Global stocks mixed amid sluggish UK growth and record US inflation
European stock markets ended in the red on Friday after new figures from the Office for National Statistics showed sluggish UK economic growth in October. It came as US inflation hit 6.8% last month.
The negative mood was driven lower by a slump in technology and utilities, with most in the red.
New data showed that GDP grew by just 0.1% in the month, below the 0.4% that economists had forecast, thanks to ongoing supply chain disruptions and staff shortages.
This remained below the pre-pandemic level of 0.5% in February 2020, and suggests that the UK economy was struggling even before the discovery of the Omicron variant in late November.
The pound (GBPUSD=X) also continued to trade near one-year lows against the dollar amid the disappointing data.
Sterling fell 0.1% to $1.3200, not far from Wednesday’s 2021 low of $1.3162. It was also flat against the euro at 85.43p.
“The pound continues to trade in a descending trendline, shedding over 7% versus the US dollar since the June peak with losses accelerating since mid-October, Victoria Scholar, head of investment at Interactive Investor, said.
“Languishing near one-year lows, the pound’s next major support level is at $1.315 with a break below potentially paving the way for further declines and a move down to test psychological round number support a $1.30, a level not seen since November 2020.”
Read more: UK economy slows to a crawl in October as GDP rises just 0.1%
It came as US inflation hit a 30-year high on Friday, coming in at 6.8%, up from 6.2% in October, although in line with expectations.
This is by far the highest inflation amongst the world’s developed economies, and well above the Federal Reserve’s 2% average inflation target. Economists believe the rise will force the Fed to step-up the pace of policy tightening at their meeting next week.
Broad-based pressures were led by energy, which rose 33%, used cars, up 31%, and food and housing which climbed 6.1% and 3.8%, respectively.
“This is likely to add further pressure to the Fed to quicken the withdrawal of quantitative easing and raise interest rates sooner than expected, Dan Boardman-Weston, CIO at BRI Wealth Management, said.
“There could be hesitancy from the Fed due to the potential impact that Omicron may have on the economy in the coming months but it’s unlikely this will significantly alter the growth trajectory of the economy.
“The US economy is in rude health and doesn’t require crisis levels of quantitative easing or interest rates and so it remains our view that policy will become tighter.
“It is important to note that whilst inflation is high and getting higher, the supply chain issues, the high levels of demand and base effects are likely to prove transitory and we continue to believe inflation will move lower over the coming year.”
Watch: What is inflation and why is it important?
Asian markets were mostly lower on Friday, following a weak lead from Wall Street.
Investors were also concerned about the debt crisis in China’s property sector, with two major Chinese property firms defaulting on $1.6bn (£1.2bn) worth of bonds to overseas creditors.
In Japan, the Nikkei (^N225) climbed 1% while the Hang Seng (^HSI) fell 1% in Hong Kong and the Shanghai Composite (000001.SS) dipped 0.2%.
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