UK Economy faces Biggest Drop in Services Sector in Last Two Years:

Image Souce: Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.04% on 28 November 2024. Industrials, Financials & Consumer Cyclicals sector demonstrated a substantial growth. Moreover, sectors such as Utilities, Real Estate & Basic Materials faced a significant decline. 

Macro Update:  Business sentiment in Britain’s services sector is falling at its sharpest pace in two years, largely attributed to the tax increases in Finance Minister Rachel Reeves’ recent budget, with consumer services bearing the brunt due to a £25 billion rise in payroll taxes. The Confederation of British Industry (CBI) highlighted a souring mood in both consumer and professional services, prompting Reeves to assure at the CBI's annual conference that such tax hikes would not be repeated. Meanwhile, the government has strengthened sanctions against employers exploiting foreign workers, extending the ban on recruiting foreign staff for serious or repeat violations, such as failure to pay minimum wage, from one year to two years. In a progressive move, Prime Minister Keir Starmer inaugurated London’s first Google-funded AI Campus in Camden, aiming to equip young people with skills in the rapidly advancing field of artificial intelligence, starting with a two-year pilot program for local students. 

Top Market Movers: Among top gainers on FTSE 100 index, Anglo American PLC (LSE: AAL) witnessed a rise of 2.23% followed by Vistry Group PLC (LSE: VTY) which gained around 1.98%. 

Commodity Update: Asian stocks were subdued on Thursday, while the U.S. dollar remained weak after U.S. data revealed that progress in slowing inflation had stalled, despite a resilient economy. This raised uncertainty about the Federal Reserve's next steps for the upcoming year. With the U.S. Thanksgiving holiday expected to keep trading volumes light, traders stayed cautious. In commodities, gold dropped by 0.50% to $2,651.40 per ounce, silver fell 1.12% to $30.21 per ounce, and copper declined by 0.06% to $9,017.50 per ton. Brent crude dipped by 0.10% to $72.79 per barrel, as a surprise rise in U.S. gasoline stocks dampened demand outlook. 

Our Stance: U.S. consumer spending increased by 0.4% in October, reflecting continued economic resilience as the economy maintained robust growth in early Q4. However, progress in reducing inflation appears to have stalled, raising concerns about the Federal Reserve's approach to future rate cuts. The inflation data has dampened sentiment, with Wall Street's major indexes closing lower, led by declines in technology stocks. With the U.S. Thanksgiving holiday approaching, market activity is expected to remain subdued. The economic data highlights a mixed scenario: while strong consumer spending indicates resilience, the stagnation in inflation progress could prompt the Federal Reserve to maintain a cautious stance on monetary easing. This dynamic has created uncertainty in both U.S. and global markets, reflected in falling equities and cautious trading. Investors are likely to remain risk-averse until clearer signals on inflation and monetary policy emerge. 

FTSE 100 

The FTSE 100 closed at 8,274.75, up 0.20%, forming a bullish candlestick pattern that reflects strong investor sentiment. The index is trading above its 21-period and 50-period Simple Moving Averages (SMAs), which now act as key support levels, suggesting the potential for further upward movement. The Relative Strength Index (RSI) stands at 58.85, signaling continued bullish momentum. On the weekly chart, the index closed at 8,262.08, up 2.62%, following a bounce from the 50-period SMA at 8,047.08. Immediate resistance is at 8,400, and a breakout above this level could signal a bullish reversal. However, a decline below 8,020 may indicate downside risk. Investors should monitor these key levels for signs of consolidation or continued strength.