Labour and the Chancellor unveiled their first budget for fourteen years last week with spending plans for the next five years laid out. A major expansion in government spending was announced (£70.0bn), funded by a significant increase in taxation (£40.0bn) and borrowing (£32.0bn)[1] with the Office for Budget Responsibility (OBR) suggesting the Chancellor’s plans could ultimately lead to a deterioration in economic growth rates over the longer term[2]. Despite a bounce on Friday, UK equities lost ground during the week with the FTSE 100 and FTSE 250 declining by -0.9% and -1.6% respectively. Whilst the Chancellor did announce a reduction in inheritance tax relief on AIM shares, the fact that some relief remained in place provided a much needed boost for the AIM market which rose by +2.3%, the bulk of that spike coming after the budget update on Wednesday.

Elsewhere, US Equities lost ground in what was a busy week for the publication of earnings results. The S&P500 fell by -1.4% in dollar terms, with growth stocks lagging their value counterparts in part due to cautious updates from the likes of Alphabet, Meta Platforms and Microsoft[3]. Friday’s US jobs report also gave investors much to ponder with the US economy adding just 12,000 jobs last month which was the lowest recorded since December 2020[4]. Returning to Europe, the MSCI Europe ex UK index declined by -1.2% in euro terms despite a better than expected GDP report covering the third quarter. Germany, France and Spain all reported improved output during the quarter although Italy flatlined[5].

Moving to Asia, the Nikkei 225 added +0.4% (local currency) after the Bank of Japan elected to hold interest rates steady at last week’s policy meeting. Meanwhile in China, the Shanghai Composite shed -0.8% (local currency) despite various economic indicators including the official manufacturing sector Purchasing Manager Index (PMI) and new home sales, pointing towards an improved economic backdrop.

Macro Data

Week Ahead

Source: Refinitiv Workspace, 04/11/24
 

[1] HM Treasury – Autumn Budget 2024

[2] Office for Budget Responsibility – Economic & Fiscal Outlook October 2024

[3] T. Rowe Price – Global Markets Weekly Update 01/11/2024

[4] US Bureau of Labor Statistics – Employment Situation Summary October 2024

[5] Eurostat – Q3’24 GDP

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