The International Monetary Fund ("IMF") released its World Economic Outlook last week, which provided a comprehensive perspective on the global economy. While the outlook has shown some balancing since earlier this year, downside risks persist. The report highlighted the limited room for policy errors and delved into the consequences of tightening policies on both inflation and economic activity. The IMF's updated gross domestic product growth forecasts for 2023 and 2024 include a weaker growth outlook for the UK compared to its G7 peers in 2024. It is also noteworthy that core inflation is expected to decline gradually, with many economies not returning to target inflation until 2025. This suggests that monetary policy must remain consistent to effectively tackle inflation, while fiscal consolidation is essential to address rising debt.

The latest survey from the Recruitment and Employment Confederation pointed to a slowdown as firms cut back on hiring for the first time since February 2021, primarily driven by economic uncertainty and escalating costs. While labour market conditions were viewed as somewhat precarious, there is optimism about the potential for a turnaround in hiring, particularly as inflation eases. The British Retail Consortium (“BRC”) also reported a marked slowdown in retail sales in September, attributed to a combination of warmer weather and increased fuel prices. BRC's like-for-like sales confirmed the influence of inflation on consumer spending.

The latest Bank of England (“BoE”) Credit Conditions Survey provided insights into the impact of higher interest rates on both the banking sector and the broader economy. Rising default rates and increased losses on secured loans raised concerns. While the availability of secured credit is expected to decrease further, there is a growing demand for unsecured lending. Separately, Barclays reported a surge in credit and debit card spending in September, primarily due to higher fuel costs.

Regulatory scrutiny in the UK reached a critical juncture as pension funds raced to sell unlisted assets, raising questions about the true valuations of these investments. The illiquidity of these assets, particularly within the defined benefit pension fund industry, has garnered attention. Simultaneously, the Financial Conduct Authority is preparing to review the practices surrounding private asset valuations, including their potential impact on the banking sector.

The latest Royal Institute of Chartered Surveyors UK House Price Balance suggested further weakening as September’s figure came in at -69 compared to forecasts of -63. However, there were signs of stabilisation attributed to more accessible home loans and the BoE's decision to pause interest rate hikes. Nevertheless, with rates expected to remain steady for an extended period, the outlook for house prices remains negative in the coming year.

Stock Focus

EasyJet, the low-cost airline, reported its fourth quarter trading update last week, which was a contributor to the company’s shares declining approximately 12.9%. The announcement was roughly in line with analyst expectations as the company expects its full year profit before tax figures to be between £440 million and £460 million. The trading update also included new medium term targets, resumption of its dividend and a proposed purchase of 157 aircraft from Airbus. Many analysts viewed these developments positively. However, the majority expected better performance, which resulted in the share price decline.

YouGov, the international research and data analytics company, saw its share price surge by approximately 25.7% last week after announcing its full year results. The company reported profit attributable to the owners for the 12 months ending 31 July of £34.5 million, an increase of 102% from the previous year’s figure of £17.1 million. Revenue also increased to £258.3 million compared to £221.1 million a year ago, demonstrating the positive momentum going into 2024 as the company benefits from a resurgence in technology spending by its clients.

Ashmore Group, the specialist emerging markets asset manager, reported a trading announcement last week which showed its assets under management decreased by $4.2 billion during the quarter ending 30 September 2023. This decrease consisted of $1.3 billion caused by negative investment performance and $2.9 billion due to net outflows. The net outflows for the company were at a similar level to the prior quarter, which demonstrates the institutional shift towards risk aversion given the current investment landscape. The share price decreased by approximately 8.6% following the news.

Market Commentary prepared by Walker Crips Investment Management Limited.

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