Market Report.
🏦 The Bank of England (BoE) kept its benchmark interest rate unchanged at 4% in a narrow 5-4 vote, but the decision signals a potential rate cut is coming in December: The close vote and comments from Governor Andrew Bailey suggest he may soon join the minority of policymakers seeking a rate cut.
👥 Deputy Governors Sarah Breeden and Dave Ramsden were among the four MPC members voting for a rate cut, a larger-than-expected minority. The BoE believes UK inflation has peaked and will start falling, but it remains the highest among G7 economies.
📉 The central bank has tweaked its forward guidance, saying rates are likely to continue on a “gradual downward path” if disinflation continues. The BoE has also revamped its forecasting process and communication, publishing individual policymaker views for the first time.
📊 The Bank of England’s Decision Maker Panel survey showed a UK economy grappling with slowing employment growth and high inflation. On one hand, there are growing signs of a cooling labor market. On the other, inflation remains stubbornly high, at the highest rate among G7 economies.
📉 Expectations for employment growth among British companies fell to -0.1% for the 3 months to October, the first negative reading since November 2020 during the COVID-19 pandemic. Expectations for wage growth ticked higher to 3.7% in the 3 months to October, the highest in 5 months. Companies’ expectations for their own price increases in the year ahead were steady, but they predicted consumer price inflation of 3% in the year ahead – the highest since December 2023.
🏛️ Regain the importance of the London Stock Exchange? A group of over 260 UK business leaders, including executives from major companies like Anglo American, Revolut, and Sage, have called on Chancellor Rachel Reeves to revamp the country’s pension system to encourage more domestic investment: The group, spearheaded by the London Stock Exchange Group, is concerned about the sharp decline in UK pension funds investing in British companies. UK pension funds have gone from investing over 50% of their assets in UK stocks to just 4.1% this year.
💷 This translates to £25 billion being withdrawn from the UK stock market every year, which the executives say is harming domestic investment and prosperity. The business leaders are urging Reeves to make the tax perks enjoyed by defined contribution pension schemes conditional on a 25% allocation of funds into UK investments.
📈 The London Stock Exchange Group has previously estimated UK pension funds get around £49 billion in tax incentives, and the executives want to leverage this to drive more investment into British companies.
🧾 In October, U.S. job losses nearly doubled compared to the previous month, marking the steepest decline for any October since 2003, according to data from outplacement firm Challenger, Gray & Christmas. The technology sector was hit hardest, with 33,281 job cuts — nearly six times the number recorded in September — highlighting growing pressure on the industry amid economic uncertainty.
📉 In total, companies have announced over 1.1 million job cuts so far this year, a 65% increase from 2024 and the highest level since the COVID-19 pandemic in 2020.
🌏 China’s exports unexpectedly contracted in October, dropping 1.1% from a year earlier. This marks the first decline in exports in 8 months. Imports also slowed sharply, growing only 1% in October, leaving China with a trade surplus of $90.1 billion.
🔻 The decline reverses 8 months of export growth and misses forecasts for 3% expansion. Chinese exports to the U.S. tumbled 25.17% year-over-year, while exports to the EU and Southeast Asia saw much slower growth.
📉 The loss of the U.S. market has cut China’s export growth by around 2 percentage points, or 0.3% of GDP. The outlook is expected to stabilize in the near-term with the U.S.-China trade truce extended. But longer-term, China’s exports to the U.S. are expected to continue declining as supply chains shift. However, the US is set to reduce tariffs on Chinese goods by 10% starting next Monday, which could lead to a pickup in trade between the world’s two largest economies by the end of the year.
📉 Stocks in Seoul and Tokyo have fallen around 5% from their recent peaks, while Nasdaq futures are also down. The hardest hit have been the biggest winners of the recent tech and AI-driven rally, such as chipmaker Nvidia. There was no obvious trigger, but the selloff began with a negative reaction to strong results from data/AI firm Palantir Technologies.
🤖 Shares of SoftBank Group, the Japanese investment conglomerate known for its high-risk, high-reward tech investments, have fallen about 20% this week, marking their biggest one-week decline since the pandemic. The drop reflects investor concerns over the company’s exposure to volatile tech sectors and global market uncertainty.
🛡️ During the Asian trading session, safe-haven assets such as the yen, gold, and Swiss franc saw increased demand, as investors sought stability amid rising global market uncertainty.
🏗️ However, The Gulf monarchies, led by Saudi Arabia, the UAE, and Qatar, are aggressively investing billions of dollars to build domestic artificial intelligence (AI) industries. The Gulf states are leveraging their vast sovereign wealth funds to partner with tech giants like Microsoft, OpenAI, and Nvidia, as they seek to become regional AI hubs. They are building massive data center infrastructure, buying up advanced chips, and launching their own national AI champions like the UAE’s G42 and Saudi Arabia’s Humain.
🌍 The Gulf states see AI as a strategic priority to diversify their oil-dependent economies and challenge the dominance of the U.S. and China in the technology race.
🚗 In other news, Tesla shareholders have voted in favor of CEO Elon Musk’s almost $1 trillion pay plan, with 75% support among voting shares. The first tranche would be awarded if Tesla hits a $2 trillion market cap, with subsequent tranches tied to incremental $500 billion and $1 trillion increases. Musk would also need to hit earnings, vehicle delivery, FSD subscription, Optimus robot, and robotaxi milestones to receive the full payout.
🛢️ Brent crude futures rose lightly. The price drop this week has been driven by concerns over excess supply and slowing demand in the U.S. market. A surprise 5.2 million-barrel build in U.S. crude inventories reignited oversupply fears.
💱 Other factors weighing on oil prices include risk-averse flows strengthening the U.S. dollar and the ongoing U.S. government shutdown, which is clouding economic activity. The OPEC+ group decided to slightly increase output in December, but paused further increases for Q1 2026, wary of a potential supply glut. Sanctions on Russia and Iran are disrupting supplies to major importers like China and India, providing some support to global oil markets.
Geopolitics.
🇭🇺 Hungarian Prime Minister Viktor Orban is visiting the White House to seek an exemption from the Russian oil sanctions imposed by President Trump, despite their political kinship: Orban had expected a political and economic boost from Trump’s re-election, but is now in “damage control mode” as the sanctions threaten to undermine his bid for re-election next year.
⛽ Hungary, a major importer of Russian energy, risks becoming “collateral damage” to Trump’s sanctions on Russia. Orban is offering deals to purchase U.S. liquefied natural gas and nuclear fuel to try to secure an exemption. Failure to get an exemption could lead to a spike in fuel prices in Hungary. European nations cannot purchase oil and gas from their Russian neighbors because of US sanctions.
🇺🇸 Trump stated that he was in charge of Israel’s attack on Iran, saying, “I was very much in charge of that. That attack was very, very powerful. When Israel attacked Iran first, that was a great day for Israel.” His comments suggest direct U.S. involvement in coordinating the strike. However, he continues to insist that he should receive the new peace prize.
Market View.
📉 S&P 500 futures have lost support, falling below 6,800 and currently trading at 6,797 points. Meanwhile, Mini Nasdaq 100 futures are attempting to regain support around 25,355, currently trading at 25,344 points.
💵 The DXY dollar index eased on Thursday, pulling back from the 100 level. This allowed pairs such as EUR/USD to recover, moving back toward the 1.1550 area before slightly retreating to 1.1530.
🇩🇪 In Europe, DAX 40 futures have fallen below 24,000, now at 23,855 points. EuroStoxx 50 futures also appear to have reached a ceiling, dropping to around 5,600, from where they are currently attempting a rebound.
🛢️ Crude oil saw another mild decline, with Brent crude approaching $63 per barrel before rebounding to above $64 in recent hours.
🥇 Gold has regained some shine, rising back above $4,000 per ounce.
₿ Bitcoin fell again during yesterday’s session, approaching the $100,000 mark before bouncing back to $101,885.
