- FTSE 100 starts the week on the front foot amid hopes for UK economy
- Moody’s cuts US credit rating outlook to negative.
- Investors await further comments from policymakers.
- Oil slips on demand concerns amid ongoing geo-political tensions.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The FTSE 100 has found a dose of Monday motivation amid hopes that peak interest rates have been reached, despite warnings about America’s huge debt pile and ongoing geo-political fracture. British Land has helped cement a more upbeat mood, helped by the performance of its retail parks portfolio, with shares rising 5% in early trade. Results appear to have spread wider cheer about the resilience of the UK economy, with the company expecting rents for commercial property to rise next year.
UK house prices dip
The outlook from British Land is a contrast to data out from Rightmove. High mortgage costs are taking a toll on the UK housing market, with average new seller asking prices suffering the sharpest fall in November for five years. Prices dropped 1.7% on a monthly basis, as higher interest rates have prompted a wave of nervousness about moving house. According to Rightmove, the market has slowed, with homes taking 62 days to sell, compared to 40 days this time last year. It’s hardly surprising given the era of cheap borrowing has hurtled to an end and average mortgage rates hover around 6%, putting many hopes of moving up the property ladder in the deep freeze.
Investors await inflation data and bank policymakers comments
There is a little more optimism edging in on markets ahead of key inflation data out this week, with sentiment fluctuating about what lies ahead for monetary policy. Investors sentiment is volatile when it comes to expectation of bank policy, swinging from pessimism to optimism from session to session. Investors will be hanging on words of central bank policymakers this week, as a slew of speeches are expected for clues about the future trajectory of monetary policy. Bank of England MPC members Sarah Breeden and Catherine Mann are set to speak later today, while Chief economist Huw Pill will make a talk at the Festival of Economics in Bristol on Tuesday. His views about the direction of monetary policy for central banks will be poured through for clues about how split the Bank of England is on its future interest rate decisions.
Moody’s downgrades US credit rating outlook
Moody’s downgrade of the US credit rating outlook from stable to negative refocuses concern about yawning fiscal deficits and political intractability in Washington. The shot across the bows at lawmakers helped nudge the yield on 10 and 30-year Treasuries up again, highlighting investors lack of confidence of an easing of budgetary pressures any time soon. While government borrowing remains high and refinancing looms, the cost of the debt burden is increasing. The hawkish stance from Fed Chair Jerome Powell about the need for interest rates to stay elevated, blocks off the prospect of an easier exit route from the smouldering debt situation. He’s stressed data will drive policy, which is why Wednesday’s CPI inflation figures will be so closely watched.
Oil prices dip amid geo-political tensions
Oil prices have dipped back amid expectations of lower demand from energy hungry China and the United States. Brent Crude is trading below $81 dollars a barrel, as traders continue to assess China’s economic slowdown and the implications of last week’s forecast from the International Energy Agency that US oil consumption will fall by 300,000 barrels a day this year. For now, concerns about the conflict in Israel and Gaza spilling over into other countries and disrupting oil supplies have dissipated. However, geo-political concerns are still bubbling, given the Middle East situation and the ongoing war in Ukraine and the tense relationship between the US and China will also take centre stage this week when Joe Biden meets with Xi Jinping in San Francisco. There will be hopes of an easing of tensions, but there is still the risk that fresh fracture could emerge.’’
