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December Market Commentary

By December 7, 2023No Comments


The ongoing crisis in the Middle East continues to dominate the headlines, although the temporary truce which saw many of the hostages in Gaza released was undoubtedly welcome.

However, it must be said that the geopolitical tensions caused by the Israel-Hamas conflict pose a very real risk to the wider global economy, which is already facing ongoing problems such as high inflation and high interest rates.

As always, let’s take a closer look at key markets across the globe to find out how they’ve been performing recently.


Chancellor of the Exchequer Jeremy Hunt delivered his Autumn Statement in November, in which he announced measures such as a cut in the main rate of National Insurance and making full expensing for businesses permanent.

Mr Hunt’s speech was accompanied by forecasts from the independent Office for Budget Responsibility (OBR), which predicts the economy will grow by 0.6 per cent this year.

The OBR has also downgraded its growth forecasts for the next two years. The body expects growth of 0.7% in 2024, down from its earlier prediction of 1.8%. This will be followed by 1.4% growth in 2025, which is lower than its previous forecast of 2.5%.

Although the UK has managed to avoid a recession in 2023, growth remains sluggish, with the Office for National Statistics (ONS) confirming that gross domestic product failed to increase at all in the third quarter of the year.

Inflation is one factor that has put the brakes on growth over the last few years, and although it fell from 6.7% in September to 4.6% in October, it remains well above the Bank of England’s target of 2%. The OBR believes that inflation will fall to 2.8% by the end of 2024, before reaching the Bank’s 2% target rate in 2025.

The Bank of England’s Monetary Policy Committee (MPC) had been steadily raising interest rates since December 2021 in an effort to bring inflation under control. However, November saw the MPC vote to keep interest rates on hold for the second consecutive month at 5.25%.

Although this suggests its strategy to drive down inflation is paying off, it still means interest rates are at a 15-year high, and Bank of England Governor Andrew Bailey warned it is “much too early to be thinking about rate cuts”.

A fall in retail sales will also have contributed to the poor economic growth figures, as ONS data shows the volume of products sold in October fell to their lowest level since February 2021, when much of the country was in lockdown. The British Retail Consortium’s data told a similar story, as it showed footfall on high streets, retail parks and shopping centres fell by 5.7% in October year-on-year.

Online fashion retailer Asos is one well-known brand that has struggled in this climate, as it announced a £300m loss before tax in the year to the start of September. This led to its share price falling by more than 11% and the company now expects to see a 15% fall in sales over the next year.

Despite the gloomy headline figures, there were chinks of light to be found in the retail sector. Marks & Spencer, for example, reported that profit before tax rose by 56% to £326m in the six months to the end of September, thanks to a surge in food and clothing sales. This was better than expected and came as the company focuses on revamping its brand. However, Chief Executive Stuart Machin acknowledged that trading could be hit by factors such as high interest rates, global conflict and unpredictable weather.

The film industry has been one notable bright spot for the economy in recent years, with Warner Bros stating that its blockbuster movie Barbie has contributed more than £80m to the UK economy.

The energy sector has, unsurprisingly, also performed strongly, with oil and gas giant Shell reporting earnings of £5.1bn between July and September, and BP posting profits of £2.7bn in the same quarter.

In the financial services sector, new rules allowing bankers to earn unlimited bonuses came into force, which UK Finance believes will help the country be more attractive to international professionals. However, the scrapping of the cap on bonuses was criticised by the TUC, which described it as “obscene”.

Meanwhile, trade union Unite has revealed that high street bank Barclays is planning to cut 900 jobs in the UK in an effort to reduce costs. Barclays itself has not confirmed the scale of the job losses, which Unite says will be seen across back office divisions such as finance, IT and compliance.

Elsewhere in the financial services industry, city firm Lloyd’s of London has apologised after an independent report found it had “significant connections to the transatlantic slave trade”, as “the insurance of ships, cargo and captured enslaved persons” facilitated its growth.

The pound ended November down 0.33% against the dollar, and on the financial markets, the FTSE-100 Index ended the month at 7,457 points, up 1.86% on October.


The European Commission has downgraded its growth forecast for both the EU and the eurozone in 2023 from 0.8% to 0.6%.

In its Autumn forecast, the commission said Europe’s economy has “lost momentum” this year, due to factors such as the high cost of living, rising interest rates and weak external demand. However, it is confident that economic activity will “gradually recover going forward”.

Germany looks set to drive much of this growth, as the International Monetary Fund believes the country will overtake Japan as the third largest economy in the world before the end of 2023.

Inflation, meanwhile, is estimated by the European Commission to have fallen to a two-year low in the eurozone in October and is likely to continue declining in the coming months.

One issue that could affect growth in the coming months is a fall in wine production. The European Union is the world’s largest producer, consumer and exporter of wine, but according to the International Organisation of Vine and Wine, wine production has fallen as a result of bad weather conditions, including drought and heavy rainfall.

Although yields have remained unchanged in France this year, they have fallen by 14% in Spain and 12% in Italy.

The big political news in Europe was the victory of controversial hard-right politician Geert Wilders in the Dutch general election. Mr Wilders’ Freedom party will have to form a coalition with another party in order to govern and talks are now ongoing.

November also saw Ukraine move closer to its ambition of joining the EU, as the European Commission has recommended that formal talks on its accession to the bloc get underway.

In other political news, Greece has found itself in a diplomatic spat with the UK, after Prime Minister Kyriakos Mitsotakis restated the country’s long-standing position that the Parthenon Sculptures should be returned from the British Museum.

UK Prime Minister Rishi Sunak subsequently cancelled his scheduled meeting with Mr Mitsotakis, while Downing Street claimed a promise not to publicly talk about the Parthenon Sculptures had been broken.

Greece has denied promising not to raise the issue, but Mr Sunak later doubled down, accusing Mr Mitsotakis of trying to “grandstand” rather than discuss “substantive issues for the future”.

Meanwhile, Portugal’s Prime Minister António Costa has resigned amid an inquiry into alleged corruption. The investigation is centred on concessions awarded for lithium mines and hydrogen production, and has seen Mr Costa’s chief of staff Vitor Escaria being issued with a detention warrant.

In the aviation sector, no-frills airline Ryanair has reported a strong performance, with passenger numbers rising by 11% to 105.4m in the six months to September. This helped the airline achieve profits of £1.9bn, despite a 24% increase in average fares.

By contrast, shipping firm AP Moller-Maersk has seen its profits fall by 92% in its latest quarterly results and is cutting a further 3,500 jobs as a result. This followed the loss of 6,500 roles earlier this year.

On the financial markets, Germany’s DAX index rose by 9.54% in November to end the month at 16,222 points. Meanwhile, the French CAC 40 index rose by 6.19% to end at 7,311 points.


The US government found itself on the brink of a shutdown for the second time this year, but Congress has passed a temporary funding measure that ensures federal agencies can keep operating until the new year.

This came amid fairly positive figures for the US economy, which grew by 4.9% between July and September, thanks in part to an increase in consumer spending. However, Deutsche Bank is predicting the US could face a mild recession in the first half of 2024.

The US Federal Reserve, meanwhile, has held its key interest at 5.25%-5.5%, which means they remain at a 22-year high. Economists at Goldman Sachs have predicted that the Fed will delay cutting rates until the final quarter of 2024, as the economy has so far managed to avoid recession. As David Mericle of Goldman Sachs says, the US economy has “made substantial progress toward a soft landing”.

Inflation figures will have also made positive reading for policymakers, as the rate of price increases fell from 3.7% in September to 3.2% in October – the lowest rate since July.

However, the data was less positive in the labour market, with employers adding just 150,000 jobs in October. This followed several months where the number of job gains was higher than had been expected.

Two high-profile industrial disputes reached a positive conclusion in November, with the United Auto Workers union agreeing a deal with General Motors to end a six-week strike. This followed similar agreements with Ford and Stellantis.

Meanwhile, the four-month actors’ strike in Hollywood has come to an end after Sag-Aftra reached an agreement with the Alliance of Motion Picture and TV Producers (AMPTP). Actors had walked out earlier this year amid a dispute over pay and the use of artificial intelligence.

Meanwhile, WeWork’s ongoing problems continued throughout November, with the office-sharing firm’s shares plunging by more than 50% in the wake of reports it could be about to file for bankruptcy.

Recent years have been characterised by tensions between the US and China, but the two nations have agreed to cooperate on reducing methane pollution. While this represents a positive step forward ahead of a UN climate summit, the joint agreement didn’t make any commitments on coal and other fossil fuels.

On the financial markets, the Dow Jones rose by 8.14% to end the month at 35,743, while the more broadly-based S&P 500 index went up by 8.53% to end at 4,551.

Far East

As we noted earlier, diplomatic relations between China and the US have been frosty in recent years. However, we may have witnessed a slight thawing of tensions as Chinese President Xi Jinping met with his US counterpart Joe Biden in California.

The meeting, which occurred on the sidelines of the Asia-Pacific Economic Co-operation summit, marked the first time the two had met since November last year.

Mr Xi has also met with Australian Prime Minister Anthony Albanese in recent weeks, which again signals a potential improvement in diplomatic relations, following disputes over issues such as security and trade.

Global concerns over China’s poor relations with other major economies and the country’s slow growth since the lifting of Covid restrictions have led to many international businesses pulling out of the market.

According to official data, China recorded a deficit of £9.6bn in foreign investment between July and September, which indicates that many businesses are reinvesting their profits in other countries rather than China.

As Nick Marro from the Economist Intelligence Unit says: “Anxieties around geopolitical risk, domestic policy uncertainty and slower growth are pushing companies to think about alternative markets.”

Nevertheless, China is planning to step up economic cooperation with South Korea, following a meeting of representatives from sectors such as the automotive industry.

Japan, meanwhile, has also struggled with economic growth, as its gross domestic product contracted by 2.1% in the third quarter of 2023. This followed growth of 4.5% in the previous quarter and was much larger than the decline that many analysts had forecast.

The slump in output reflects the continued impact of high inflation on households in Japan, as well as slow global demand.

Japan also looks set to lose its status as the third largest economy in the world, as the International Monetary Fund (IMF) believes it will be overtaken by Germany before the end of the year.

The IMF has forecast that the Japanese economy will grow by 2% this year, thanks in part to a rebound in car exports and an increase in inbound tourism.

On the financial markets, Hong Kong’s Hang Seng index fell by 0.34% to end November at 17,042. Meanwhile, Japan’s Nikkei index rose by 5.97% to 33,486. China’s Shanghai Composite index rose by 0.22% to 3,029 and the Korea Composite Stock Price Index went up by 10.16% to 2,535.

Emerging Markets

India’s status as a burgeoning economic powerhouse has been reinforced by a forecast from Morgan Stanley, which predicts gross domestic product will go up by 6.5% in 2024 and 2025.

The organisation believes its strong performance is being driven by strong domestic fundamentals and the implementation of recent policy reforms.

Meanwhile, the IMF is predicting that India will become the third largest economy in the world by 2027, overtaking Japan.

Speaking during its World Economic Outlook news briefing, IMF Chief Economist Pierre-Olivier Gourinchas described India as “one of the growth engines in the world economy.”

The IMF forecast has been hailed by Finance Minister Nirmala Sitharaman, who said that by 2047, India aspires to be a developed economy.

In sanction-hit Russia, Prime Minister Mikhail Mishustin has confirmed it will simplify investment processes for people and businesses from so-called “friendly” countries.

Russia has been isolated by many western nations following its invasion of Ukraine last year, prompting the government to seek to establish a coalition of allies to bolster its economy. These countries are Belarus, Brazil, China, India, Kazakhstan, Saudi Arabia and Turkey.

“Creating more convenient conditions for foreign enterprises and entrepreneurs is an important part of the government’s systemic efforts to achieve financial sovereignty as part of the implementation of the national goals set by our president,” Mr Mishustin said.

The European Commission, meanwhile, is reportedly toughening up its sanctions regime against Russia, with Politico reporting a new ban on Russian diamonds is to be introduced from January 2024.

Overseas sanctions and Russia’s investment in its military operations in Ukraine have been cited by Elvira Nabiullina, Governor of the Central Bank, as a cause of ongoing labour shortages and weak growth.

“We now find ourselves in a situation where the economy has practically fully used the available resources,” she said. “Unemployment is 3% and in some regions it is even lower. This means there are practically no workers left in the economy, the situation with personnel is really very acute. For further growth of the Russian economy, increased labour productivity is needed.”

Nevertheless, the Russian government remains defiant, with Kremlin spokesperson Dmitry Peskov telling reporters that the country is not scared of more sanctions being imposed.

“Russia has been living under a sanctions regime for quite a long time, for decades, and we have sufficiently adapted to it,” he said.

In Brazil, the economy bounced back by more than expected in the second quarter of the year, with gross domestic product increasing by 0.9% in the three months to the end of June. This was attributed to a surge in industrial activity and a strong performance in the service sector.

The figures have been welcomed by President Luiz Inácio Lula da Silva, who is keen to see interest rates reduced and an increase in the minimum wage and wider public spending.

On the financial markets, India’s BSE Sensex index rose by 5.34% to end at 66,988 points. Russia’s MOEX index went down by 1.10% to close at 3,165 points, while Brazil’s Bovespa index ended the month up 11.67% at 126,351 points.

And Finally…

A heartwarming, festive entry for this section as we gear up for Christmas, as a £700 advert for a pub has gone viral.

Charlie’s Bar in Enniskillen, Co Fermanagh, created a video to highlight the issue of loneliness during the festive season and it generated a huge online response.

Even John Lewis, the market leader when it comes to tear-jerking Christmas ads, had to acknowledge the pub’s effort, sharing and praising the video on its TikTok account.

Speaking to Sky News, bar manager Una Burns, described the response to the ad as “completely overwhelming”.