Closing post
Time for a recap.
UK government bonds are rallying today as the City bets that UK interest rates will fall next year.
The yields, or interest rates, on shorter-dated UK gilts fell, after Bank of England chief economist Huw Pill indicated last night that the central bank could start lowering borowing costs next summer, as markets expect.
The yield on two-year UK bonds, and five-year bonds, both fell to their lowest level since June.
The move came after Pill said last night that market expectations for cuts next summer were not “unreasonable” – while cautioning that the outlook was likely to change over the next nine months .
The money markets are now indicating that UK interest rates will be cut to 4.5% by December 2024, down from 5.25% at present.
🇬🇧 UK 2-YEAR GILT YIELDS DROP MORE THAN 7 BPS ON DAY pic.twitter.com/0xeKvGbaqz
— PiQ (@PiQSuite) November 7, 2023
Falling interest rates could help the UK housing market strengthen.
Prices rose by 1.1% on a monthly basis in October, new figures from Halifax show, helped by a shortage of products. They were still 3.2% lower than a year ago, though.
Fears of weaker demand have also hit the oil price today, with Brent crude dropping 2% to $83.31, the lowest since August.
Fears that the UK is heading for a recession this winter have intensified amid signs Britain’s hard-pressed households are cutting spending as they save for Christmas and higher fuel bills.
Recession fears are on the rise in Germany too, after a disappointing fall in factory output in September.
German industrial production dropped by 1.4% month-on-month in September, which ING said suggested the country could be in a technical recession by the end of this year.
The UK’s cost of living squeeze has eased, with supermarket inflation falling into single-digits for the first time in over a year.
The UK government is planning a ban on the creation of new leasehold houses in England and Wales, through a shake-up of the housing market announced in the King’s speech today.
In the banking sector, UBS has reported a $785m (£637m) quarterly loss, its first in nearly six years, as the Swiss banking group counted the costs of rescuing its rival Credit Suisse earlier this year.
PwC’s chair has defended plans to cut up to 600 jobs rather than cut partner pay amid a slowdown in client demand, saying it was important to offer “competitive” pay packages to senior staff.
Stocks have dipped slightly in New York at the start of trading.
The Dow Jones industrial average is down 40 points, or 0.1%, to 34,055 points.
Energy stocks are sliding, following the drop in the oil price today.
Technology stocks are stronger, though, with the Nasdaq composite index up 0.35%.
Meanwhile in London, mining company shares are also weaker, as commodity prices are hit by growth fears.
