Global shares fall as investors scrutinise economic data

Global stocks then fell on Thursday as investors weighed mixed economic data coming out of the world’s largest economy and reacted to a set of gloomy forecasts for the UK.

Wall Street’s S&P 500 fell 1.1 percent in early trade, while the Nasdaq Composite fell 1.4 percent. London’s FTSE fell 0.6 percent as British Prime Minister Jeremy Hunt announced a £55bn “consolidation” of the country’s finances and admitted the economy was in recession.

The regional Stoxx Europe 600 shed 0.9 percent and Germany’s Dax shed 0.4 percent, erasing earlier gains.

The Office for Budget Responsibility said Britain’s output would return to pre-pandemic levels by the end of 2024, more than two years after the fiscal watchdog said in March. In the third quarter of 2024, the unemployment rate will reach 505,000 people from 3.5% to 4.9%.

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Sterling traded 0.9 percent lower against the dollar at $1.181 immediately after Hunt’s remarks to Parliament, extending a decline earlier in the day. Gilts sold off globally – the 10-year yield rose 0.07 percentage point on the day, while the two-year yield rose 0.13 percentage point to 3.11 percent.

Inflation in Britain hit a 41-year high in October, accelerating to 11.1 percent from 10.1 percent in September, data released on Wednesday showed, driven by higher electricity prices. and food.

Reading will put pressure on the Bank of England to raise interest rates from the current level of 3 percent at its next meeting in December. Silvana Tenreiro, an external member of the BoE’s Monetary Policy Committee, warned last week that UK rates were already higher than they needed to be.

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Paul Dales, chief UK economist at Capital Economics, said Hunt had “protected the economy by easing policy for the next two years and tightening for the next three years”, but UK interest rates still had to rise to 5 per cent. to include inflation.

The moves came after U.S. retail sales came in better than expected in October, rising 1.3 percent, more than the 1 percent forecast by economists. Another set of data showed on Wednesday that US manufacturing output rose 0.1 percent in October, slightly below expectations for a 0.2 percent increase.

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In US government bond markets, the yield on the two-year Treasury note remained unchanged at 4.36 percent, while the yield on the 10-year note rose 0.03 percentage points to 3.72 percent. As the prices fall, the yield increases.

Asian shares fell on Thursday, adding to losses in the previous session.

Hong Kong’s Hang Seng Index was down 1.2 percent, China’s CSI 300 was down 0.4 percent, and South Korea’s Kospi was down 1.4 percent. Japan’s Topix rose 0.2 percent.

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