AHR Weekly Financial Market Update

UK inflation pressures surged, reinforcing expectations for steady BoE policy, while oil prices rebounded, and Bitcoin hit record-breaking highs.

US Equities Lead the Charge

US equities led global markets this week, with the S&P 500 advancing around 2% as small-cap and value stocks outperformed growth counterparts. This reflects a continued post-election shift into economically sensitive sectors, such as materials and consumer goods, significantly contributing to returns.

Economic Optimism Fuels Sentiment

Investor sentiment was buoyed by economic data from the US, where initial jobless claims fell unexpectedly to 213,000, the lowest level since April 2024. Further optimism stemmed from a strong flash PMI reading for services, which rose to 57, its highest in 32 months, while manufacturing PMI improved modestly to 48.8, marking a four-month high.

Strong Earnings Season Nears Conclusion

Adding to the upbeat tone, nearly all third-quarter earnings results are now in, with S&P 500 companies on track to post an average year-over-year growth of 5.8%. This would mark the index’s fifth consecutive quarter of earnings growth if confirmed.

Inflation Surges in the UK

In the UK, inflation pressures mounted significantly in October. The headline rate jumped from 1.7% in September to 2.3%, driven largely by higher energy bills following an increase in the energy price cap. However, core inflation—which excludes volatile components such as energy and food—also rose sharply to 3.3%, signalling broad-based price pressures.

The data reinforced expectations that the BoE will likely keep policy steady for the rest of the year. Markets also scaled back their expectations from three rate cuts to two in 2025.

Global Equity Performance

Despite this, UK equities emerged as a standout performer among European markets, rising 2.5% over the week. The weaker sterling, which fell more than 1% against the US dollar, helped bolster UK exporters. Other European equity markets delivered mixed results, reflecting subdued investor sentiment across the continent. Japanese equities fell around 1%, whilst Chinese equities fell over 2%.

Oil Prices Rebound Amid Geopolitical Tensions

After a sharp decline the prior week, US crude oil prices rebounded, gaining more than 6% to trade above $71 per barrel on Friday. The rally came amid heightened geopolitical tensions, although prices remain well below October’s peak of $77 per barrel.

Bitcoin’s Record-Breaking Rally

Bitcoin extended its record-breaking rally in the cryptocurrency market, climbing above $99,000 by week’s end. This marks the third consecutive week of all-time highs for the digital asset, reflecting sustained speculative momentum.