In this weekly market outlook, the host provides a concise briefing on major geopolitical and economic events shaping global markets. He starts with the G20 summit in Bali, highlighting the first in‑person meeting between President Joe Biden and Chinese President Xi Jinping, the ongoing Russia‑Ukraine conflict, and the absence of Russian President Putin, whose foreign minister was briefly hospitalized. He then shifts to the United Kingdom, detailing Chancellor Jeremy Hunt’s upcoming Autumn Budget, which aims to reduce debt through a mix of tax hikes (lowering the £150k income‑tax threshold, extending the freeze on thresholds, and raising the windfall tax on energy firms) and delayed spending cuts, all while the UK economy slides into a prolonged recession with inflation hovering near a 40‑year high of ~10‑11%. He reviews upcoming UK data releases—CPI, jobs, and retail sales—emphasizing the expected rise in headline inflation to 10.8% driven by a 27% jump in energy bills, and a modest easing of core inflation. The host then covers US developments, summarizing Goldman Sachs’ forecast that core PCE will fall to 2.9% by year‑end, driven by supply‑chain easing, shelter inflation peaking, slower wages, weaker commodities, and a stronger dollar. He notes Fed Governor Christopher Waller’s hawkish remarks, indicating further rate hikes are likely despite a short‑term slowdown in inflation. Finally, he discusses China’s property sector, where a 16‑point policy package to ease credit constraints sparked a 15% rally in the domestic real‑estate index, and outlines the week’s economic calendar—including US manufacturing, retail sales, corporate earnings, and speeches by Fed officials, the SEC chair, and ECB President Lagarde. Throughout, the tone remains conversational yet analytical, with a measured, cautiously optimistic sentiment about policy responses while acknowledging persistent inflationary pressures.
Chapters
Hello and welcome back to the channel. Lots for me to get you up to speed on for the outlook for this week in markets. We're going to talk a little bit about what to expect from the G20 happening in Indonesia. Also the UK, lots of information coming out this week, namely UK CPI on Wednesday expected to add to the already 40-year high level and knocking on the door of near 11% for inflation rates here in the UK. You've also got the UK Autumn Budget coming out out on Thursday. Lots of other things to talk about from an economic data perspective. We're going to touch on US central bank policy and also some commentary on that regard over the weekend from a central banker, but also analysts at Goldman Sachs. So stay tuned. And if you don't already subscribe to the channel, please do so. I know a number of people who watch this aren't subscribed, so lots more videos coming throughout the week. But let's jump straight in and talk about the G20. As you can see here, President Biden arriving in Bali, Indonesia, and it's going to be dominated by two things here in the discussions for the G20 Summit, and that's going to be Russia, Ukraine, and also the tensions between US and China. And on the latter, there is actually going to be the first face-to-face conversation between US President Joe Biden and China's Xi Jinping since the onset of the pandemic. Now, they have spoken before, but never in person, face face. This is quite a big step in a positive direction, some might say, and it does come in the context of China cutting off working relationships in very key strategic areas of their relationship, in the likes of military relations, climate change. And this all happened earlier this year, of course, because the US House Speaker Nancy Pelosi went to Taiwan for the first time in 25 years, which flared tensions at the time. So quite a big deal. And that's the real headline from this G20 summit. Biden himself is going to be feeling in a relatively good mood, about as good as you can be, because last week, of course, we had the US midterm elections. And on Sunday this weekend, we found out that indeed the Democrats retained control of the Senate and also the control of the House remains unresolved at this point. So the red wave really did not materialize. And so Biden and the Democrats outperforming, as we had known before. The other thing I just put as a footnote that I've just seen is that Putin is not attending these talks. In his place was going to be the foreign minister, Sergei Lavrov. However, I've just seen on the ticker tape a piece of information hit the wires that the foreign minister Lavrov had been taken to hospital upon landing at the airport in Indonesia. However, It's now been reported that he's left hospital, so I'm definitely just keeping an eye on this as it develops. Otherwise, talking of the UK, very busy week as I said. Let's talk about the UK Autumn Budget to start with. And remember, this is really important because it was only, what, 6 weeks ago or so that the UK market got rocked by, at the time, what was this outrageous, um, plan that was put forward by the previous, let's say, dual leadership team of Truss and Kwarteng. But now they've been replaced. We've got a much more kind of fiscally prudent approach by Chancellor Hunt and obviously PM Rishi Sunak. And Hunt will unveil measures to bring down national debt under control in the delayed, what is now a more fuller autumn budget statement we're going to get on Thursday. Around 40% of the savings coming from tax rises, the remaining 60% then from spending cuts. A couple of things then to be aware of here. The bulk will be delivered in the final years of the 5-year forecast to protect growth now, according to 2 people familiar with the plans. Remember, at the end of last week we saw the UK economy dip into contraction, pretty much then the commencement of what's set to be a very long protracted UK in recession for the next 2 years or so. So what the government are doing here is they're trying to safeguard, as you can see here, their Tory election hopes by not doing any radical spending cuts, which is really going to hamper then the kind of ability for the government to have confidence of the electorate. And so they're going to kind of keep away from that and then put in the more hefty spending cuts after the election. So that's kind of reading through the kind of headline noise. In terms of the other things to be aware of, they're probably going to cut 45% income tax threshold down from £150,000 to £100,000. £25,000. Again, the PR spin on that is that those who can afford it should shoulder the biggest burden, and that should raise around an extra £1 billion per year. They can extend current freeze on income tax thresholds for another 2 years up to 2028, and that's going to add around £6 billion. And then they're going to extend existing windfall tax on energy firms by 2 years to 2027 and raise the rate from 20, uh, 25% to 30%. That's going to generate an extra £5 billion as well in income for the country. As I mentioned, though, away from this, one of the other things is it's a very busy calendar from a data perspective for the UK. Here's just a look at the last 12 months' readings of UK inflation. As you can see, we've been sat up here at around 10.1%, which is a 40-year high for UK inflation. But on Wednesday, for the month of October reading, is it— it is expected according to those analysts surveyed by Bloomberg to tick up to 10.8%. But again, this is largely, uh, in reflection of the rising energy bills that consumers have faced. Energy bills went up actually 27% over the course of that single month, contributing into that sharp uptick that we're expecting. So shouldn't come as a great deal of surprise. And actually, when you look at these numbers clean of more volatile components like food and energy, so effectively the core number that is actually expected to slow to 6.2% from 6.5% the previous month as businesses sought to reduce costs that they're passing on to customers against the weaker consumer spending backdrop we're seeing at the moment. The other things we're looking out for on the UK front, we got UK jobs data on Tuesday. Really interesting point put out by analysts at ING. They note that Hiring indicators have begun to turn lower, but so far there's been little to no sign of kind of mass redundancies that have been happening. And firms continue to face material staff shortages, driven in part by rising rates of long-term sickness in older workers. So kind of offsetting things, meaning that we are going to be expecting unemployment to tick up over this long-term recession that we're heading into in the UK. But just perhaps not right now in terms of the numbers we'll see this week. And then for UK retail sales, we'll get that on Friday, expected to see a third consecutive month-on-month fall in sales as the cost of living continues to squeeze consumers. And again, that really shouldn't come as too much of a surprise either. So the data perspective, I don't think it's going to really carry too many things that are really going to rock the boat. The Autumn Budget, I think, I wouldn't get too caught up thinking we're going to get a repeat of what we had before. As per usual with UK politics, a lot of the information has been drip-fed into the market as I've just outlined, and all of it seems, I quote, relatively sensible in this respect. So I wouldn't be expecting any type of massive surge in yields like we saw last time. All right, sticking with the inflation theme, one thing I wanted to mention was this. I did tweet earlier. My Twitter handle's here, actually, if you want to check it out. The outlook for inflation in the US by analysts at Goldman Sachs, their chief economist Jan Hasse has put out a piece at the weekend and was basically talking about US inflation. Their team say is likely to see a significant decline in 2023, and they say they expect core PCE measure to decline to 2.9% by the end of 2023. '23 from 5.1% of what it is at the moment. And they put that down to 5 key elements. 1, softening of supply chain problems. 2, a peak in shelter inflation. Piers and I talked about that on the podcast, um, on Friday if you want to check that out. 3, slower wage growth. 4, weaker commodity prices. And 5, a stronger US dollar. And on that tweet, as you can see here, I actually took a snippet, a bit more context around those points as well from the GS note if you want to check them out. With that in mind, though, and I think quite an interesting thing is that we've had one of the Fed speakers come out yesterday on Sunday, Fed's Waller. If you've never heard of Waller, Waller is on the board of the FOMC, so has a vote at every meeting this year and the years after. But he is an outright hawk, so you'd be expecting hawkish comments, and he hasn't let us down. He said there's ways to go before rate hikes are done. And of course, this comes in the context of, remember, what we had last week, which was the weaker, let's say, US inflation metrics, which saw markets really spike very aggressively last week. I think this is all pretty tactical, to be honest. I think the Fed don't want the markets to get too ahead of steam, that all of a sudden that they should be pricing in aggressively that rate rises are just going to stop. That's not the case. This is about downshifting the pace of rate increases. There are still likely to be multiple more rate hikes to come, but as like what GS was saying, as inflation starts to really tail off as we go through the next 12 months, obviously we're going to get to a point where the rate rises will stop pretty quickly in the first quarter, most likely of next year, all things remaining the same. One other thing I saw over the weekend's press, just to cover, which I thought was quite interesting, was about the Chinese property market. Obviously China is still very much in focus from a global perspective given the downturn that we're seeing in their economic growth at the moment. We're still definitely keeping an eye on the COVID situation. Some of the numbers last week were the worst we've had in many months and and they continue to enforce their zero tolerance COVID policy, and that can have real economic impact not just on China but globally. So we do keep an eye on that. But one thing that's come out from a more positive sense overnight is the fact that shares in Chinese real estate companies rocketed higher overnight. I think their actual real estate index, which is a sub-index they have domestically, was up about 15% overnight. And the reason why is a 16-point plan that's been issued to support debt-ridden sector has been interpreted as a real crucial pivot from Beijing that could spark a bit of a revival in the sector. The measures outlined in a policy document from the central bank and the banking regulator included extending a year-end deadline for lenders to cap their ratio of property sector loans. So seen as one of the strongest moves yet that Beijing wants to relieve pressure from the credit crunch that's been roiling the industry. And as such, then a positive response on the, on the back of that. In terms of the week and other things to keep an eye on, we do have from China retail sales, industrial production, and their latest jobless numbers coming out overnight. So when we go into the Tuesday session, if you're based in the UK, Tuesday we get the US Empire Manufacturing PPI numbers. We do also get US retail sales this week on Wednesday. Me just move this down. And that's expected to be driven by an increase in petrol prices, which have come down from the peak seen this summer but remain pretty variable at this point in time. Big retailers as well, talking about retail sales, are reporting this week. Just flipping over here, you've got Walmart on Tuesday with Home Depot. Then on Wednesday, you've got the likes of Target, Lowe's, TJX. Thursday, Alibaba, Macy's, Kohl's for example. So some of the brick-and-mortar names in particular will be coming out reporting this week, which really then bookends the earnings season. And then going back to the calendar, a few other things to be aware of. Fed's John Williams, Léon Brainard, the vice chair, speaks alongside the SEC chair Gary Gensler, who's always been quite outspoken on the crypto market and in the wake of the FTX debacle. Be interested to keep an eye on those comments. Christine Lagarde also speaks midweek And then you've got eurozone CPI data as well coming out later on the week on Thursday with existing home sales on Friday from the US with that UK growth data, as I mentioned. All right, that is it. So thank you very much for watching again. Please do like and subscribe to the channel and I'll catch you for the next episode. Take care.
