UK Weekly Roundup
Summary of economic, political and market moves. Posted on Notes, archived here.
23 NOVEMBER 2024
👎 💼 🏭 Some weak economic data points as PMIs dipped below 50 (indicating shrinking activity) for the first time since October 2023, and retail sales fell by 0.7% in October.
😎 🙏 But on the plus side, consumer confidence edged up in November. Maybe the budget wasn’t as bad as expected?
🤬 🏬 Not for businesses though, who still seemed shocked and angry with the NI increase. John Lewis was the latest retailer to come out this week against it.
🏛️ If businesses pass through costs of the tax rise that’s bad for inflation, although the BoE may look-through the impacts if they deem it a one-off event. October CPI came it at 2.3%, higher than expected, so overall interest rate/inflation picture still feels quite uncertain.
📉 By the end of the week markets were pricing in furtherrate cuts – more concerned by the weak PMIs than the higher inflation figures. Yields were downacross the curve. 10-year now at 4.39%, only 10bps higher than before the budget.💷 Sterling also weaker.
📈 FTSE 100 ended the week up +1.38% and the FTSE 250 ended up +1.14% helped by some strong earnings updates and a weaker pound.
👺 🎉 Games Workshop saw a +17% move on Friday off after a trading update showed a big increase in licensing revenues. Those mini figures are quite the UK success story!
15 NOVEMBER 2024
👎 Monthly GDP numbers showed a UK economy in standstill mode over Q3. 😟 Real GDP growth came in below expectations at +0.1% in Q3 and -0.1% in September.
💼 💻 Services sector weaker with general picture of uncertainty leading up the UK budget and US elections weighing on consumer and business sentiment.
🗡️😰 Economy seems on a bit of a knife edge. Q4 numbers could be key to understanding immediate post-budget, post-Trump effects, though we’ll need to wait for long-term impacts.
⚖️ Balancing act between higher growth, lower rates and lower inflation continues. 🍯 Weekly wage growth fell to its lowest level since 2021-22, but the BOE also said pay growth remained “quite sticky”.
🧑🤝🧑 👭 UK gov announced plans for consolidation of DB and DC pension assets plus. 🎱 Pooling to lower costs and increase expertise makes sense, but I’m less of a fan of pooling “to put half the portfolio in high fee, sub-par PE strategies…”
🤔 I’m pro UK investment, but also instinctively sceptical of the “we can unlock billions of productive investment via pensions and the like. Post to follow when I gather my thoughts!
📉 📈 10-year gilt ended the week up 3bps, now 18bps higher than pre-budget. Yields slightly down on Friday on the weak GDP numbers. 💉 FTSE 100 ended down with big pharma taking a hit on RFK Jnr’s appointment; and Astra Zeneca taking an additional hit on Chinese allegations of dodgy import dealings.
8 NOVEMBER 2024
🏛️ ⬇️ Bank of England cut rates by 25bps in a widely expected move, taking base rate down to 4.75%. BoE expects that “interest rates will continue to fall gradually from here”, although with uncertainties around impact of UK budget and US tariffs.
🍞🧀 On the budget… multiple warnings from UK retailers (Tesco, Sainsbury, M&S, Asda, Wetherspoons) on higher costs from the increase in employer’s national insurance plus rise in minimum wage. 😮 All seem quite shocked by the extent of tax changes.
🥙🍩❌ Deutsche put out a sell rating on Greggs, purveyor of choice for the nation’s sausage rolls and baguettes, mostly due to these rising costs.
🤷 Some sympathy for business here, although recent tax changes have been favourable to them. Expect more lobbying on business rates reform as partial compensation.
🦅 🗽 And on tariffs… NIESR, a think tank, have estimated that UK GDP growth would be 0.8 percentage points lower next year if Trumps goes ahead with a 60% tariff on Chinese goods and a 10% tariff on other imports. US growth would be hit even harder.
📉 📈 👍 Gilt yields have stabilised after digesting the budget and Trump. UK 5-year now at 4.325% (+14bps vs pre-budget) and 10-year at 4.440% (+15bps vs pre-budget). Reeves should be happy with that.
1 NOVEMBER 2024
🏛️ All talk dominated by the budget, which I’ll post on tomorrow. In short ⬆️ taxes and ⬆️ borrowing to fund ⬆️spending on public services and investment.
🤯🔥🧊 It feels like commentators have been willing on a gilt market meltdown. UK 10-year yields closed at 4.46% vs 4.24% a week ago - a 22 bps move up reflecting expectations for more borrowing and fewer rate cuts. But far from a meltdown, especially when US 10-year yields are up ~12 bps over the same period.
😐 Other markets mixed: 📉 FTSE 100 -0.87%, 📈 FTSE 250 -1.63%, 💷 GBPUSD -0.30%. The budget may not be perceived as the saviour of UK growth but nor is it fiscally irresponsible.
🏠 House prices grew by 0.1% in October according to Nationwide, while property stocks, including housebuilders fell as markets priced in one less rate cut than before.
🍼 Reckitt Benckiser, producer of baby formula, got a favourable court ruling in the US, while 👗 Next, the high street retailer, upgraded it sales forecasts.
🎯🔐 In the latest UK take-private deal, Bridgepoint Advisors agreed to pay £169.3 million for Eckoh plc, a software and secure payments provider listed on AIM since 2003.
25 OCTOBER 2024
🚀✅ The IMF upgraded its projection for UK growth this year by 0.4% to 1.1% - the largest upward revision for any advanced economy. 1.1%, not quite blast off, but improving.
🏛️ 💷 Lots of pre-budget commentary and positioning with Rachel Reeves confirming she will change the fiscal rules to increase borrowing for public investment. Details to come in this week’s Halloween budget 🎃 🍬
📉 🚗 UK stock markets closed down for the week amid a mixed set of earnings. Among financials, Lloyds and Close Brothers fell on exposure to auto loan misselling litigation, while NatWest and Barclays jumped on strong earnings.
😟 ⬇️ Consumer confidence hit its lowest level since March although October was only marginally worse than September. ⏲️ General view is that consumers are waiting to see what the budget brings, and how interest rates and the job market continue to shake out.
18 October 2024
📉👍 September inflation figures came in lower than expected, with the annual figure now running at 1.7%, driven by ✈️ fares and ⛽prices.
⬇️ 💷 The inflation numbers triggered a fall in the £ and higher gilt yields as markets priced in more rate cuts by the BOE than previously expected.
✅👍 FTSE 100 and the FTSE 250 rose on the back of this. September retail sales were also better than expected in a positive sign for the UK consumer.
🚬❌ British American Tobacco (BATS) one of the long-term best performing stalwarts of the FTSE 100 (ethical investing considerations aside) fell off the back of a multi-billion pound litigation settlement in Canada.
🪳🪲✅ Rentokil (RTO), the UK headquartered pest control champion, saw its shares rise as it announced a shake-up of its underperforming US business. Nelson Peltz’s (aka Brooklyn Beckham’s FIL) activist hedge fund Trian now has a seat on the board so further change looks likely.
Bugs and tobacco, who says UK equities aren’t exciting? 😜
4 October 2024
👎 Final GDP numbers for 2Q came in at 0.5%, slightly below the original 0.6% estimate. 💪 Some signs of strength with business investment rising 1.4% and households saving more.
🥳 🙌The OECD no longer expects Britain to be the weakest economy among big, rich nations as it raised its forecasts for growth in the country to 1.1% in 2024 and 1.2% in 2025, up from previous forecasts of 0.4% and 1.0%.
🏠 👍 Housing market looks to be benefitting from lower rates with Nationwide reporting a 0.7% rise in prices in September and BOE figures showed mortgage approvals
💷 Pound took a tumble after comments from BOE governor Andrew Bailey suggesting room for faster rate cuts than currently priced in. Bad for the £ but good for UK consumer.
🏛️ Ongoing jitters around potential tax changes to capital gains and pensions relief in the UK budget on 30 October. Claims about a mass exodus from UK assets because of this should be taken as standard pre-budget lobbying. Let’s see what the details are first.
🏹 💰 Robinhood is looking at offering UK stock investing to British users while also rolling out margin trading on US stocks in the UK. 👍 for helping a UK retail investment culture.
30 August 2024
📈 ✅ European markets hit record highs with the FTSE 100 up 1% taking YTD gains to 8.48%. Still, it’s the dregs of summer and let’s wait until September to see where momentum goes given a few market stumbles in recent months.
🏠 👍👎 Mixed picture for UK housing following a more positive update from Rightmove the week before. Zoopla (another online sales platform) said the market was turning a corner, but Nationwide said house prices dipped slightly in August.
👍👎 Building supplier Grafton reported a tough UK operating environment given weakness in housebuilding and home improvement, although expectations are higher going forwards.
🏛️ 💷 Growing noise around raising Capital Gains Tax in the upcoming Autumn Budget with plenty of pushback around the prospect of killing entrepreneurialism in the UK. This isn’t quite fair – founders get a big tax-free allowance for selling businesses. Also, CGT rates have been very low for a decade with little impact.
🔐 🎯 Private equity is launching a final lobbying effort to thwart the government’s plan to tax carried interest as income vs. capital gains. Never understood why this exemption exists and seems high time that the rules change. Great write-up on this here.
23 August 2024
👍 Solid (if not exhilarating) economic data out of the UK this week. PMIs showed business activity rising for a tenth month running.
😐 Consumer confidence in August was stable from July with more negative sentiment on the economy offset by more positive views on personal finances. Rightmove reported an uptick in 🏠 buying enquiries following the BoE interest rate ✂️
❌👎Less positive view from FTSE 250 recruiting company Hays, which issued a profit warning on the back of a “clear slowdown” in the global jobs market. But in this topsy turvy world, slowing jobs supports further rate cuts so… 🤷
🗳️ 🏛️ Parliament in recess so little politics of note aside from prosecutions post riots. More focus on the US with (stretched??) analogies drawn between Kamala Harris and Keir Starmer.
🛥️ 🌪️ Lots of headlines around the sailing yacht that sank off the coast of 🇮🇹 with Mike Lynch, the British tech entrepreneur, on board. Still unclear to me if the company he founded, Alchemy, was a complete scam or if HP just bought a dud 🤷
🎮 💰 The Sunday Times released its first ever UK Gaming Rich list, a sign of how the industry has become a UK success story. Top ranks driven by Gardenscapes, GTA and Candy Crush.
🥜🧈 Major headlines across the pond as the NY Times reported on the UK finally embracing peanut butter.
16 August 2024
👍 Positive macro data this week as Q2 GDP growth came in at 0.6%, in line with expectations, and only marginally below the 0.7% growth seen in Q1. Retail sales rebounded in July, in line with expectations, helped by good weather and Euro 2024.
💷 Inflation rose less than expected to 2.2% in July, with services inflation falling from 5.7% to 5.2%. Services pressures have been a persistent concern for the BoE, so this raises the chances of further rate ✂️ later in the year.
✅ Strong results from UK 🚗 insurer Admiral, benefitting from higher premiums, and easing price pressures for repairs. Flip side of this is that high insurance premiums continue to add to cost of living pressures.
💰 Balderton Capital closed on total funds of $1.3bn for European investment split between VC/early stage and growth. Small 🍳 in US terms but a prominent European manager.
🗳️ 🏛️ 💰Lots of shenanigans at UK local government level as further details emerged of Thurrock council investing (and losing) hundreds of millions in solar farms off the back of advice from a one-man show who spent the proceeds on a lifestyle of 🛥️, ✈️, and country estates.
29 June 2024
👍 UK GDP growth in Q1 was marginally better than expected with revised figures showing a 0.7% expansion vs. original estimates of 0.6%.
💊👎 Pharmaceutical giant GSK fell after US regulators changed their guidance on the use of one its vaccines. ⌚️👍Luxury retail group WOSG was up with management noting signs of stabilisation in the UK. 🍷 Chapel Down, one of the largest and most well-known UK winemakers, announced it was looking at options to fund growth.
🏠 A gloomier tone from the Bank of England warning that rising interest rates had not yet filtered through to mortgage holders in its latest Financial Stability Report. Higher payments coming for many, even if rates stabilise from here, although worth noting how well households have coped to date. Key to me is if employment holds up, particularly in London and the South East, where house prices and high and mortgages hefty.
🏭 Tata Steel, owner of one of the two remaining blast furnace sites in the UK was locked in negotiations with unions on proposals to shut down the blast furnaces at Port Talbot. Look out for a future post on the past, present and future of the UK steel industry.
🗳️ The lacklustre general election campaign rumbles on with a betting scandal dominating coverage. Is it me or does it feel like there’s very few signs in windows and gardens this time round. People becoming less party-affiliated or just general apathy?
⚽︎ Euro 2024 continued, 🎤 Taylor smashed it in London, ☀️ is still shining and 🎾 on its way!
21 June 2024
🎯🔐 UK stockbroker Hargreaves Lansdown (HL.) (the Charles Schwab of the UK) accepted a £5.4bn from a CVC-led consortium, in the latest public to private UK deal.
💷🛒⚡️ UK CPI inflation fell to its lowest level in three years with prices rising 2.0% in the 12 months to May from 3.2% in March. Services inflation remains high but is easing.
🏛️ The Bank of England left rates unchanged at 5.25%, noting how key indicators of inflation persistence “continued to moderate”. August rate cut continues to look likely.
🗳️ The Conservative’s dire election campaign continues, and now involves insider gambling from campaign staff.Most people unenthused as we slow march towards polling day on 4th July.
💂 Once again London is Europe’s largest equity market thanks to political jitters across the Channel 🥐🍷
⚽︎ Euro 2024 kicked off, 🎤 Taylor Swift is in town and the ☀️ has been sort of shining.
⚽︎ + 🎤+ ☀️ = GDP bump for June on its way!