Global equity markets retreated for the week, giving back much of the previous week’s gains, as investors digested what the incoming US president’s proposed policies might mean for the global economy.
What You Will Learn
- Market reactions to the new US president’s policies.
- Impact of rising US consumer prices on Fed rate cuts.
- UK’s economic slowdown and sector performance.
- Resilience in US corporate earnings trends.
- Bitcoin’s record-breaking post-election surge.
US Inflation Challenges Federal Reserve Outlook
US consumer prices rose as expected in October, mainly driven by higher shelter costs such as rents. The pace of progress toward lower inflation has slowed in recent months, potentially limiting the number of interest rate cuts the Federal Reserve may implement next year.
According to the US Labour Department, the Consumer Price Index (CPI) increased by 0.2% for the fourth consecutive month, in line with economists’ forecasts.
Over the 12 months to October, the CPI advanced 2.6%, up from 2.4% in September. A 0.4% rise in shelter costs—including rents and accommodation—accounted for more than half of the monthly increase.
Underlying inflation remained slightly elevated, though expectations stay for a third rate cut from the Federal Reserve in December.
This comes amid signs of a softening labour market, adding complexity to the central bank’s monetary policy outlook.
UK Economy Slows Sharply in Q3
The UK economy slowed more than expected in the three months to September, with GDP growth slipping to 0.1% from 0.5% in the previous quarter.
This fell short of the 0.2% consensus forecast. The weaker-than-expected performance was compounded by a 0.1% contraction in September, driven by a slump in manufacturing output.
The services sector, which grew by a modest 0.1%, provided little support, while the construction sector was a rare bright spot, expanding by 0.8%.
However, annual wage growth, excluding bonuses, averaged just 4.8% over the three months, marking its lowest level in over two years.
US Retailers Wrap Up Earnings Season
Major US retailers wrapped up earnings season, with S&P 500 companies on track to post a 5.4% increase in third-quarter earnings compared to a year earlier.
This exceeded the 4.2% growth expected at the start of the reporting season, signalling resilience in corporate performance.
Market Declines and Bitcoin’s Record Highs
Over the week, US equities fell around 2%, and US technology fell over 3%. European equities followed suit, falling over 2% as concerns about the new US president’s trade policies unsettled investors.
The UK market fell similarly, down over 2% for the week. These concerns fed through to Asian markets, particularly China, where the benchmark fell around 3.5%, whilst Japanese equities were off over 2%.
The most notable performance since the US election result was Bitcoin. For the second week in a row, the price of the most widely traded cryptocurrency rose to a record high.
After finishing the previous week at around $77,000, Bitcoin traded at around $91,000 on Friday afternoon.
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