16 January 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
"UK labour market data today for October to November showed a smaller than expected increase in jobless claims, with unemployment coming in a shade better than expectations, at 4.2%. Job vacancies continued to decline for what was the 17th consecutive month, with average weekly earnings annual growth rates falling to 6.5% from 7.2%. Annual growth in real total pay remained at 1.3% but rose from 1.1% in September to 1.7% in November, reflecting a falling rate of inflation and ultimately meaning that consumers are increasingly better off. This recovery in spending power does not unfortunately include everyone, with construction workers seeing a continued drop in the rate of wage growth, which now stands at 4.5%, below the headline rate of inflation and reflective of persistently weak conditions in this sector. Retailers and the leisure sector have in contrast seen a continued uptick in wage growth, now standing at 7.2%, as the sector continues to take a larger share of the modest economic growth on offer.
"European equities look likely to give back some of the very strong returns booked in Q4, as confidence around continuous rapid disinflation and earlier than signalled cuts by the ECB is being tested with ECB officials putting on a co-ordinated display of hawkishness in the past 24 hours, all essentially saying the same thing – don’t bet on early rate cuts. Recent inflation figures in the US have been a sharp reminder that the battle is not yet won, whilst events in the Red Sea could make themselves felt in consumer prices in weeks to come as 10-12 day delays clearly add up on each successive leg and supply chain shortages begin to bite. Thankfully healthy shipping capacity, a mild winter and high levels of gas storage mean that freight rates are still a magnitude lower than during Covid and energy prices remain unaffected. Any change in this status quo would be a clear early warning signal."
