Originally published at: https://blog.investengine.com/market-roundup-reeves-and-the-fed-under-pressure/
This week has brought with it some notable moves in both the UK and US markets. Here’s our Head of Investments, Andrew Prosser, with a look at what’s been driving sentiment and what investors might want to take away.
UK bond yields climb to 27-year high
On Tuesday, yields on 30-year UK government bonds rose to their highest level since 1998. Yields on 10-year gilts – a more accurate measure of government borrowing costs – also pushed above 4.8%.
These moves reflect investor concerns over government borrowing and the UK’s persistently high inflation. Rising yields mean higher borrowing costs for the government, which could leave Chancellor Rachel Reeves with less room to manoeuvre ahead of the autumn budget.
The budget is now confirmed for 26 November. It’s later than usual, to give the Office for Budget Responsibility enough time to assess Labour’s planned reforms.
US jobs data adds to rate cut expectations
The highlight for global markets this week was the US non-farm payrolls report, released today (Friday). Markets had expected 75,000 new jobs in August, with unemployment rising to 4.3%. The actual figures came in weaker, with just 22,000 jobs added.
That shortfall strengthened expectations that the US Federal Reserve will cut interest rates at its next meeting on 17 September. Market pricing suggests there’s now a slim chance of not just one cut, but possibly two.
Market reaction
Despite mixed economic signals, markets have remained relatively positive, continuing the run of strong performance we’ve seen through much of this year, particularly outside the US.
Important information
Capital at risk. The value of your investments may go down as well as up, and you may get back less than you invest.
Tax treatment depends on your personal circumstances and may change in future. This article is for general information only and does not constitute financial advice.
Past performance is not indicative of future performance. ETF costs also apply. If in doubt you may wish to consult a professional adviser for guidance.