UK stocks closed off a very positive month of November with a whimper despite the release of slightly better-than-expected inflation data in the U.S. that some analysts said backed up expectations for interest rate cuts on either side of the Pond in 2024.
“It turns out that the surge in inflation was transitory, after all,” said IG chief market analyst Chris Beauchamp.
“Today’s PCE figures from the US will mean that Jerome Powell is now permitted to think about ticking off inflation from his 2023 to-do list. Having already rallied hard off the back of the CPI data a month ago, US stocks responded in muted fashion, but this November will go down as a very solid month for stocks on Wall Street.”
The FTSE 100 was up by 1.8% for the month, held back by a rebound in sterling, and the second-tier by nearly 7%.
Investors in the S&P 500 meanwhile notched up an approximately 9% gain on the S&P 500 in U.S. dollar terms.
America’s Department of Commerce reported on Thursday that the price deflator for personal consumption expenditures fell from a pace of 3.7% year-on-year in September to 3.4% for October (consensus: 3.5%).
“The bottom line, then, is that the core inflation threat is receding faster than the Fed expected, and likely will continue to do so,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in response to the figures.
“Chair Powell will repeat at the next FOMC meeting that the Fed still retains the option to hike again, but the market has moved on and won’t be listening. We expect the Fed to ease by 150bp next year, starting in March or May.”
Against that backdrop, Banks lent their heft to Thursday’s gains with NatWest Group benefitting from an upgrade to ‘overweight’ at JPMorgan, which included the stock in its top picks portfolio.
Metro Bank Holdings added 2.3% after it announced plans to reduce its workforce by around 20% and review its branch opening policies, aiming to save Â£50m annually.
Rolls Royce (LONDON: RR) continued to power ahead alongside, giving a boost to the Aerospace and Defence space.