Week ending 13th December 2024.

As you can see from the accompanying table, it was a mixed week for markets with key economic data points to digest, ahead of final interest rate decision meetings for major central banks.

US inflation data was a focal point for investors this week with the Federal Reserve’s last policy meeting of the year set to commence on the 17^th of December with an announcement on the rate decision made the following day. The Consumer Price Index (CPI) rose 2.7% higher year-on-year in November, while core inflation held steady at 3.3%. On a monthly basis, the index rose 0.3%, faster than the 0.2% rate in the previous month.

On Thursday, the US Labour Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000. While some of the increase was attributed to seasonal factors around the Thanksgiving holiday, continuing claims also rose and remained near three-year highs, a sign that it is taking longer for some unemployed individuals to find a job. The jobs data served as another indication of a softening labour market following the prior week’s report of an uptick in the unemployment rate in November. Despite the stalled progress in inflationary pressures, the combination of weak labour data and steady inflation has led markets to price in a 25 basis point rate cut at the upcoming Fed meeting.

UK stock markets closed slightly lower on Friday as investors digested the news of an unexpected contraction in the economy during October whilst the pound also weakened against major currencies. The UK economy contracted by 0.1% month-on-month in October, matching the decline seen in September and falling short of forecasts for a modest 0.1% growth. The slowdown was primarily driven by declines in production and construction, with some pointing to a pause in activity ahead of the Autumn Budget on the 30^th October as a possible factor. Despite the disappointing economic figures, the FTSE 100 had eked out intraday gains, benefiting from the weaker pound which helped lift the earnings of companies with significant international exposure.

Meanwhile, consumer confidence showed slight improvement with the GfK Consumer Confidence Index rising to -17 in December, its second consecutive month of gains. Despite better personal finance expectations (+1), overall economic confidence remains subdued.

The ‘my wealth invest’ app will be available to clients who hold investments with my wealth, which is a trading name of Wealth at Work Limited, part of the Wealth at Work group.

As the Bank of England (BoE) prepares for its final policy meeting of the year, markets do not expect the economic slowdown to lead to an interest rate cut. Most participants anticipate the Bank will hold rates steady at 4.75%.

In Europe, the European Central Bank (ECB) took action this week by cutting interest rates by 25 basis points for the fourth time this year, bringing the deposit rate to 3%. ECB President Christine Lagarde noted that while the disinflationary process is on track, economic recovery remains slow, with growth projected at just 0.7% in 2024. She emphasised the ECB’s data-dependent approach to policy, stating that the bank is not committed to a specific rate path moving forward.

In France, President Emmanuel Macron appointed centrist leader François Bayrou as the new prime minister, marking the fourth person to hold the position in just one year. This move is part of Macron’s broader efforts to stabilise his government and address ongoing political challenges.

Looking ahead, key events include industrial production and retail sales data from China, UK inflation and unemployment figures, and monetary policy meetings for the Federal Reserve and Bank of England. While the Fed is expected to cut rates, weaker UK GDP data has raised speculation about potential action from the BoE.

Kate Mimnagh, Portfolio Economist