Investors continue to receive mixed economic data. Here in the UK, wages increased at a slower pace than expected, which likely eases pressure on the Bank of England to raise interest rates again before the end of the year. On a more negative note, UK Consumer Price Index (CPI) inflation held steady at 6.7%, which was slightly higher than consensus estimates. Whilst an easing of supply chain pressures seems to have cooled goods inflation, rising fuel prices once again proved something of a headwind. For anybody waiting to see what happens, the next Bank of England interest rate decision comes on Thursday 2nd November.
Away from the UK, US Federal Reserve Chair Jerome Powell remains in a hawkish mood with his suggestion that US economic strength could yet require still tougher borrowing conditions. In China, GDP growth came in at 4.9% thanks to better retail sales and industrial production – close to its long- term target of 5%. On the face of it, this should be good news as China has contributed significantly to global GDP growth since the Financial Crisis, but there remain dark clouds lingering over their real estate sector which continues to be of enormous importance to domestic consumer wealth and more globally, to the demand for commodities such as iron ore.
This is not a political column, and the performance of stock markets is trivial compared to events unfolding in the Middle East but for investors, markets have moved into a risk-off mode. A flight to safe haven assets has resulted in the gold price rising to a two-month high whilst the oil price is again above US$90 per barrel. This is good for the energy companies making up about 15% of the FTSE 100 Index, but bad for energy-dependent businesses and consumers, particularly if like me, you are about to fill up your heating oil tank ahead of winter.
