisonment of former China Life Insurance Chairman Wang Bin. 

Japan focused on an economic stimulus package to combat inflation and maintain currency stability, preparing for a moon landing in February. South Korea sought to increase global influence, with President Yoon Suk Yeol engaging in foreign policy discussions and bidding to host the 2030 World Expo. 

On the financial markets, Hong Kong's Hang Seng index fell by 3.65%, Japan's Nikkei index declined by 1.15%, China's Shanghai Composite index dropped by 0.81%, and the Korea Composite Stock Price Index decreased by 1.92%. 

Finally, Emerging Markets
India continued its robust economic growth, expanding by 7.8% year-on-year between April and June 2023. Optimistic projections by the OECD and Finance Minister Nirmala Sitharaman suggest that India is on track to achieve its growth target of 10.5% for the fiscal year. 

Global trade discussions, including a potential trade deal with the UK, further support India's economic growth. Brazil outperformed global trends, with stronger-than-expected growth driven by agriculture, services, and industrial sectors. 

In Russia, efforts to garner international support amid the Ukraine conflict continued, with key meetings between Russian and Chinese diplomats and President Putin's discussions with North Korean leader Kim Jung Un. 

On the financial markets, India's BSE Sensex index rose by 0.67%, Russia's MOEX index fell by 2.90%, and Brazil's Bovespa index closed the month at 116,603 points. 

 

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