A Bit More of the Same

Head of German central bank suggests not second guessing data releases, situation in the Middle East escalates further, Rishi's bill passed, fall in UK house prices, and what is in the data for today.

Today’s news cycle is a bit more of the same, with a bit more talk on rates from Europe, a bit more concern over whether inflation might become sticky once again and a bit more military action from the US in Yemen.

It was the head of the German central bank, Jaochim Nagel, speaking yesterday that gave his thoughts on rates, but some more interesting comments on his feeling that Europe needs to focus more on itself than worry about whether Donald Trump gets into office again. “We have to improve Europe in resilience and make it stronger…and then we will be prepared next year when we know who will be the next US president”. This feels like he’s putting a brave face on it, but he has got a point that Europe could probably use the months head of the election to think and act on areas around military and energy security, in case a sudden sweeping change comes from the West this time next year.

On rates, his view is to look at the data when it arrives, not to try and second guess it, which is sounding more and more sensible given the growing risks to prices.

Speaking of risks, The Middle East situation has escalated, with Iran targeting militant groups in Pakistan with missile strikes yesterday, which Pakistan has since responded to with missile strikes in Iran. Iran’s readiness to admit to its missile attacks in Pakistan have moved them away from their usual ‘proxy war’ sponsors and are now taking direct responsibility for their actions, which is being seen as a show of strength in the region.

This tit for tat exchange has pushed the price of oil and kept the dollar in a strong position, as did news of another US strike against Houthi targets in Yemen.

In the UK

On the domestic front, Rishi got his bill passed last night and can breathe easy for a while. The bill will now make its way to the Lords, do a bit of back and forth between there and the Commons and likely be passed into law around March. It will be interesting to see how long it takes for planes to take off to Rwanda thereafter!

Other UK news comes in the form of house prices, which have seen their biggest year on year fall in more than a decade. Price data from November shows that prices nationally fell at 2.1% year on year, whilst in London that was a more severe fall at 6%. Despite this the RICS survey says that sales forecasts for 2024 are expected to be their strongest since the pandemic – though if this is predicated on falling interest rates, some wind might be taken from those sails.

Today in Focus

Today we look at US jobless claims and housing starts. As per yesterday, we see economic data being the secondary driver of markets, with geopolitics taking being the likely driver of any material moves.

Have a great day