Today: UK unemployment set to drop as rate hike bets rise
European markets got off to a mixed start yesterday as US markets, after initially looking healthy, moved up the close to end on the day’s lows.
While investors want to believe the narrative that stock markets can continue to rise, this belief collides with the reality of how continuously rising energy prices, as well as pressures on the supply chain are. likely to impact business profit margins, both when consumer incomes are likely to come under increasing pressure as the winter months approach.
“The reality is that over the past few months, the stock markets haven’t moved anywhere, cutting a wide range since early July,” said Michael Hewson, chief market analyst at CMC Markets UK this morning.
“As we look at the European opening today, we can expect to see the same, with markets expected to open lower after the US sell off last night, and weakness this morning. in Asian markets, once again concerns about rising energy prices outweighed optimism about a recovery in demand, ”he said.
“It seems rather counterintuitive to speculate that we may well see a Bank of England rate hike by the end of this year, at a time when the bank is still implementing a buying program. ‘assets, but that’s where we are now, with a warning about the risk of a central bank policy error, ”Hewson continued.
They seem to get into a corner when it comes to a rate hike, which is always a dangerous place.
All eyes on unemployment in the UK
Today’s latest UK unemployment data may well bolster the rate hike narrative, and while a rise from 0.15 per cent, to 0.25 per cent, may well be justified in the coming months, the gilt markets are valuing much more than that, although its notable the pound has not risen in line with returns. This would suggest that the evolution of bond markets may well be exaggerated.
The unemployment situation for the UK economy has improved considerably in recent months, a trend which has not been better illustrated than with the decline in the enumeration rate for applicants since March, when it was 7.2%.
Since then, we’ve seen steady declines, dropping to 5.4% in August, as businesses continued to reopen, even with the delay to July 19.e, Hewson pointed out.
The ILO rate has also fallen steadily, falling to 4.6 percent in July, and is expected to drop again for the three months through August to 4.5 percent, even as holidays continue to decline. , with the Bank of England appearing to be the most keep in mind that we may not see a leave post go higher, ”he said.
“With the various supply chain disruptions seen across all industries, it is becoming increasingly evident that the holiday has exceeded its usefulness. Vacancies in July rose to over one million, with 182,000 new positions added as the UK economy reopened and the rest of the remaining restrictions were removed, ”Hewson said.
Salaries are also on the rise, and while some of the gains can be attributed to the base effects caused by the pandemic, they still fell from 6.6% to 7.4%, excluding bonuses in June, although we did slipped to 6.8 percent a cent in July, and could drop even more today to 6 percent, for the three months through August.
“Nonetheless, wages are still rising much faster than the headline CPI, and this trend may well continue in the months to come as we head into the end of the year if companies howl in anguish over labor shortages are right, ”Hewson said.
“This could see the ILO’s measure further increase if struggling companies decide to lay off the remaining employees. If this happens, the next few months could be difficult for the job market, especially when there is a skills mismatch that causes delays in re-entering the job market, ”he concluded.