Week ending 16/08/24 - UK sitting pretty…but risks are out there

The Market Call

This week’s Market Call sees Jeremy and Gareth discussing the UK outlook.

UK GDP data was up 0.6% quarter-on-quarter, showing that the economy is growing, albeit slowly, and putting the UK at #3 in the G7 group - a reassuring backdrop for investors. Meanwhile we also had inflation “down but not out”…with the figure this week showing a less-than-expected rise to 2.2%. Producer prices are showing some signs of increase at the output side, and there were slightly higher levels of inflation in terms of inputs…suggesting that companies are swallowing some of the price increases. This can’t last forever, so there are a couple of warning bells longer-term for the inflation outlook.

Nevertheless, the outlook for the UK economy seems solid, and the UK markets are seeing good levels of interest from global investors. It might not feel like we’re off to the races, but at least our markets survived the recent volatility relatively unscathed when compared to other major financial centres.

Sterling remains strong, and the US dollar is gradually weakening…strange with global risks rising in both the Middle East and Europe, and potentially a sign of pressure from the central bankers. We’ll learn a lot more from the Jackson Hole meeting of those central bankers in the next week – most of all regarding rate outlooks for the USA and Japan, affecting the all-important but hard-to-quantify Yen Carry Trade, in which a small wobble rocked markets dramatically over the past fortnight.

UK company news saw a regulatory approval for a major deal at Beeks, a reassuring update from CML Microsystems, but a major warning from Accesso Technology, who are seeing weak levels of customer visits at the visitor attractions/theme parks they serve.

Next week we have FOMC minutes in the USA, and Japanese inflation data…which could re-focus people on the carry trade if the figure is out of line with the 2.9% expectation.

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