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November Market Commentary

By November 2, 2023No Comments


All eyes have been on the Middle East following Hamas’ terror attack on Israel on October 7th, which led to the deaths of more than 1,400 people.

The resulting conflict has led to a humanitarian crisis in Gaza, fears of a possible escalation across the wider region, and a surge in oil prices.

We will be keeping a close eye on the unfolding situation in the Middle East and if it has an effect on the wider global economy.

As always, let’s take a closer look at what’s been happening in key markets across the world over the last month.


Economic growth in the UK remains sluggish, as official figures showed that GDP went up by just 0.2% in August 2023. According to the Office for National Statistics (ONS), this was driven largely by strong growth in services, but offset by falls in sectors such as manufacturing and construction. Data also showed that the fall in GDP in July was bigger than originally thought, with the figure being revised from 0.5% to 0.6%.

Meanwhile, ONS figures indicated that efforts to drive down inflation are still yielding limited results. The rate of inflation remained unchanged from the previous month in September at 6.7%, which is well above the Bank of England’s target of 2%. The ONS attributed the high rate partly to petrol and diesel costs, but noted that food and non-alcoholic drink prices have fallen.

This was backed up by the British Retail Consortium, which reported a 0.1% fall in food prices in September – the first monthly drop for more than two years. However, food prices are still 9.9% up on where they were a year earlier.

Ken Murphy, Chief Executive of supermarket chain Tesco, believes the pace of rising food prices will continue to slow this year. Speaking to BBC News, he insisted that Tesco is trying to “lower prices wherever we can”, and acknowledged “how challenging it is for many households across the country”.

There was another indication that cost of living pressures may finally be easing, as ONS data showed wages rose by 7.8% between June and August year-on-year. This means that average pay growth rose above inflation for the first time in nearly two years.

With a general election looming, you might expect the government to start talking about or dangling tax cuts in front of a hard-pressed electorate. But while recent figures may suggest we may be starting to turn a corner, the Institute of Fiscal Studies (IFS) believes there is no compelling case for net tax cuts “any time soon”.

“The UK economy remains stuck between weak growth on the one hand and the risk of persistently high inflation on the other,” the IFS said. “An ill-timed fiscal loosening – such as an unfunded package of pre-election tax cuts – might give a short-term economic sugar rush, but could prove unsustainable and ultimately mean a protracted recession as interest rates rise even further to bring inflation back under control.”

The IFS added that the “Chancellor is in a terrible bind, as will be whoever is Chancellor after the general election”.

There was more positive news from credit rating agency Moody’s, which has dropped its negative outlook on the UK, partly in response to Chancellor Jeremy Hunt’s decision to scrap most of the measures announced in last year’s Mini-Budget.

Meanwhile, the International Monetary Fund has been forced to defend itself against criticism from the Treasury that its UK economic assessment is too pessimistic. Chief Economist Pierre Olivier Gourinchas told the BBC that its growth forecasts exceed the Bank of England’s estimates, and that it is trying to be “honest interpreters of the data here”.

October also saw confirmation that the UK’s biggest infrastructure project would be dramatically scaled back, with Prime Minister Rishi Sunak announcing that the leg connecting the West Midlands and Manchester would not go ahead.

It has been a mixed few months for the banking sector, with Metro Bank recently being denied permission from the Bank of England to use its own internal models to assess its mortgage risks. However, a £925m deal was later struck that enables the business to raise extra funds from investors – an agreement that secures its financial position, but means it has to cut about £30m in costs every year from 2025. By contrast, Lloyds revealed a pre-tax profit of £1.9bn for the three months to September, up from £576m a year earlier.

October also saw the removal of the cap on bankers’ bonuses, a move first announced in last year’s controversial Mini-Budget, and one of the few measures announced by Kwasi Kwarteng to be retained by Jeremy Hunt. The government hopes that the move will help to make London a more attractive place to do business post-Brexit.

On the high street, fashion retailer Next has confirmed it is to buy clothing brand Fatface for £115m. This follows Next’s acquisition of Cath Kidston and Joules in recent months.

Meanwhile, a proposed merger of Vodafone and Three is still under close scrutiny, with bosses having to deny it would lead to price rises after concerns were raised by the Unite union. If the merger goes ahead, it would lead to the creation of the UK’s biggest mobile network and service around 27m customers.

The pound ended October unmoved against the dollar, and on the financial markets, the FTSE-100 Index ended the month at 7,321 points, up 3.76% on September.


The European Central Bank (ECB) left its interest rates unchanged for the first time in over a year, following ten consecutive rate hikes.

Policymakers had been rating hikes in order to tackle the rising cost of living, but thankfully, inflation across the eurozone has started to come down. The rate of inflation hit 4.3% in September, which is well down on the peak of 10.6% seen in October 2022.

The ECB believes that while inflation is likely to remain fairly high for some time yet, interest rates are now at a level where they could substantially contribute to it meeting its 2% target.

Christine Lagarde, President of the institution, added: “The economy is likely to remain weak for the remainder of this year. But as inflation falls further, household real incomes recover and the demand for euro area exports picks up, the economy should strengthen over the coming years.”

The eurozone economy contracted during the last quarter, according to new data from S&P Global, as rising borrowing costs and higher prices led to consumers limiting their spending. The report also showed that declining output in the services and manufacturing sectors also contributed to the downturn.

Speaking after the data was published, Franziska Palmas of Capital Economics said it still expects the eurozone economy to fall into recession in the second half of 2023.

Germany, in particular, is going through a tough period economically right now, with the European Commission predicting that the country will face a prolonged recession this year.

It is likely to be the only major economy in Europe to see its economy shrink during 2023, and according to the latest European Commission estimates, output will fall by 0.4% this year. The body has also downgraded its growth forecast for Germany in 2024 from 1.4% to 1.1%.

This comes after the International Monetary Fund predicted that Germany’s economy would contract by 0.3% in 2023.

It was a much more positive picture in Spain, where officials are hopeful it will outpace eurozone growth in the coming months. Pablo Hernández de Cos, Governor of the Bank of Spain, believes the country is performing relatively well because it relies less on sectors such as manufacturing than many other key European nations, and is less dependent on exports from China and Russia.

October also saw progress in the European Union’s efforts to bolster the banking system and make it more resilient. The European Banking Authority has published guidance for banking regulators in each member state, which includes a call for specific checks on the impact of higher interest rates on their business models, as well as their liquidity and funding risks.

The move is being taken in the wake of the recent collapse of Silicon Valley Bank and UBS’s forced takeover of Credit Suisse to ensure regulators in Europe learn lessons from what happened across the Atlantic.

Francesco Mauro of EBA said: “This is an exercise that has always looked at supervision, but the novelty is that, being more targeted, we can be more specific on what are the expectations that we are putting on supervisors. The spring events reminded us of the importance of proper management of liquidity risk.”

October also saw voters come out for the Polish general election. While the incumbent Law and Justice (PiS) party secured the biggest share of the vote, opposition parties secured enough votes to oust the government. Donald Tusk’s Civic Coalition, which attracted almost a third of the popular vote, looks to be in the strongest position to be able to form a coalition.

On the financial markets, Germany’s DAX index fell by 3.75% in October to end the month at 14,810 points. Meanwhile, the French CAC 40 index fell by 3.50% to end at 6,885 points.


October ended with better than expected economic figures, official data showing GDP rose by 4.9% between July and September, up from 2.1% in the previous quarter. This was the biggest increase in economic output since the final quarter of 2021, and was attributed partly to healthy levels of consumer spending.

This was welcome news, particularly as last month began with the US government narrowly avoiding a federal shutdown, after a short-term deal ensuring funding until November 17th was agreed.

However, the congressional budget deal did not include further military funding for Ukraine, which had been a key demand for the Democrats. Despite this setback, President Joe Biden has insisted the US will continue to support Ukraine, and said it cannot “under any circumstances allow US support to Ukraine to be interrupted”.

Meanwhile, economists are keeping a close eye on interest rates and wondering which way they will be heading over the coming months. In a poll by Reuters, 45% said they don’t expect to see any rate reduction until the second half of next year at the earliest.

Interest rate movements will also be of particular interest to anyone planning to take out a mortgage on a property in the coming months. According to Mortgage News Daily, the average interest rate on the typical 30-year fixed rate home loan rose to 8% for the first time in 23 years.

Consumers across the board were under financial pressure as a result of higher housing and petrol costs, which contributed to the inflation rate remaining static in September at 3.7%. Although inflation is significantly lower than it was this time last year, it is still well above the Fed’s target of 2%.

Nevertheless, the retail sector has continued to perform strongly, with figures showing that retail sales went up by 0.3% in September, when adjusted for inflation.

There was also positive news in the employment market, with figures from the Labour Department showing that employers added 336,000 jobs in September. This was almost double the amount that had been widely anticipated.

In the business sector, chip company Nvidia and iPhone maker Foxconn confirmed they are collaborating to create new data centres capable of powering various applications, including AI-powered electric vehicles and other AI-based services.

However, many sectors have been hit by ongoing industrial action. For example, more than 75,000 nurses, pharmacists and technicians at healthcare company Kaiser Permanente went on a three-day strike to call for improved wages and staffing levels. A tentative deal has since been struck, although the terms of the agreement have not been disclosed.

Industrial unrest also hit the car manufacturing sector, as the United Auto Workers union has been taking strike action against Ford, Stellantis and General Motors (GM) since September. GM believes the strikes could cost the company approximately £164m a week.

The ongoing actors’ strike in Hollywood also continued throughout October. Negotiations between actors’ union SAG-AFTRA and major Hollywood studios had been on hold for almost two weeks but have since resumed. Members of the union have been on strike since July over issues such as pay and the use of artificial intelligence.

In the tech industry, Microsoft is in dispute with the Internal Revenue Service over its allocation of profits across various countries and jurisdictions. The tax authority has asked for the tech giant to pay an additional £23.5bn in back taxes for the years 2004 to 2013. However, Microsoft is contesting the request, arguing that the issues raised by the body are “relevant to the past but not to our current practices”.

Meanwhile, Microsoft has announced that about 670 roles are set to go at professional networking site LinkedIn. This follows the loss of more than 700 jobs in May and accounts for approximately 3% of its current workforce.

On the financial markets, the Dow Jones fell by 1.36% to end the month at 33,052, while the more broadly-based S&P 500 index fell by 2.20% to end at 4,193.

Far East

Embattled Chinese real estate giant Evergrande saw its shares soar after it resumed trading in Hong Kong following a two-day suspension. The property company’s chairman Hui Ka Yan is currently under police surveillance “due to suspicion of illegal crimes”.

Evergrande also recently filed for bankruptcy protection in the US, after it defaulted on its debts two years ago. Real estate developer Country Garden has also defaulted on its US debts, Bloomberg reports, which could prove problematic for the wider Chinese economy, as the sector accounts for a significant share of its GDP.

According to the latest official figures, China’s economy grew by 4.9% between July and September, down from 6.3% in the previous quarter.

Ongoing tensions between the US and China have shown no signs of easing, following the US government’s decision to place restrictions on advanced chip exports. China’s foreign ministry argued the curbs, which affect major companies such as Nvidia, “violate the principles of the market economy and fair competition”.

Elsewhere in the tech industry, Apple Chief Executive made an unexpected visit to China, meeting with gamers in the city of Chengdu. Meanwhile, MG Motors, which is owned by China’s SAIC Motor Corp, believes it is in a “very strong position” to capitalise on growing demand for electric cars, after posting pre-tax profits of £54.2m in 2022.

While relations between China and the US remain frosty, the same cannot be said of China and Russia. Russian President Vladimir Putin recently attended a global summit in Beijing, hosted by Xi Jinping, where he was the guest of honour.

In Japan, business sentiment has continued to pick up, according to a survey by the country’s central bank. The headline big manufacturers’ confidence index rose to 9 in September from 5 in June, exceeding analysts’ expectations of 6. Meanwhile, the non-manufacturers index rose from 23 to 27, again beating forecasts. This bodes well for Japan’s economic output in the coming months, against the backdrop of sluggish growth worldwide.

Nevertheless, inflation remains a problem in Japan, as the central bank is expected to raise its core consumer inflation forecast for the year to March 2024 from 2.5% to 3%. How this affects interest rates remains to be seen, although a poll of economists by Reuters suggests that Bank of Japan will end its negative interest rate policy in 2024.

The export market looks set to be one ray of light for Japan’s economy, as exports from the country rose by 4.3% in September year-on-year. This upturn was driven by increased shipments of electronics, machinery and vehicles.

In South Korea, meanwhile, the central bank has opted to leave its policy rate on hold at 3.5%, partly in response to rising private sector debt and growing inflationary pressures.

The central bank believes inflation will average at 3.5% this year, down from 5.1% last year but still well above its 2% target. Furthermore, it is predicting that South Korea’s economy will grow by 1.4% in 2023, following an upturn of 2.6% in 2022.

On the financial markets, Hong Kong’s Hang Seng index fell by 3.91% to end October at 17,112. Meanwhile, Japan’s Nikkei index slumped by 3.14% to 30,858. China’s Shanghai Composite index fell by 2.95% to 3,018 and the Korea Composite Stock Price Index went down by 7.59% to 2,277.

Emerging Markets

India’s status as one of the world’s leading emerging markets was reinforced recently by the International Monetary Fund (IMF), which predicted that India and China will jointly account for about half of all global growth in 2023 and 2024.

The IMF expects to see growth of 6.3% in 2024, thanks to strong domestic demand and a steady inflow of investment. This is higher than the 5% growth it is predicting in China. For the Asia Pacific region a whole, the IMF is forecasting growth of 4.6% in 2023, up from 3.9% in 2022. This will then slow to 4.2% in 2024.

In sanction-hit Russia, the government confirmed it would force many exporters to convert their foreign revenues into roubles, in order to help prop up the struggling currency as its invasion of Ukraine continues. Russia’s financial regulator will monitor and enforce the capital controls on 43 companies in industries such as metal and energy.

Andrei Belousov, First Deputy Prime Minister of Russia, commented: “The main purpose of these measures is to create long-term conditions for increasing the transparency and predictability of the currency market, [and] to reduce the opportunity for currency speculation.”

Meanwhile, President Vladimir Putin has confirmed Russia will continue increasing the production of military equipment “not by some per cent, but by several times”. This suggests that the prospect of Russia standing down and ending the war in Ukraine is remote and the country is preparing to continue with its invasion for some time.

In Brazil, economic growth has remained robust, with a survey of investors by the Central Bank showing their median GDP growth projection has risen from 2.56% to 2.92%.

This strong performance was reflected in the labour market in particular, as employers added nearly 221,000 jobs in August. This was well above the expectations of many economists, who had expected an upturn of between 180,000 and 200,000.

On the financial markets, India’s BSE Sensex index fell by 2.97% to end at 63,874 points. Russia’s MOEX index rose by 2.16% to close at 3,200 points, while Brazil’s Bovespa index ended the month down 2.94% at 113,143 points.

And Finally…

When you hear the words “on the run”, we’re betting that a tortoise doesn’t spring immediately to mind. But a runaway tortoise that went missing in 2020 has amazingly been found.

The tortoise was seen happily crossing a major road in Florida and was taken to a local animal refuge, which launched an appeal to find the owner.

Thankfully, a person came forward and they revealed that it had been missing for more than three years. We hope to find out what measures they put in place to prevent the pet from, er, running off again.