Signs of slowdown emerge

Signs of an economic slowdown emerged in the UK, US and Europe – but equity markets rallied, led by the US, as hopes of business-friendly reforms by Donald Trump buoyed global markets. Surveys of business activity in key regions unexpectedly fell, but investors remained optimistic.

Tensions between Moscow and the West increased after Russian President Vladimir Putin warned the US and UK over an “escalation of aggressive actions” after they gave permission for Ukraine to use long-range missiles inside Russia.

The FTSE 100 was up 1.7% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading 0.3% ahead.

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Economics

British retail sales fell much more than expected in October as consumers pared back purchases of clothes and food ahead of the Budget. The quantity of goods bought in the UK fell 0.7% between September and October, following a downward revised growth of 0.1% the previous month, according to the Office for National Statistics.

Economists polled by Reuters expected a contraction of 0.3 per cent.UK business activity slumped to a 13-month low in November, with a survey of businesses giving a “thumbs down” to policies announced in the Budget, according to the S&P Global flash UK PMI composite index. Its gauge fell to 49.9 in November from 51.8 in October, below the 50-point mark indicating a contraction. The figure was also below a consensus view for no change.

UK Consumer confidence jumped in November, after uncertainty seen in the run-up to Labour’s first Budget of this government dissipated. The latest GfK consumer confidence index was -18 in November, a 3-point jump from October, when it eased one point to -21. It was also a significant improvement on the -24 recorded in November 2023. Consumers were also more willing to spend, with the major purchase index jumping five points to -16. Contrastingly, the savings index fell 3 points to 24.

There was some surprise negative US economic news, as manufacturing activity in the Philadelphia region unexpectedly contracted, although companies remained upbeat about growth. The Philadelphia Fed Manufacturing Index dropped to -5.5 this month from +10.3 in October, according to the Federal Reserve Bank of Philadelphia. This was the lowest level in three months and well below the consensus forecast of +8.0. This was the second negative reading since January, with just 18% of manufacturers surveyed reporting increases in general activity, down from 24% in October, while 23% reported decreases, up from 14%.

Eurozone business activity fell sharply in November. HCOB’s composite Eurozone purchasing managers’ index, a survey of businesses, unexpectedly fell to a 10-month low of 48.1 points. The data increases the odds of a 0.5 percentage point cut in interest rates by the European Central Bank next month.

The German economy grew less than originally thought in the third quarter. Gross Domestic Product (GDP) grew 0.1% between July and September, down from the 0.2% rate in the first reading by Germany’s official data organisation Destatis. Germany and France are in difficult economic situations, with poor performance creating considerable political instability.

The UK car industry is struggling to sell enough battery cars, but the government will be reluctant to relax the targets given its strong commitment to the green transition. Electric cars in the UK

Geopolitics

Russian President Vladimir Putin warned the US and UK over an “escalation of aggressive actions”. This followed the two countries giving permission for Ukraine to use long-range missiles over the border. "We believe that we have the right to use our weapons against military facilities of the countries that allow to use their weapons against our facilities," Mr Putin said in a televised statement.

With the US election occurring a few days before the start of the world's largest climate conference (UN Climate Change Conference of Parties) the overarching feeling has seemed to be one of tentativeness rather than optimism. COP29: Short term interests "Trump" the long-term necessity.

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Companies

Artificial intelligence (AI) chipmaker Nvidia, now the world’s most valuable public-listed company, posted another set of consensus-beating figures in the third quarter. The shares were volatile after the earnings report. The company issued revenue growth guidance for the current quarter of 79%, but this was below the 94% year-on-year growth recorded in the third quarter. Chief, Jensen Huang said: “Generative AI is not just a new software capability but a new industry with AI factories manufacturing digital intelligence – a new industrial revolution that can create a multi-trillion-dollar AI industry,”

The US Department of Justice (DoJ) has called for Google parent company Alphabet to dispose of its Chrome browser arm to break the group’s online search monopoly. The DoJ also recommended that Alphabet was stopped from making contracts with businesses such as Apple and Samsung that make Chrome the default search engine on both smartphones and browsers.

British Land reported a stable first-half performance, with underlying profit up 1% to £143m. The portfolio value grew 0.2% to £8.9bn as yields stabilised over the half. The portfolio’s loan-to-value rose to 38.7% from 37.3%, reflecting higher development investment.

Safety equipment and hazard detection products group Halma raised its interim dividend by 7% after a record first-half performance which saw sales top the £1bn mark for the first time. Management maintained its full-year guidance.

Close Brothers reported a stable first-quarter performance in a trading update, supported by growth in its banking division and disciplined cost management, despite headwinds from legal challenges in its motor finance business.

Shares in JD Sports fell after the retailer warned full-year profits would be at the lower end of forecasts. It blamed a "volatile" trading environment in October due to bigger discounts, milder weather and consumer caution ahead of the US election.

US-listed shares of Chinese ecommerce giant PDD Holdings dropped sharply after the owner of online store Temu missed market estimates with its lowest quarterly revenue growth in two years. Third-quarter revenues rose up 44% but was below expectations as sale growth slowed.

Warhammer maker Games Workshop raised its guidance for its interim figures after trading in the last two months exceeded expectations. Management now expects pre-tax profit of at least £120m for the six months to 31 December, compared with £96.1m a year earlier.