Written by Ilaria Massei
The Office for National Statistics published a new set of data elaborating on a new methodology, which signalled that the UK’s unemployment rate increased to 4.2% during the three months ending in August, compared to 4.0% in the period from March to May. On a separate note, a survey conducted among purchasing managers indicated that business activity within the private sector continued to be in a contractionary phase for the third consecutive month in October. Net approvals for house purchases, which act as a gauge for future borrowing trends, declined to 45,400 in August 2023. This represented a drop from the revised July figure of 49,500, but slightly surpassed the market’s projected 45,000. This decrease marked the lowest point since February, reflecting softened housing activity in response to the Bank of England’s assertive tightening measures.
Following ten consecutive interest rate hikes, the European Central Bank (ECB) opted to keep its key deposit rate steady at 4.0%. The ECB reaffirmed that maintaining this rate for an extended period would assist in bringing back inflation to its medium-term goal of 2.0%. The ECB President Christine Lagarde expressed that the eurozone’s economic condition was fragile and expected to persist in this state for the remainder of the year.
In the US, the focus was on earnings announcements. Although the majority of the mega-cap tech firms displayed robust growth and surpassed consensus forecasts, investors appeared to react strongly to signs of increasing costs, putting downward pressure on stock prices. Most of the equity indexes finished lower last week, moving to correction territory, defined as a decrease by more than 10% of an equity index from a recent high.
Elsewhere, equities in China rose as an improvement in industrial profits suggested that the economy may be stabilising. Additionally, last Tuesday, China’s government authorised the issuance of RMB 1 trillion in additional sovereign debt and approved a plan to raise the fiscal deficit for 2023 to about 3.8% of gross domestic product, up from the 3% limit it set in March.
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