HL commentary as it happens

Global markets are waiting on economic data from the US

Global markets are waiting on the overdue economic data from the US – which will potentially be released at the beginning of this week. During the record long shutdown, inflation and jobs data for October was not collated or released, which has left policy makers in limbo. These two data points are key for the Fed to help determine whether they continue to cut rates when they meet next month. The S&P 500 fell on Friday, following a strong start to the week, as the market digested what the lack of data might mean for the dot plot.

UK market opens slightly down after poor Friday finish

Interest rate uncertainty is not just a feature of US markets at the moment. Here in the UK, we saw rate expectations jump on Friday, following rumours that the Chancellor Rachel Reeves would not be making the much-anticipated increase to income tax in the Budget next week. UK assets performed poorly on Friday, with the FTSE 100, UK gilt market and the pound all falling in value. The FTSE 100 closed down 1.11%, and opens slightly down this morning too.

The jump in gilt yields – bond prices and bond yields have an inverse relationship – reflects market concerns that without a rise in income tax, the Budget will leave the Chancellor with insufficient headroom, which would make pro-growth spending more difficult. 10-year gilts are currently paying a yield of 4.58%, up from 4.39% last week.

Global markets buoyant on expectation of US shutdown resolution

Macro news has also provided a tailwind for markets – with the US shutdown nearing resolution after a record 43 day run. Somewhat surprisingly given the recent successes in the odd-year elections, Democrats appear to have conceded some of their demands for healthcare funding and the prospect of an approved US Budget has lifted markets globally. Add to that, poor jobs data in the UK yesterday meaning that the markets are now pricing in a near cert of a December rate cut – sending both UK equities and bonds up.

European stocks hit record highs and continue upwards

European markets have continued their winning streak this morning, opening up thanks to a smattering of positive macro and company news in areas of the market which have been overlooked year to date – with much of European gains coming from defence and banking, thanks to government spending and a supportive rate environment, leaving sectors such as consumer staples, healthcare, and utilities behind.