HL commentary as it happens

Brent crude sticks below $60.

Brent Crude prices have retreated a little further beneath the $60 mark, down nearly 20% year to date. The losses might have been greater still if US sanctions against Venezuela and the prospect of tighter measures on Russian exports weren’t in play. For now, it’s good old supply and demand that’s driving prices, with increasing production and jitters around the Chinese growth outlook weighing on traders’ minds.

Benign US inflation data taken with large pinch of salt.

On the face of it, cooler than expected CPI of 2.7% for November extended an olive branch to American doves – hoping for a rate cut. However, with government agencies boarded up for much of that period, the number was based on incomplete datasets, and, after an initial dip, short term Treasury yields ended up broadly where they started. The major US stock indices all finished up on the day, with big tech rebounding amidst continued volatility.

Bank of Japan raises rates, after UK cuts and ECB holds.

The FTSE is down this morning after a small gain yesterday. The Bank of England cut rates as expected, but with the decision only carried by one vote, the case for further cuts is far from clear. This was echoed by a rate hold in the Eurozone coupled with an upgrade for the region’s growth outlook for both 2025 and 2026. Overnight, Japan’s central bank has increased borrowing costs to a 30 year high of 0.75%.

Oil rebounds from a near five-year low

Brent oil rose back above $60 a barrel, helped by rising tensions that could make it harder to move oil around the world. The US is tightening the net on oil linked to Venezuela, and is also weighing tougher action on Russia, both of which could squeeze supply. In the US, stockpiles fell again last week, which also gave prices a lift, even as petrol and diesel supplies increased.

US markets set to open higher

US markets briefly edged higher yesterday afternoon before sliding into the close for a fourth straight daily drop in the S&P 500. The biggest drag came from big tech and chipmakers, as investors took profits and shifted money toward steadier areas like energy, basic goods and materials.

US futures are pointing to a brighter start this afternoon, with stocks set to open higher. With softer jobs data now behind us, the spotlight turns firmly to today’s inflation reading, which could set the tone for where markets head next.

Investors wait for Bank of England decision

A small lift for the FTSE 100 at the open, but the wider European mood looks jumpy as investors wait for a packed day of central‑bank decisions. In the UK, the Bank of England is widely expected to cut rates by a quarter of a percent to 3.75%, helped by cooling inflation and a softer economy. But this is unlikely to be a full sweep, with some members expected to take a more cautious stance, and further moves in the new year will likely be slow and cautious.

Across the Pond, US markets had a lacklustre day.

Yesterday’s payroll and unemployment data for October painted a mixed picture, with tech stocks one of the few sectors to rally.

The FTSE 100 has reacted well to the news inflation is falling.

The FTSE 100 has reacted well to the news inflation is falling, with broad gains across the piece. Lower interest rates are good news for any corporate with leverage, and has the potential to boost domestic consumption too, which in turn could support corporate revenues. Gilts are also reacting in anticipation of a BoE decision, with yield falling across the curve, most acutely at the short end.

Expectations for a rate cut tomorrow, though markets should not expect the voting to be unanimous

The latest inflation data means that a rate cut tomorrow is all but guaranteed, though markets should not expect the voting to be unanimous. Today’s inflation data follows Office of National Statistics data that showed wage growth also slowed in the three months to October. A cut to Bank of England base rate of 25 bps to 3.75% is most likely, but there is potential for one or two members to vote to hold given inflation is still above 2% target. This should help indicate where interest rates go in 2026. Our house view is investors and savers should expect two more cuts of 25bps a piece through the year.

Inflation fall fed by food prices

Like the waistband on a dieter, food changes helped inflation shrink notably in November. It’s following the path the Bank of England had forecast – peaking in September and gradually moving south. However, it’s moving faster than had been expected, which means tomorrow’s rate cut is all-but nailed on. It could persuade borrowers and savers to take action.

Food prices helped fuel the fall. After rising the previous month, food inflation fell to 4.2%. Your experiences at the supermarket will still depend enormously on what you buy. Striking annual rises included beef and veal up 27.7%, whole milk up 14.8% and butter at 12.1%. Cattle farmers are still feeling the financial impacts of a poor grass harvest – as well as increased labour costs throughout the production and sales process.

Alcohol and tobacco inflation fell. Some of this will be booze discounting ahead of Christmas, to get people through the doors of the supermarkets, but duty changes play a big role, because tobacco duty is hiked in the aftermath of the autumn Budget. By the time the data was collected last year it had taken effect, but this time round it hadn’t.

Energy prices continued to spark lower inflation, as a lower energy price cap rise in October than the year before mean electricity prices are up just 2.8% and gas prices 2.1%. The Budget brought some good news for energy bills, with the removal of charges that are expected to cut the cost by £150 a year from April. Given that otherwise the forecast was for a rise in the price cap in April, this will be a relief for hard-pressed bill payers.

Brent crude prices dip towards $60

Brent crude oil prices are precariously close to falling through the $60 barrier. A peace deal between Russia and the Ukraine looks to be back on the agenda but there have already been multiple false dawns this year. Even without Russian exports, concerns around Chinese demand as well as increasing production from OPEC+ members and other nations are keeping prices way below the $80 peaks seen earlier this year.

Double dose of US jobs numbers later today

Later on, we'll see official US jobs numbers, which haven’t been seen since before the US government shut down. Non-farm payroll numbers are expected for both October and November, with last month likely to be a cleaner-looking print. Consensus forecasts suggest around 50,000 new hires were made, less than half the 119,000 seen in September, but the range of expectations is much wider than usual.

If recent private jobs data is anything to go by, the risk here is to the downside. With average hourly earnings expected to be up 3.7% on a 1-year view the juggling act for those with the keys to monetary policy also looks increasingly tricky stateside. That’s weighing on sentiment with US stock futures pointing downwards today. If, however, jobs and wage growth comes in weaker than expected, there is a chance that the bears will go back into hibernation on hopes of a more doveish approach by the Fed in 2026.

FTSE opens in the red

The FTSE’s in the red this morning. While the Bank of England is widely expected to bring rates down to 3.75% on Thursday, today’s employment figures raise the question of whether that will be enough to stimulate growth as the UK economy limps towards the new year.

If setters stick to the playbook, rates will be at their lowest level since February 2023, but save for the exceptional circumstances of the coronavirus pandemic, unemployment of 5.1% is now at its highest level since 2016. With wage growth easing only slowly, the headroom for further rate cuts next year looks pretty tight.